Some states provide for a “buy-in” to the equivalent of the state’s Children’s Health Insurance (CHIP) program by individuals who have income exceeding the eligibility levels for the actual CHIP program. A question had arisen about whether such individuals would be disqualified from eligibility for the premium credit under IRC §36B due to having access (albeit often at full, unsubsidized cost) to a CHIP-like program.

The CHIP program is a program that qualifies as minimum essential coverage and, generally, individuals who qualify for such a government program is deemed to be eligible for minimum essential coverage and, thus, not eligible to obtain a tax credit for any marketplace coverage the taxpayer may obtain in lieu of the program coverage.

The “buy-in” programs require the eligible taxpayer to pay in premiums to obtain coverage and generally receive little or no government subsidy of such premiums.

In Notice 2015-37 the IRS addressed this issue, determining that such individuals will only be deemed “eligible for minimum essential coverage” for purposes of the credit only for the period the person is actually enrolled in the coverage. Or, to put it more simply, so long as the individual who is not eligible for CHIP coverage does not actually enroll in the equivalent program, the individual will be eligible to obtain a credit for coverage obtained from the state marketplace.

The IRS determined that such programs are neither authorized nor funded under title XXI of the Social Security Act and are, therefore, not government-sponsored minimum essential coverage under IRC §5000A(f)(1)(A).

The notice also provides that since a CHIP “buy-in” program itself is not in a statutorily designated class as being “minimum essential coverage” a program would need to apply to be designated to qualify as such with the Department of Health and Human Services.