Jay Rockefeller is making a lot of noise about a provision in the House health care bill that would fold the SCHIP (State Children’s Health Insurance Program) into the insurance exchanges when they begin running in 2013. Rockefeller, who changed the Senate Finance Committee bill to rescue SCHIP from the same fate, released this statement yesterday:

The Congressional Budget Office has been very clear that replacing CHIP with private health coverage will lead some children to lose their health coverage altogether, which is harmful and intolerable. Health care reform should improve the coverage children have – not take their coverage away.

I have spent my entire career working to protect children and other vulnerable populations, and will keep fighting to protect CHIP as health care reform goes to the Senate floor, and then moves to conference with the House of Representatives. We must do all we can to shield children from harm. Always.

As I understand how SCHIP works, states and the federal government both contribute to a program for children whose families don’t qualify for Medicaid but who cannot afford insurance on their own, allowing them to purchase affordable state-run plans. The mechanism for the exchanges is similar in that affordable coverage would be provided for those above Medicaid eligibility, up to 400% of the federal poverty level, but those individuals would get subsidies to purchase either private coverage or, in the House bill, a federal public option.

Supporters say there are advantages to this. One of them is John Dingell:

Pelosi’s office did not respond to calls and e-mails for comment. But another one-time CHIP champion, former Energy and Commerce Chairman John Dingell (D-Mich.), said that moving kids from CHIP to exchange plans has at least two distinct advantages: First, CHIP requires renewal every few years, leaving the program’s longevity to the whims of Congress. And second, exchange coverage could wrap kids and their parents into the same insurance plan — a strategy the Michigan Democrat says will increase enrollment of youngsters.

“The most important thing is to cover the children,” Dingell said in an email. “As effective as CHIP has been, families constantly must deal with long wait lists or block grants running out. Families in the Exchange or Medicaid will not have the same problems.”

But detractors note that children could fall through the cracks if put onto the exchanges, being offered more expensive coverage that their families may not be able to afford. The private coverage in the exchanges also may not be as comprehensive as it is under the various SCHIP plans.

Mike Lillis notes a side benefit – for insurance companies:

A recent report from Inside CMS, a trade publication, points to another reason that Democrats might have proposed an end to CHIP: Moving kids to the exchange “would significantly improve the risk pools for private insurers, a boon for insurers,” the paper reported, citing an unnamed Senate Democratic aide.

Of course, those improved risk pools could lead to lower overall premiums.

There is unquestionably a benefit to returning SCHIP coverage to the federal level. Many states are facing budget shortfalls and scaling back their SCHIP coverage or wait-listing patients. States which cannot deficit spend are always threats to cut children’s health. However, putting it on partially private exchanges, albeit administered by the federal government with some basic minimum standards that need to be met, does leave low-income children at least in part to the vicissitudes of the market.

Rockefeller’s insistence that SCHIP be retained is a big boon to those who support it. He will probably play a major role in the final negotiations. That, combined with children’s health advocates, could be determinative. So the House’s dropping of SCHIP may amount to nothing.

But the politics of this are pretty bad. One of the major achievements of this Congress is the passage of a 5-year SCHIP extension. Folding it into the exchanges in the health care bill just opens Democratic leaders up to criticism. One Republican has already begun:

Rep. Shelley Moore Capito (R-W.Va.) told The Charleston Gazette yesterday that the proposed CHIP repeal “is yet another example of pieces of this bill that just don’t add up.”

Capito has supported the CHIP program since she was in the state Legislature, she said. “The fact that [the health reform bill] takes aim at a popular program that we know is effective only further demonstrates that this bill isn’t ready for prime time.”

That’s probably not the last Republican we’ll hear from on this.