[Federal Register Volume 59, Number 88 (Monday, May 9, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11097]
[[Page Unknown]]
[Federal Register: May 9, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 434 and 435
[MB-044-P]
RIN 0938-AF15
Medicaid Program; Requirements for Certain Health Insuring
Organizations and OBRA '90 Technical Amendments
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend the Medicaid regulations to:
make those health insuring organizations (HIOs) that provide or arrange
for health care services to Medicaid recipients, but are not subject to
the requirements for health maintenance organizations (HMOs) set forth
in section 1903(m)(2)(A) of the Social Security Act, subject to the
regulations governing prepaid health plans (PHPs); and
Incorporate technical amendments relating to HMO enrollment,
disenrollments, guaranteed eligibility and provisional status made by
1990 legislation.
DATES: Written comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5 p.m. on July 8,
1994.
ADDRESSES: Mail written comments (original and 3 copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: MB-044-P, P.O. Box 7518,
Baltimore, MD 21207.
If you prefer, you may deliver your written comments (original and
3 copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW.,
Washington, DC 20201; or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,
Maryland 21207
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code MB-044-P. Written comments received timely will be
available for public inspection as they are received, generally
beginning approximately 3 weeks after publication of a document, in
room 309-G of the Department's offices at 200 Independence Avenue, SW.,
Washington, DC, on Monday through Friday of each week from 8:30 a.m. to
5 p.m. phone: (202) 690-7890.
FOR FURTHER INFORMATION CONTACT: Mike Fiore, (410) 966-4460.
SUPPLEMENTARY INFORMATION:
I. Health Insuring Organizations
A. Background
Under the Medicaid program, States may arrange for the provision of
services to Medicaid recipients through contracts with managed care
entities such as health maintenance organizations (HMOs), health
insuring organizations (HIOs), and prepaid health plans (PHPs).
An HIO is an entity that receives a premium or subscription charge
from the State, typically based on the number of persons enrolled in
the HIO, and assumes some risk of loss if the cost of the actual
services exceeds the monthly capitation amount. Unlike HMOs or PHPs,
the original HIOs did not themselves provide or arrange for health care
services for their enrollees, but merely paid for the cost of services
furnished to their members by independent providers. These original
HIOs were essentially risk-bearing fiscal agents.
In recent years, certain entities that contracted with providers
and required their enrolled members to obtain all of their medical care
exclusively from these providers have either retained or adopted the
label ``HIO'' in order to avail themselves of the less burdensome
regulatory requirements applicable to HIOs, compared to the
requirements applicable to HMOs or CMPs. This practice has had the
effect of subjecting enrollees to the same membership restrictions that
are characteristic of HMOs and PHPs, without the regulatory safeguards
afforded the HMO and PHP enrollees.
Contracts between State agencies and HIOs that act as risk-bearing
fiscal agents are made under the broad authority of section
1902(a)(4)(A) of the Social Security Act (the Act), which provides for
``such methods of administration * * * as are found by the Secretary to
be necessary for the proper and efficient operation of the plan'', and
are subject to the regulatory requirements of 42 CFR 434.40. Section
434.40 provides that HIO contracts must meet certain capitation,
underwriting risk, and reinsurance requirements, but it is silent with
regard to emergency services, grievance procedures, marketing
practices, inspection of financial records, and other important
regulatory issues that apply to HMOs and PHPs. Section 434.40 also
specifies that HIO contracts must conform to Sec. 434.6, that is, the
general requirements for all contracts and subcontracts entered into
between State agencies and providers as set forth in part 434.
Contracts with HMOs (and, as a result of legislation discussed
below, some HIOs) that provide or arrange for ``comprehensive
services'' on a risk basis are subject to the requirements of section
1903(m)(2) of the Act and implementing regulations under Secs. 434.20
through 434.36. ``Comprehensive services'' are defined under
Sec. 434.21(b) as inpatient hospital services and any of the following
services, or any three or more of the following services or groups of
services: (1) Outpatient hospital services and rural health clinic
services; (2) other laboratory and x-ray services; (3) skilled nursing
facility (SNF) (now referred to as nursing facility (NF)) services and
early and periodic screening, diagnosis, and treatment (EPSDT), and
family planning; (4) physicians' services; and (5) home health
services.
