HHS Frees States from Strict Child Care Co-Pay and Payment Rules
Published Date: 5/12/2026
Rule
Summary
Starting July 13, 2026, states and territories get more freedom in running the Child Care and Development Fund (CCDF). This means they no longer have to limit family co-pays to 7% of income or follow strict rules on paying child care providers. These changes cut red tape and could save money, making it easier to support families and child care programs.
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Analyzed Economic Effects
4 provisions identified: 1 benefits, 0 costs, 3 mixed.
7% Co‑Payment Cap Rescinded
Starting July 13, 2026, HHS no longer requires States and Territories to cap family co-payments for CCDF at 7 percent of income. As of March 2026, 31 States plus the District of Columbia and 5 Territories limited co-payments to 7% or less (including 15 States and DC at exactly 7% and 16 States plus 5 Territories at less than 7%), but Lead Agencies may now set different sliding fee scales as long as co-payments are not a barrier to receiving assistance.
Grants/Contracts Requirement Removed
Effective July 13, 2026, States and Territories are no longer required to use some grants or contracts to provide direct CCDF services for infants and toddlers, children with disabilities, or children in underserved areas. Lead Agencies can continue to offer child care certificates/vouchers so parents can choose providers, and may still use grants or contracts if they prefer.
Prospective Provider Payment Option Restored
Beginning July 13, 2026, HHS rescinds the requirement that CCDF providers be paid prospectively; States and Territories may choose to pay providers prospectively or reimburse them. If a Lead Agency reimburses rather than pays prospectively, it must reimburse providers within 21 days of receiving a completed invoice.
Enrollment‑vs‑Attendance Payment Flexibility
As of July 13, 2026, States and Territories are no longer required to pay CCDF providers based on a child's authorized enrollment rather than attendance. Lead Agencies may choose to pay based on enrollment, pay in full if a child attends 85% of authorized time, allow full payment for five or fewer absences in four weeks, or adopt another justified approach in their CCDF Plan. The March 2024 estimate that enrollment‑based payment would cost $16.5 million per year is referenced in the rule preamble.
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