CHIP Program Ends; Its Tobacco Tax Does Not

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Congress Lets Children's Health Insurance Program Expire

With the start of the new fiscal year, another government program is getting the axe due to a lack of funding. This time the program on the chopping block is the Children’s Health Insurance Program (CHIP). This program provided federal funding to states in support of basic healthcare for children.

While this may seem out of place on a tobacco business website, CHIP had a great impact on cigar manufacturers and consumers. The program was first passed into law in 1997 during the Clinton administration, aimed at providing coverage for children in families with low and moderate incomes and pregnant women. Long before the Affordable Care Act, CHIP lowered the number of children who were uninsured from 14 percent when it was first launched to 4.5 percent in 2015. It was renewed in 2015 and was due to be renewed again by Sept. 30, 2017. Ironically, the Republican-lead Congress’ attempts to repeal the Affordable Care Act allowed CHIP to go unrenewed as it wasn’t an immediate focus of Congress.

CHIP cost the federal government about $13.6 billion in 2016 as it provided many services including routine checkups, immunizations, doctor visits, prescriptions, dental and vision care and other medical and emergency services. To help fund CHIP (sometimes known as SCHIP), a federal excise tax that was capped at 40.26 for each cigar and at 52.75 percent was imposed on every cigar imported into the U.S. CHIP also increased the federal tax on cigarettes to $1, up from 39 cents.

While the CHIP program itself is going away, the tobacco tax associated with it is not. It’s funds still support several states’ health services. If CHIP isn’t renewed, funds will be depleted and states will be without any funding to support these health services.

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