Those HIOs which provided or arranged for the delivery of
comprehensive services (and assumed financial risk for those services)
were made subject to these HMO requirements by section 9517(c) of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA '85) with
some exceptions. The provisions of section 9517(c) of COBRA '85 were
not made applicable to HIOs that became operational before January 1,
1986. Also, HIOs that became operational after that date but which
operate under a waiver approved under section 1915(b) of the Act before
that date, were exempted by section 9517(c) from HMO requirements
related to composition of enrollment and the right of enrollees to
disenroll without cause, under sections 1903(m)(2)(A)(ii) and
1903(m)(2)(A)(vi) of the Act, respectively. (Note: Section
9517(c)(2)(b) of COBRA erroneously identified the exception clauses as
(ii) and (iv). Section 1895(c)(4) of the Tax Reform Act of 1986, Public
Law 99-514, corrected this error.)
Section 9517(c) of COBRA '85 was silent on the requirements
applicable to HIOs which it did not subject to HMO requirements. This
would include those HIOs within the explicit exceptions discussed
above, as well as HIOs with risk contracts providing less than
comprehensive services.
We believe that it would be inappropriate to permit an HIO that
provides or arranges for services, yet is not subject to HMO rules, to
remain subject to the HIO rules at Sec. 417.40 governing those HIOs
that only function as risk-bearing fiscal agents. We did not, however,
include such a provision in proposed regulations published on August
25, 1988 (53 FR 32406). Those proposed regulations, which were designed
to implement the statutory amendment subjecting some HIOs to section
1903(m) of the Act, thus would permit HIOs that provide or arrange for
less than comprehensive services on a risk basis to be subject only to
the rules governing HIOs that perform the original basic HIO services
of paying for and assuming risk for health care services. In the final
rule published on December 13, 1990 (55 FR 51292), we recognized the
omission and declared our intent to publish, in a separate proposed
rule, revisions to the regulations that would make all HIOs that
provide or arrange for services subject to the same regulations as PHPs
if they are exempt from section 1903(m)(2)(A). However, we did not
provide for a comment period on this policy. This document provides
that comment period. Regulations that apply to PHPs are contained in
Secs. 434.20 through 434.36 and are derived from the authority granted
to the Secretary under section 1902(a)(4)(A) of the Act, not section
1903(m)(2)(A) as discussed above. These are the same regulations that
apply to Medicaid-contracting HMOs.
B. Provisions of the Proposed Rule
This proposed rule would subject all HIOs that assume risk and
provide or arrange for services, but are exempt from section
1903(m)(2)(A) of the Act, to the same requirements that apply to PHPs
as set forth in Secs. 434.20 (d) and (e), 434.21 through 434.36, and
434.50 through 434.65. It would affect (1) HIOs that provide or arrange
for comprehensive services and either were operational before January
1, 1986 or are otherwise exempted from section 1903(m)(2)(A) of the Act
by statute, and (2) HIOs that provide or arrange for less than
comprehensive services. We propose to amend Sec. 434.44 by adding a new
paragraph (c) to incorporate this provision.
This proposed rule also would expressly limit the applicability of
the existing HIO requirements at Sec. 434.40 to HIOs that only process
claims and underwrite risk and do not provide or arrange for the
delivery of health care services.
In addition, we propose revising the definition of ``prepaid health
plan'' at Sec. 434.2 to include HIOs that provide or arrange for health
care services.
II. Technical Revisions--Omnibus Budget Reconciliation Act of 1990
Section 4732 of the Omnibus Budget Reconciliation Act of 1990 (OBRA
'90) made several changes to the Social Security Act which affected
HMOs and Medicare-contracting competitive medical plans (CMPs) (defined
in Sec. 417.407(c)) which participate in the Medicaid program.
