Congress extends CHIP for six years after Democrats agree to ACA tax breaks proposed by House Republicans.
Swept up in the debate surrounding Congress’ efforts to pass a stopgap funding bill by January 19 was the fate of the Children’s Health Insurance Program (CHIP), a federally sponsored program that provides health insurance to 8.9 million children. After sometimes tense negotiations, Congress passed a short-term spending bill on January 22 that appropriated $124 billion for the program through 2023.
Children covered by CHIP typically come from working families whose household income is too high to qualify for Medicaid, but who cannot afford or don’t have access to private health insurance.
Funding for CHIP had expired on September 30. In December, Congress passed a bill authorized $2.85 billion in funding to keep the program running through March. Prior to the temporary fix, a number of states had dipped into surplus funds to maintain the program, but a report from Georgetown University warned that 11 states would exhaust CHIP funding by the end of February.
In an effort to gain Democratic support for their proposed postponement of three taxes that help fund the Affordable Care Act (ACA), House Republicans introduced legislation that would extend CHIP for another six years. Under the GOP proposal, the medical device tax and the so-called “Cadillac” tax on high-cost healthcare plans would be delayed for up to two years.
The health insurance tax (HIT), a levy criticized by the insurance industry, would also be suspended for one year starting in 2019. According to America’s Health Insurance Plans (AHIP), an industry advocacy group, HIT is equal to a $100 billion sales tax on health insurance, a significant cost for individuals and small businesses. According to its website, the group is working for a “full repeal” of the tax.
Democrats agreed to the compromise, and all three taxes were ultimately suspended in the passed bill, which will keep the government up and running until February 8. As a result, the government will lose roughly $12.7 billion in ACA health insurer taxes in 2019.
CHIP Cost Estimate Lowered
Political wrangling aside, lawmakers from both parties may have been persuaded to maintain CHIP because eliminating the program might have been more expensive than continuing to finance it. The Congressional Budget Office (CBO) originally estimated in October that extending CHIP for five years would cost the government $8.2 billion over 10 years.
That estimate, however, was made prior to the recently enacted tax bill, which included a repeal of the ACA’s requirement that all individuals purchase health insurance. That change doesn’t take effect until 2019. Without the individual mandate, the cost of buying insurance on the ACA exchanges is expected to rise. If former CHIP families opt for the ACA, they’ll likely qualify for subsidies to make premiums affordable, which, in turn, increases the cost to the federal government.
Because of the extension, however, those families will remain with the program, ultimately costing the government less money in comparison to subsidizing more ACA enrollees. In January, the CBO lowered its projected cost for a five-year extension of CHIP to $800 million over 10 years.
“The new CBO score is great news because a major sticking point has been how to pay for CHIP,” Tricia Brooks, a healthcare policy expert and former CHIP director for New Hampshire, told Business Insider. Nevertheless, it remains unclear whether CHIP will survive as Congressional leaders debate yet another spending bill to keep the federal government open.