CBO: Individual mandate repeal cuts cost of five-year CHIP funding extension

U.S. Capitol Building
The CBO now estimates that funding CHIP for five years would cost just $800 million. (Leslie Small)

The repeal of the Affordable Care Act's individual mandate has made it significantly cheaper to fund the Children’s Health Insurance Program for five more years.

That’s the conclusion of the Congressional Budget Office, which updated its cost estimate for the Senate’s CHIP reauthorization bill at the request of Finance Committee Chairman Orrin Hatch, R-Utah. Hatch, who recently announced that he won’t seek another term, both helped create CHIP and supported repealing the individual mandate in the GOP tax reform bill.

But what does funding for CHIP have to do with the individual insurance market? A lot, considering that if Congress fails to reauthorize funding for CHIP, many children will have to seek coverage in the Affordable Care Act marketplaces instead.

And as the CBO has estimated previously, repealing the individual mandate will increase premiums in those marketplaces. For those who are subsidy-eligible, higher premiums mean higher tax credits—for which the federal government foots the bill.

“As a result, the federal cost of enrolling a child in coverage through the marketplaces will be higher,” the agency said.

But if Congress funds CHIP for five additional years—as the Senate bill aims to do—some children would be covered under CHIP rather than through the marketplaces. Therefore, rather than the $8.2 billion price tag for a five-year CHIP extension that the CBO previously estimated, it now puts the cost at just $800 million over the 2018-2027 period.

The CBO’s revised estimate is significant because the primary reason that Congress hasn’t reauthorized CHIP funding is the disagreement among Democrats and Republicans over how to pay for it. Federal funding for the program, which insures 9 million children, expired Sept. 30.

The spending bill that lawmakers passed before the holiday break authorized $2.85 billion in funding to tide states over in the short term, but many state officials have still been preparing contingency plans for when they run out of money. In fact, some states will start running out of money after Jan. 19, a Centers for Medicare & Medicaid Services official told Kaiser Health News.

Editor's note: This article has been updated to clarify that the CBO's original cost estimate for the CHIP funding bill was $8.2 billion.