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The ACA’s 'Family Glitch' Could Hurt Families Who Need CHIP

The Children's Health Insurance Program is critical for parents who can't afford private insurance

Christine Vestal/Stateline | 9/23/2013, 6 a.m.
Is CHIP in danger? Thinkstock

The Affordable Care Act is primarily aimed at insuring more adults, including parents. In the process, a substantial number of uninsured children may also get coverage as their parents learn more about federal and state subsidies. Just how many will depend on whether states maintain their existing Children’s Health Insurance Program (CHIP).

“Now, more than ever, it is crucial that states continue or expand coverage of children,” said Bruce Lesley, president of the children’s advocacy group First Focus. Without CHIP, the federal-state health-care program for kids, he and others worry about potential harm the ACA may do to children. A main concern is a provision known as the “family glitch” that could make employer-sponsored insurance too costly for low-income workers.

According to a study by the Urban Institute, Obamacare could result in new coverage for as many as 3.2 million uninsured children because of tax credits on health insurance exchanges and overall outreach efforts. But if CHIP is not reauthorized by Congress when it expires in 2015, or states decide not to continue it, the ACA could result in fewer children covered by insurance.

Children could fall through the cracks as the massive health-care law is rolled out, said Catherine Hess of the National Academy for State Health Policy. The 15-year-old CHIP program, Hess wrote in a recent report, “has been exceedingly successful in finding uninsured children and providing them with quality, affordable coverage.” She and other advocates for children insist that the program should continue well after the ACA is fully implemented.

What Is the Family Glitch?

An apparent mistake in the ACA makes the future of CHIP particularly important.

The so-called family glitch in the health law requires employers to provide “affordable” insurance only for the workers themselves—not for their families.

Premiums for individual coverage must not exceed 9.5 percent of a worker’s income. But there is no limit on the employee’s share of premiums for family coverage, which typically costs close to three times as much as individual coverage.

In addition, federal subsidies for people with incomes below 400 percent of the federal poverty level ($45,600 for an individual) will be unavailable for anyone who receives an affordable offer of insurance from an employer. That means workers who can’t afford employer-offered premiums for family coverage will have nowhere to go except the Children’s Health Insurance Programs (CHIP) or Medicaid, if they qualify.

At least two states preparing for the ACA have already discontinued their CHIP programs and more may follow as a way to reduce administrative costs and make enrollment simpler for families. “Looking ahead,” said Joan Alker of Georgetown University’s Center for Children and Families, “the ACA does raise questions about the future of the CHIP program.”

The CHIP Provision

Although most of the ACA focuses on adults, one provision requires states to shift children ages 6 to 19 in families with incomes between the poverty level ($11,490 for an individual and $23,550 for a family of four) and 138 percent of poverty ($15,860 and $32,499) out of CHIP and into Medicaid by January 1.