The Children’s Health Insurance Program, or CHIP, is a key piece of the social safety net. Let’s take a look at what CHIP is, how it is financed, and who benefits from it.
1. CHIP covers about 10 percent of the nation’s children.
CHIP was created in 1997 and covers children in families that are ineligible for Medicaid due to their income but still have difficulty purchasing health insurance. Income eligibility differs by state, ranging from 185 percent of the federal poverty level (FPL) in Idaho to 400 percent of the FPL in New York. Nationally, the program covered 7.2 million people at the end of 2025 — most of whom were children. Since the program was enacted almost 30 years ago, the percentage of uninsured children has dropped from 14.0 percent to 5.6 percent.
2. CHIP is jointly funded by the federal and state governments and is designed to give states flexibility in implementation.
Similar to Medicaid, CHIP is funded jointly by the federal and state governments. To encourage states to expand coverage for children, the federal government matches state spending on CHIP at a higher rate that is at most 15 percentage points higher than the Medicaid matching rate. In 2024, CHIP cost a total of $28.2 billion, with the federal government funding about 70.1 percent of that amount. If states do not use their matching funds within two years, leftover money is reallocated to states that have exhausted their funds or have seen increases in enrollment. Because CHIP is funded as a block grant, Congress must regularly reauthorize the program. The most recent reauthorization of CHIP was passed in 2018 and funds the program through the 2027 fiscal year.
As a federal-state partnership, CHIP affords states considerable flexibility in how they design and administer their programs. States may implement the program by expanding Medicaid to cover children eligible for CHIP, establishing standalone CHIP programs, or using a combination of both. (Most states have combination programs.) States also have the flexibility to design the benefit package as well as the level of premium and cost-sharing, within the program’s guidelines.
3. CHIP plays an important role in keeping insurance affordable for families.
To keep insurance affordable for families, CHIP limits premiums and cost-sharing. Families with children enrolled in standalone CHIP plans can be charged premiums, copayments, deductibles, and other fees up to 5 percent of their household income combined. Premiums are generally prohibited for families below 150 percent of the FPL. The restrictions on out-of-pocket spending can make a significant difference for families that do not qualify for cost-sharing assistance for marketplace plans due to their income level. Moreover, CHIP plans tend to cover a higher percentage of costs than marketplace plans.
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