Children' Health Insurance Program — Special Topics — Home

The President signed the new State Children's Health Insurance Program (SCHIP) into law on August 5, 1997. The Balanced Budget Act of 1997 (Public Law 105-33) created SCHIP under Title XXI of the Social Security Act. SCHIP enables States to initiate and expand health insurance coverage for uninsured, low-income children. Under SCHIP States have the option of electing to expand coverage for these children through the Medicaid program, establish a separate child health insurance program, or use a combination of the Medicaid program and a separate child's health insurance program.

The Department of Health and Human Services is pleased to be a part of this historic initiative and is looking forward to working with States on the implementation and oversight of these programs. These programs will make an unprecedented investment and contribution to the quality of life for millions of vulnerable children.

The purpose of this letter is to provide a summary of SCHIP, to provide information on coverage for mental health and substance abuse services under SCHIP and to recommend that you become involved in your State's planning process to develop a child health assistance program for uninsured, low-income children that also appropriately addresses the needs of children with mental illness or addictive disorders.

Overall, all uninsured children (up to age 19) who are ineligible for Medicaid, are eligible for SCHIP. The program can cover children with family incomes up to 200 percent of poverty. If Medicaid eligibility levels are already close to or above this level, a State may include children up to 50 percentage points higher than their Medicaid eligibility as of June 1, 1997.

States choosing SCHIP to provide child health assistance coverage must ensure that the benefits package available to children meets the requirements of one of the following,
1. Benchmark Coverage- A plan that has health benefits coverage that is equivalent to the benefits covered in commercial insurance plans (e.g., Blue/Cross Blue Shield for federal employees, a state employee health plan, or the largest HMO in the State).

2. Benchmark-Equivalent- A plan having the same actuarial value as the benchmark benefit package.

3. Any other health benefits plan the Secretary of the Federal Department of Health and Human Services determines provides appropriate coverage for the targeted population.

4. Coverage of comprehensive benefits provided by approved existing State plans offered in New York, Pennsylvania or Florida. (These State plans have been "grandfathered" into the legislation.)

The basic benefits category includes: inpatient and outpatient hospital services, physician services, lab and x-ray, well-baby and well-child care, including age-appropriate immunizations.

The additional services category includes: coverage of prescription drugs, mental health services, vision services, and hearing services.

The optional services category includes any category of service not described above, including inpatient, outpatient, and residential substance abuse treatment services.

A State choosing a benchmark-equivalent plan must provide for at least the benefits in the basic benefits category plus at least 75 percent of the actuarial value of coverage under the plan for each of the additional services category. Also, States may elect to provide benefits from the optional services category.

States may choose the option to provide child health insurance coverage through expansion of their existing Medicaid program. To receive grants, a State must maintain Medicaid eligibility levels for children that were in effect in June 1997. A State that provides benchmark coverage or benchmark equivalent coverage must screen applicants for possible Medicaid coverage and enroll Medicaid-eligible children into Medicaid rather than SCHIP.

SCHIP will provide Federal matching funds to States to initiate and expand health insurance coverage to uninsured, low-income children. SCHIP provides for approximately $24 billion during the next five years. For fiscal year 1998, the total amount allocated for the program is $4.275 billion. Based on a formula grant, each State will receive a minimum floor of $2 million. Funding for the new program was available to States on October 1, 1997.

To be eligible for funds, States must submit to and obtain approval from the Secretary for a State Child Health Plan. Under the law, a State plan is considered approved in 90 days unless the Secretary notifies the State in writing that the plan is disapproved or that specified additional information is needed. If a State wishes to use Medicaid to expand coverage through Title XXI, it must submit a Medicaid plan amendment for an eligibility expansion. This plan should encompass all of the child's health assistance being provided using Title XXI funding. Noting that is important, once a Title XXI plan is approved, the State will be obligated to continue providing Benefits as described in that plan until the plan is amended. (The same is true for Medicaid.)

Funding will be provided to the States as a block grant, leaving the State with great flexibility to design and implement their own programs. States are given a choice in how they participate in SCHIP-- through expansion of the Medicaid program above current State eligibility requirements for coverage of children; or creation of a new State program for children's health insurance, or both.

Title XXI statue provides that funding under SCHIP may be used to pay for inpatient mental health services, including services furnished in a State-operated psychiatric hospital and residential or other 24 hour therapeutically planned structured services. Also, funds may be used for the payment of outpatient mental health services. (See Section 2110(a)(10)(11) of the Act.)

Also, Title XXI permits funding under SCHIP to pay for inpatient substance abuse treatment services, including residential and outpatient substance abuse treatment services. (See Section 2110(a)(18)(19)of the Act.)

There are several provisions in Title XXI that will have a significant impact on States providing mental health and/or substance abuse services to children and adolescents.

The provisions of Title XXI impose the following requirements on all health plans receiving funding through the SCHIP:

• Compliance with the Mental Health Parity Act of 1996, guaranteeing non-discrimination for mental health benefits with respect to annual caps and lifetime limits.



• Coverage equal to 75 percent of the actuarial equivalence of mental health benefits provided in a State's benchmark plan. Because the benchmark plan options generally provide mental health services as part of their overall package, this would likely guarantee at least some mental health coverage under the children's health initiative in most states.

A child who is a patient in an Institution for Mental Disease (IMD) is not eligible to receive health insurance or services under SCHIP, even if he or she is receiving medically necessary inpatient services otherwise covered by the health plan.

The Personal Responsibility and Work Opportunity Act (PRWOA) of 1996, established a new definition of childhood disability for receipt of SSI benefits. Under the new definition, some children will lose their SSI and their Medicaid eligibility as well. Under the State Children's Health Insurance Program, States are required to continue Medicaid coverage for disabled children who were receiving SSI on the date of enactment of the Personal Responsibility and Work Opportunity Act (PRWOA), if they lose SSI because of the new definition of disability.

States have the option of giving children who appear to qualify for Medicaid presumptive eligibility for short periods, pending final processing of their Medicaid applications. Once they determine eligibility, States may offer 12 months continuous eligibility.

Your participation at the State level in development of your State's children's health insurance plan is strongly encouraged. It is critical that you identify the planning body in your State for the children's health insurance program and participate in its development. Because States can provide substance abuse treatment services as "optional services," participation in your State's planning body may ensure their inclusion. Although SCHIP includes mental health services as "additional services," the statute does not address the types of mental health services required to address the mental health concerns for children. The SCHIP emphasizes mental health services delivered by hospitals to the detriment of community-based services.

Enclosed are reserved State allotments that are estimates of States' FY 1998 Title XXI payments, if each State submitted and received approval for a State child health plan. Also enclosed is a resource listing of World Wide Website information that will provide links to selected child health publications, a summary of SCHIP guidelines, and a portfolio of other resources.

We are interested in working with you to improve the health of all children with mental illness and/or addictive disorders. If you have any further questions, you may contact SAMHSA's Children's Health Representative, Duiona R. Baker, M.P.H. at (301)-443-5184.

Nelba Chavez, Ph.D.
Administrator
Enclosures