New Jersey has filed a civil suit in the U.S. District Court in Newark, in an effort to preserve states’ ability to enroll what they say are moderate-income children in State Children’s Health Insurance Program plans.

New Jersey Gov. Jon Corzine, a Democrat, says income-limit guidance that the U.S. Department of Health and Human Services issued in August would force New Jersey to stop subsidizing health coverage for about 10,000 children in the state.

“SCHIP is an unqualified bipartisan success in New Jersey and in states across the nation, and the Bush administration’s determination to pursue a course of action that will harm our children’s health is incomprehensible,” Corzine says.

President Bush and HHS officials say states are getting too far away from the original SCHIP goal of providing health coverage for low-income children.

“We are confident that our requirements are appropriate and will be sustained in a court of law,” says Jeff Nelligan, a spokesman for the Centers for Medicare and Medicaid Services. “Our chief goal with SCHIP is to ensure that the poorest kids and those with no health insurance are placed at the front of the line.”

California Gov. Arnold Schwarzenegger, a Republican, has agreed to join with New Jersey in the battle against the administration’s approach to setting SCHIP income guidelines.

Aside from Schwarzenegger, the governors of the other states supporting the Corzine suit are Democrats.

Other states that say they will join the SCHIP income limit battle include Arizona, Illinois, Maryland, New Hampshire, New York and Washington, officials say.

The bill that has authorized SCHIP expired Sept. 30, but there is a continuing resolution to keep it going until Nov. 16.

President Bush recently vetoed H.R. 976, a bill that would have extended SCHIP authorization. (See story above.)

Under the SCHIP, that has just expired, the CMS had been permitting states to use SCHIP funds to cover children in families with incomes up to 300% to 400% of the federal poverty limit as well as children in families with incomes closer to the federal poverty limit.

In August, administration officials told states in a letter the government would stop reimbursing them for covering children in families with incomes over 250% of the federal poverty level unless the states first showed they had provided coverage for almost all low-income children.

New Jersey officials argue in their complaint, in State of New Jersey vs. U.S. Department of Health and Human Services, that the Bush administration failed to use the usual public rule-making process when it told them about the 250% federal poverty level income limit.

New Jersey now covers children in homes with incomes up to 350% of the federal poverty level.