May 29, 2025
Medicaid and CHIP and Employee Benefit Considerations
Medicaid is a joint federal and state program that helps cover medical costs for people with limited income and resources. Federal rules exist that all state Medicaid programs must follow, including mandatory benefits, but as each state runs its own Medicaid program, eligibility requirements and benefits can vary from state to state.
CHIP (The Children’s Health Insurance Program) provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid. Each state offers CHIP coverage and works closely with its state Medicaid program. Each state program has its own rules about who qualifies for CHIP.
Medicaid and CHIP are the payors of last resort. Typically, all available resources, including employer-sponsored group health plans, must be utilized first.
Medicaid Expansion
- In 2014 the ACA expanded the availability of Medicaid to adults under age 65 up to 138% of the Federal Poverty Level.
- Within the 40 states that adopted the ACA Medicaid expansion, 90% of their funding for expansion enrollees comes from the Federal Government.
- In the 10 states that did not adopt expansion, eligibility rules vary based on income, family status, household size, disability, etc.
- Most states have websites dedicated to providing detailed eligibility and benefit information.
Congress is considering reversing the Medicaid expansion, perhaps as part of a budget reconciliation process, which requires only a simple majority in the Senate. If Medicaid expansion is rolled back, eligibility rules would vary to a larger degree on a state-by-state basis. In addition, it may result in increased enrollment in public Marketplaces and employer-sponsored group health plans.
Health Insurance Marketplaces
Upon enactment, the ACA required states to either establish their own health insurance Marketplace or to participate in the federally-facilitated Marketplace. These Marketplaces, or Exchanges, are the avenue through which individuals can qualify for premium tax subsidies to help pay for individual health insurance premiums based on their household income and whether they have affordable coverage through their employer. Typically, these Marketplaces will also redirect individuals to the state’s Medicaid or CHIP program if they qualify for either. Individuals who qualify for Medicaid will not be eligible for a premium assistance subsidy.
HIPAA Special Enrollment
When a HIPAA special enrollment event occurs, a plan is required to permit the special enrollee to enroll in coverage mid-plan year if the request is made within the required timeframes. If enrollment is timely requested, the plan must permit coverage to go into effect no later than 1st of the month following when enrollment was requested (not necessarily the date of the event), except that following a birth or adoption, coverage must be available retroactive back to the date of the birth or adoption.
In general, plans are required to give special enrollees 30 days to request special enrollment; however, if the special enrollment event was a loss of Medicaid/CHIP or new eligibility for a Medicaid or CHIP premium subsidy, the plan must allow special enrollees up to 60 days to request enrollment.
Premium Assistance
A considerable number of states offer funds from their Medicaid or CHIP programs to eligible individuals to use toward employer-sponsored health plan premiums. If a benefit eligible employee or dependent is eligible for a Medicaid or CHIP premium assistance subsidy, employers are required to accept these payments.
Employers can receive the state subsidy in one of two ways.
- First, the employer can forgo premium deductions from employees and retain the state subsidy directly.
- Alternatively, employers have the option to continue collecting premium deductions from the employee and remit the subsidy to the employee. Employers may decide it is advantageous to continue collecting premiums and subsequently remit subsidy payments to employees in recognition of the fact that subsidy payments are not always provided in a timely manner.
Employers are required to send a notice describing the availability of these premium assistance programs to benefit eligible employees who reside in a state that offers these programs. The notice, on the Department of Labor website, provides information about the programs and lists each state that currently participates.
While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.