A. Waiver of Enrollment Requirements
Before the enactment of OBRA '90, an HMO that was a public entity
could receive a waiver of the composition of enrollment requirement
that Medicare and Medicaid recipients constitute less than 75 percent
of the entity's total enrollment only if HCFA determined that the
entity had special circumstances and the entity continued efforts to
enroll individuals who were not eligible for Medicare or Medicaid.
Section 4732(a) of OBRA '90 eliminated the requirement that special
circumstances must exist as the basis for granting the waiver.
We propose to revise our regulations at Sec. 434.26 (b)(2) and
(b)(3) to eliminate the requirement for the existence of special
circumstances in order for HCFA to grant a waiver of the composition of
enrollment requirements.
B. Guaranteed Eligibility in CMPs
Section 4732(b)(1) of OBRA '90 amended section 1902(e)(2)(A) of the
Act (which allows for a minimum guaranteed enrollment period of up to 6
months) to add CMPs that contract with Medicare under section 1876 to
the list of entities that, at a State's option, may deem individuals
who lose eligibility before the end of the minimum enrollment period,
to continue to be eligible until the end of the period.
We propose to amend Secs. 435.212 and 435.326 to identify CMPs that
contract with Medicare as one of the entities with which States may
guarantee Medicaid eligibility.
C. Disenrollments in CMPs
Section 4732(b)(2) of OBRA '90 amended section 1903(m)(2)(F) of the
Act, which, for purposes of Federal financial participation (FFP)
imposes disenrollment restrictions on certain prepaid health plans, to
add CMPs that contract with Medicare to the list of entities that may,
at a State's option, restrict disenrollment without cause for Medicaid
enrollees for up to 6 months. Disenrollment without cause would be
permitted only in the first month of each period of enrollment.
We propose to amend Sec. 434.27(d)(1) to add a new paragraph (vi)
to identify CMPs that contract with Medicare as one of the
organizations, with which States may contract, that may restrict
disenrollment rights of Medicaid enrollees.
D. Reenrollment in HMOs
Section 4732(c) of OBRA '90 amended section 1903(m)(2) of the Act
to provide that if a Medicaid-eligible individual is enrolled in an HMO
in a given month and loses eligibility in the next month (or in the
next 2 months) but in the succeeding month is again eligible for
Medicaid benefits, the State agency may enroll that individual in the
same HMO in which he or she was enrolled at the time of loss of
eligibility.
We propose to add a new Sec. 434.25(c) to incorporate this
provision. We also propose to add a new paragraph (h) to Sec. 434.27 to
explain that a new restricted period of disenrollment begins following
each period of ineligibility as outlined by Sec. 434.25(c).
E. Elimination of Provisional Qualification of HMOs
Section 4732(d) of OBRA '90 amended section 1903(m) of the Act to
eliminate a provision under which a State Medicaid agency could
determine that a Federally qualified HMO was in provisional status
because more than 90 days had elapsed since the HMO applied to the
Public Health Service (PHS) for Federal qualification and the PHS had
not made a final determination. This status continued until the PHS
made the final determination or the contract with the Medicaid agency
was terminated, whichever occurred first.
Section 434.20 of the Medicaid regulations contained the provision
that allowed State agencies to contract with provisional status HMOs
and Sec. 434.72 provided for FFP in expenditures for payments to these
provisional status HMOs. We propose to revise Sec. 434.2 to delete the
definition of a provisional status HMO, revise Sec. 434.20(a)(l) to
remove all references to provisional status HMOs, and delete
Sec. 434.72 in its entirety.
III. Regulatory Impact Statement
We generally prepare a regulatory flexibility analysis that is
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601
through 612), unless the Secretary certifies that a proposed rule would
not have a significant economic impact on a substantial number of small
entities.
The RFA defines ``small entity'' as a small business, a nonprofit
enterprise, or a governmental jurisdiction (such as a county, city, or
township) with a population of less than 50,000. We do not consider
States to be small entities. However, we do consider HMOs, PHPs, and
HIOs to be small entities.
