CHIP Buy-in Programs May Qualify as Minimum Essential Coverage

Under Notice 2015-37, an individual who may enroll in a Children’s Health Insurance buy-in program (CHIP) that has been recognized as minimum essential coverage by the Department of Health and Human Services (HHS) will be treated as eligible for minimum essential coverage under the program for purposes of the premium tax credit only for the period the individual is enrolled.

Some states permit individuals whose household income exceeds eligibility levels for CHIP to nonetheless enroll in CHIP coverage. These programs are usually called CHIP “buy-in” programs and require participants to pay the premiums with little or no government subsidy. Because the programs are not authorized or funded under title XXI of the Social Security Act, they are not government-sponsored minimum essential coverage for purposes of the individual mandate penalty (Sec. 5000A(f)(1)(A)). To help individuals enrolled in such coverage, however, HHS may, upon application by a state, recognize CHIP buy-in programs as minimum essential coverage.

Some people who otherwise would be eligible for subsidized qualified health plan coverage can enroll in coverage through a CHIP buy-in program only at high cost. In states offering a CHIP buy-in program that the HHS has recognized as minimum essential coverage, taxpayers who could enroll in the program would be considered ineligible for the premium tax credit because they were eligible for minimum essential coverage (the CHIP buy-in program), regardless of whether they enrolled in the program or not.

To help these individuals, Notice 2015-37 provides that when a state offers a CHIP buy-in program that counts as minimum essential coverage, taxpayers who could enroll in that program will be considered eligible for minimum essential coverage because of the program only during periods they are actually enrolled in the program, and thus the existence of the CHIP buy-in program will not make them ineligible for the premium tax credit in periods they are not enrolled in the program.

The notice is effective for coverage on or after Jan. 1, 2015.

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