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State Children's Health Insurance Program (SCHIP)


Logo of State Children's Health Insurance Program.

This topic provides a summary of The State Children’s Health Insurance Program (SCHIP), Title XXI of the Social Security Act (PL 105-33, August 5, 1997).

You may jump to a specific section by following one of the links below, or simply read the sections of the topic in sequence:

·               Overview

·               Program Structure

·               Benefits Package

·               Cost Sharing For Families

·               Funding

·               State Matching Requirements

·               State Maintenance Of Effort

·               Administration

·               Resources


The State Children’s Health Insurance Program (SCHIP) gives grants to states to provide health insurance coverage to uninsured children up to 200% of the Federal Poverty Level (FPL). States may provide this coverage by expanding Medicaid or by expanding or creating a state children’s health insurance program. Funds became available October 1, 1997. However, states did not have to participate, and they could also choose to wait up to three years to implement the program without losing any funds.

Program Structure

Effective Date

Most provisions took effect October 1, 1997. States could start receiving the funds then or postpone implementation for up to 3 years without losing any funds.


The legislation set eligibility criteria. States could decide to cover all of those children or to target coverage to a narrower group of children. The eligibility criteria are to cover uninsured children who are:

·               not eligible for Medicaid

·               under age 19; and

·               at or below 200% of the federal poverty level (FPL).

Note: If a state had expanded Medicaid eligibility above 150% for any age group, the income eligibility level is 50% above the current Medicaid eligibility levels.

States must maintain the Medicaid eligibility they had in place on June 1, 1997 in order to receive the grants. They must also maintain the same level of state spending on child health programs that was expended in 1996.

Medicaid eligibility was reinstated, effective July 1, 1997, for children who lost Medicaid eligibility due to SSI changes included in welfare legislation from 1996.

Program Structure

The legislation allows states to choose the way they spend their money. They can:

·               expand Medicaid;

·               create or expand a state program; or

·               a combination of both.

States can also spend up to 10% of the funds to provide coverage through a community-based health delivery system or by purchasing family coverage.

Waiver Provision

While the law limits the amount (10%) that states can spend on direct purchase of services, administration, and outreach the Secretary of Health and Human Services can grant states waivers to spend more on these.

Benefits Package

If a state chose to implement a Medicaid expansion, it was required to offer the newly eligible the same Medicaid benefits package.

If a state chose to implement a state children’s health insurance program, it could choose the benefits package from among five basic options:


Blue Cross/Blue Shield preferred provider option offered to federal employees under the FEHBP.


State employee health plan.


HMO with the largest insured commercial, non-Medicaid enrollment in the state.


Coverage that is the actuarial equivalent to one of the above (1 through 3).


Another benefit package approved by the Secretary of Health and Human Services.

Because of their existing state programs, New York, Pennsylvania and Florida were exempted from the above benefits requirements and could continue to offer the health insurance package in place in their children’s health insurance programs at the time of enactment.

Cost Sharing For Families

States are allowed to impose premiums, deductibles, or fees for some services and for some groups. However, no copayments are allowed for pediatric preventive care, including immunizations, at any income level.

At or below 150% FPL, current regulations on cost sharing for adults receiving Medicaid apply. States can impose the following:

·               premiums: $15-19 per family per month

·               deductibles: $2 per family per month

·               co-insurance: 5% of non-institutional costs

·               co-payments: range from $.50 to $3.00 per service

·               institutional care: 50% of the first day’s costs.

For children above 150%, states can impose premiums, deductibles or other cost-sharing on a sliding scale not to exceed 5% of the family’s income.


The agreement authorized $40 billion over 10 years ($20 billion in the first 5 years) for SCHIP. The minimum allocation to a state was $2 million in any year.

The legislation also includes an additional $8 billion over 10 years ($4 billion in the first 5 years) to cover several Medicaid provisions (e.g. presumptive eligibility, continuous eligibility, and restoration of Medicaid to those who lost SSI due to the welfare legislation).

State Matching Requirements

State Matching Rate

States are required to provide matching funds in order to receive their state allocations.

The federal government will match states funds at 30% higher than the state’s FMAP (Federal Medical Assistance Percentage), which determines the portion of Medicaid expenses the federal government contributes. However, the maximum federal match is 85%.

For example: if a state’s FMAP is 50% (the federal government contributes 50%, and the state must pay 50% of its Medicaid expenses) the federal government will match funds under the SCHIP program at 65% [.30 x 50%= 15% and 50% + 15% = 65%].

State Matching Rate and the Medicaid Expansion Option

If a state chooses to expand Medicaid with the SCHIP funds, the state allocation is paid out through an "enhanced" FMAP. The maximum enhanced FMAP is 85%.

The calculation is the same as in the previous example. For example, if a state FMAP is 50%, the federal government will pay 65% of the Medicaid expenses for children covered by this new program.

The state will receive the enhanced FMAP until the state’s SCHIP funds run out. If there are still Medicaid expenses, the state match reverts to the regular FMAP. Because of a fear of using up the SCHIP funds, states may choose to be conservative when expanding Medicaid eligibility. For example, a state may choose to expand Medicaid eligibility to 185% FPL, instead of the maximum 200%.

If a state chooses the Medicaid expansion option and also adopts the Medicaid presumptive eligibility option, children are covered at the enhanced FMAP until their Medicaid eligibility is determined. If they are found to be Medicaid eligible according to the eligibility criteria in place on June 1, 1997, future services are matched at the regular FMAP. If they are found to be Medicaid eligible according to the expanded Medicaid eligibility criteria, future services are matched at the enhanced FMAP.

Restrictions on Financing State Match

The law places several restrictions on how states finance their matching requirements. States cannot use:

·               any federal funds,

·               provider taxes, or

·               cost sharing with enrollees.

In addition, states cannot use SCHIP funds to meet their federal matching requirements for the Medicaid program.

State Maintenance Of Effort

In order to receive the SCHIP funds, states can not lower their Medicaid eligibility levels from what was in force on June 1, 1997. States must also maintain the same level of state spending on child health programs that they expended in 1996.


Federal Administration

The Center for Medicaid and State Operations in the Health Care Financing Administration (now the Centers for Medicare & Medicaid Services) administers the program.

State Plan

States must submit a plan to the Secretary of Health and Human Services in order to receive funds. The plan must include: the number of uninsured children, what the state is already doing, eligibility requirements (can target on the basis of geography, income, age, residency, etc.), benefits package offered, how it will be coordinated with Medicaid, and outreach to be conducted. States can submit amendments to their plans at any time. There are no explicit requirements that states use a public process in developing their plan. However, if the state submits an amendment to restrict eligibility or benefits, the state must ensure that it has allowed prior public notice of the change.

Cap on Administration

States cannot spend more than 10% of the funds on administration, including outreach and enrollment, and direct purchase of services. The Secretary may grant waivers to states seeking to spend more on these.

Data Collection and Reporting

Each state must submit an evaluation of the state’s plan in increasing the number of children with health insurance.


A summary of the provisions of Title XXI from the Balanced Budget Act of 1997 (P.L. 105-33), and Title XXI Legislation as amended by the D.C. Appropriations Bill (P.L. 105-100) may be found in two Word documents contained in a ZIP file available from CMS at:

Also see:

Much of the information in this topic was drawn from the Centers for Medicare & Medicaid Services' informational site on SCHIP at:

Other information was drawn from the National Governors' Association Center for Best Practices SCHIP website at:

Additional material was drawn from The National Conference of State Legislatures’ SCHIP website at:

The U.S. Department of Health and Human Services operates a SCHIP outreach website at:

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