The provision that would subject HIOs that provide or arrange for
services to the requirements governing PHPs would affect HIOs in at
least three States. HIOs in two of these States that are currently
fully operational serve a 3 combined Medicaid enrollment of
approximately 43,800 individuals. These HIOs currently operate under
section 1915(b) freedom of choice waivers which require adequate access
to quality services. They are also regulated by their respective States
in a manner similar to HMOs and PHPs. There is no anticipated change in
operation other than they would be required to afford HIO Medicaid
enrollees the same protections as those Medicaid enrollees enrolled in
other prepaid plans that arrange for or provide services.
The technical provisions in this proposed rule are necessary to
conform the Medicaid regulations to provisions of OBRA '90. We
anticipate that these provisions would have a negligible impact.
We have not prepared a regulatory flexibility analysis because we
have determined, and the Secretary certifies, that this proposed rule
would not have a significant economic impact on a substantial number of
small entities.
Also, section 1102(b) of the Social Security Act requires the
Secretary to prepare a regulatory impact analysis for any proposed rule
that may have a significant impact on the operations of a substantial
number of small rural hospitals. Such an analysis must conform to the
provisions of section 603 of the RFA. For purposes of section l102(b)
of the Act, we define a small rural hospital as a hospital with fewer
than 50 beds located outside a metropolitan statistical area. We have
determined, and the Secretary certifies that this proposed rule would
not have a significant impact on the operations of a substantial number
of small rural hospitals.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
IV. Paperwork Reduction Act
This proposed rule does not contain any information collection
requirements that are subject to review by the Executive Office of
Management and Budget (OMB) under the authority of the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501 et seq.).
V. Response to Public Comments
Because of the large number of items of correspondence we normally
receive on a proposed rule, we are not able to acknowledge or respond
to them individually. However, we will consider all comments that we
receive by the date and time specified in the ``Dates'' section of this
preamble, and we will respond to the comments in the preamble of the
final rule that is issued.
List of Subjects
42 CFR Part 434
Grant programs-health, Health maintenance organizations (HMO),
Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 435
Aid to Families with Dependent Children, Grant programs-health,
Medicaid, Reporting and recordkeeping requirements, Supplemental
Security Income (SSI), Wages. 42 CFR Chapter IV would be amended as
follows:
A. Part 434 would be amended as set forth below:
PART 434--CONTRACTS
1. The authority citation for part 434 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. In Sec. 434.2, the introductory text is republished, the
definition of ``Prepaid health plan'' is revised and the definition of
``Provisional status HMO'' is removed, to read as follows:
Sec. 434.2 Definitions.
As used in this part, unless the context indicates otherwise--
* * * * *
Prepaid health plan (PHP) means an entity, including an HIO, that
provides or arranges for the provision of medical services to enrolled
recipients, under contract with the Medicaid agency and on the basis of
prepaid capitation fees, but is not subject to the requirements in
section 1903(m)(2)(A) of the Act.
* * * * *
3. In Sec. 434.20, the introductory text of paragraph (a) is
republished and paragraph (a)(1) is revised to read as follows:
Sec. 434.20 Basic rules.
(a) Entities eligible for risk contracts for services specified in
Sec. 434.21. A Medicaid agency may enter into a risk contract for the
scope of services specified in Sec. 434.21 only with an entity that--
(1) Is a Federally-qualified HMO;
* * * * *
4. In Sec. 434.25, a new paragraph (c) is added to read as follows:
Sec. 434.25 Coverage and enrollment.
* * * * *
(c) If a Medicaid eligible individual is enrolled in an HMO in a
given month and loses eligibility in the next month (or in the next 2
months) but in the succeeding month is again eligible for Medicaid
benefits, the State agency may enroll that individual in the same HMO
that he or she was enrolled in at the time of loss of eligibility.
5. In Sec. 434.26, paragraphs (b)(2) and (3) are revised to read as
follows:
Sec. 434.26 Composition of enrollment.
* * * * *
(b) Exceptions--
* * * * *
(2) Waiver for public HMOs with risk comprehensive contracts. The
Regional Administrator may approve waiver or modification of the
requirement of paragraph (a) of this section, for an HMO that is owned
or operated by a State, county, or municipal health department or
hospital if the HMO has made and continues to make reasonable efforts
to enroll individuals who are not eligible for Medicare or Medicaid.
