From the Hotline: CHIP Interaction with Child Health Care Coverage

Question: An employee has acquired health insurance coverage for her child under the Children’s Health Insurance Program (CHIP). Can this employee drop group coverage for the child due to the coverage through CHIP?

Answer: Having her child become newly eligible for CHIP coverage is not a qualifying event under Internal Revenue Code section 125 which would allow the employee to drop coverage for the child. In general, part of the premise behind CHIP is that it does not replace existing private or public coverage. As such, CHIP generally coordinates coverage with another health plan and, like Medicaid, is always secondary to the other health plan in terms of expense payment.

In addition, under the special enrollment opportunity rules outlined in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), a special enrollment opportunity is triggered to allow an employee to enroll in the group health plan (but not to drop coverage) when dependent children become eligible for CHIP. HIPAA special enrollment is triggered if the employee or dependent who is otherwise eligible, but not enrolled in, a group health plan either (1) loses eligibility for coverage under a state Medicaid or CHIP program, or (2) becomes eligible for state premium assistance under a Medicaid or CHIP program. The plan must provide at least 60 days for the employee or dependent to request coverage after the employee or dependent loses eligibility for coverage or becomes eligible for premium assistance.