Congress enacted the State Children's Health Insurance program (SCHIP) in 1997 to expand health insurance coverage to children of low-income families. This program entitles states to block grants in order to initiate and expand health insurance programs for low-income children with higher federal matching payments than under Medicaid. The program is designed to make funds available only for those uninsured children who were not eligible for Medicaid but whose families have incomes below 200 percent of the federal poverty level.3 The SCHIP legislation gave states the option of using Medicaid, a separate state program, or some combination of the two to expand coverage. The SCHIP legislation, along with other provisions of the Balanced Budget Act of 1997, also gave states greater flexibility to streamline the eligibility determination process under both Medicaid and SCHIP by allowing them to implement presumptive and continuous eligibility for children. By the end of 1999, all states had received federal approval to participate in the program, and by 2002 most states provided coverage to children in families with income at or above 200 percent of the poverty guidelines.
States have considerable flexibility in the design of their SCHIP programs; however, the federal government establishes basic guidelines. These standards primarily affect program eligibility, scope of benefits, and out-of-pocket costs. States define the eligibility standards for health assistance under their own plans. These standards include those related to geographic areas served, age, income and assets, residency, disability status, access to or coverage under other health plans, and duration of eligibility.