CHIP provides health insurance coverage for children in families whose incomes are too high to qualify for Medicaid, but who lack access to affordable private coverage. The program was established in 1997 and originally called the State Children’s Health Insurance Program (SCHIP). Though CHIP is optional, all states expanded coverage under the program, with an estimated 8 million children enrolled at some point in fiscal year 2011.
Some states have been granted authority through waivers to use CHIP funds to cover adults, including pregnant women and parents of CHIP- and Medicaid-eligible children. State programs vary in their structure and characteristics (e.g., cost-sharing arrangements and income eligibility levels), reflecting the flexibility over design built into the program’s statute. Unlike Medicaid, CHIP was created as 10-year program and requires congressional reauthorization to continue.
CHIP is jointly funded by states and the federal government. The federal government’s share of CHIP expenditures is based on the federal matching rate for Medicaid (known as the Federal Medical Assistance Percentage, or FMAP). CHIP’s federal matching rate, though, is higher than Medicaid’s rate and is known as the “enhanced FMAP,” or E-FMAP. The shares are designed so that the federal government pays more in states with lower-than-average per capita income.