(3) Waiver for certain nonprofit HMOs with risk comprehensive
contracts. The Regional Administrator may approve waiver or
modification of the requirement of paragraph (a) of this section, for a
nonprofit HMO which has a minimum of 25,000 members; is and has been
federally qualified for a period of at least 4 yrs; provides basic
health services through members of its staff; is located in an area
designated as medically underserved under section 1302(7) of the Public
Health Service Act; and has previously received a waiver under section
1115 of the Act of the requirement described in paragraph (a) of this
section, if the HMO has made and continues to make reasonable efforts
to enroll individuals who are not eligible for Medicare or Medicaid.
* * * * *
6. In Sec. 434.27, (d) introductory text and (d)(1) introductory
text are republished, paragraph (d)(1)(v) is revised, and new
paragraphs (d)(1)(vi) and (h) are added, to read as follows:
Sec. 434.27 Termination of enrollment.
* * * * *
(d) A State plan may provide for contracts with certain
organizations which restrict disenrollment rights of Medicaid enrollees
under paragraph (b)(2) of this section if the following conditions are
met:
(1) The organization is--
* * * * *
(v) An entity described in Sec. 434.26(b)(3); or
(vi) A competitive medical plan as defined in Sec. 417.407(c) of
this chapter that has a valid contract with HCFA under section 1876 of
the Act; and
* * * * *
(h) When an agency has elected to restrict disenrollment, the
restricted disenrollment period commences with each enrollment,
including reenrollments permitted under Sec. 434.25(c). Disenrollment
without cause will be permitted during the first month of each new
restricted disenrollment period.
7. In Sec. 434.40, paragraphs (a) introductory text is revised to
read as follows:
Sec. 434.40 Contract requirements.
(a) Contracts with health insuring organizations that are not
subject either to the requirements in section 1903(m)(2)(A) of the Act
or to Secs. 434.21 through 434.36 must:
* * * * *
8. In Sec. 434.44, a new paragraph (c) is added to read as follows:
Sec. 434.44 Special rules for certain health insuring organizations.
* * * * *
(c) A health insuring organization that provides or arranges for
the provision of services, and meets the definition of a PHP in
Sec. 434.2, must meet the requirements in Secs. 434.20(d) and (e),
Secs. 434.21 through 434.36 and in Secs. 434.50 through 434.65 that
apply to PHPs.
Sec. 434.72 [Removed]
9. Sec. 434.72 is removed.
B. Part 435 would be amended as set forth below:
PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA
1. The authority citation for part 435 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. In Sec. 435.212, the introductory text is revised to read as
follows:
Sec. 435.212 Individuals who would be ineligible if they were not
enrolled in an HMO.
The agency may provide that a recipient who is enrolled in a
federally qualified HMO (under a risk contract as specified in
Sec. 434.20(a)(1) of this chapter) or a competitive medical plan with a
current Medicare contract under section 1876 of the Act and who becomes
ineligible for Medicaid is considered to continue to be eligible--
* * * * *
3. Section 435.326 is revised to read as follows:
Sec. 435.326 Individuals who would be ineligible if they were not
enrolled in an HMO.
If the agency provides Medicaid to the categorically needy under
Sec. 435.212, it may provide Medicaid under the same rules to medically
needy recipients who are enrolled in a federally qualified HMO or in an
entity specified in Sec. 417.407(c) of this chapter with a current
contract with Medicare under section 1876 of the Act; Sec. 434.20(a)(3)
and (a)(4), Sec. 434.26(b)(3), or Sec. 434.26(b)(5)(ii) of this
chapter, or section 1903(m)(6) of the Act which provides services as
described in Sec. 434.21(b) of this chapter.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: November 3, 1993.
Bruce C. Vladeck
Administrator, Health Care Financing Administration.
Dated: February 20, 1994.
Donna E. Shalala
Secretary.
Editorial Note: This Document was received at the Office of the
Federal Register on May 4, 1994.
[FR Doc. 94-11097 Filed 5-6-94; 8:45 am]
BILLING CODE 4120-01-P
