[Federal Register Volume 59, Number 117 (Monday, June 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14792]
[[Page Unknown]]
[Federal Register: June 20, 1994]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 435 and 436
[MB-47-P]
RIN 0938-AF64
Medicaid Program; Requirements for Enrollment in or Payment for
Certain Employer Group Health Plans
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend our regulations to require
States to provide, as a condition of Medicaid eligibility, for
mandatory enrollment of certain Medicaid eligibles in employer-based
group health plans determined cost-effective by States under guidelines
approved by HCFA, and require States to pay all premiums, and all
deductibles, coinsurance, and other cost-sharing obligations under
these group health plans for items and services otherwise covered under
the approved Medicaid State plans. In addition, the proposed rule would
provide for Medicaid payment of premiums for certain individuals who
are entitled to elect COBRA continuation coverage (see Public Law 99-
272 and section 601 of the Employee Retirement Income Security Act
(ERISA)) under a group health plan provided by an employer with 75 or
more employees.
This rule would conform our regulations to sections 4402 and 4713
of the Omnibus Budget Reconciliation Act of 1990.
DATES: Written comments will be considered if we receive them at the
appropriate address, as provided below, and must be received no later
than 5 p.m. on August 19, 1994.
ADDRESSES: Mail written comments (original and three copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: MB-47-P, P.O. Box 7518,
Baltimore, Maryland 21207-0518.
If you prefer, you may deliver your written comments (original and
three copies) to one of the following addresses:
Room 309-G, Hubert H. Humphrey Building, 200 Independence Ave., SW.,
Washington, DC 20201, or
Room 132, East High Rise Building, 6325 Security Boulevard, Baltimore,
Maryland 21207.
Due to staffing and resource limitations, we cannot accept comments
by facsimile (FAX) transmission.
In commenting, please refer to file code MB-47-P. Written comments
received timely will be available for public inspection as they are
received, beginning approximately 3 weeks after publication of this
document, in Room 309-G of the Department's offices at 200 Independence
Ave., SW., Washington, DC on Monday through Friday of each week from
8:30 a.m. to 5 p.m. (phone: 202-690-7890).
If you wish to submit written comments on the information
collection requirements contained in this proposed rule, you may submit
written comments to: Laura Oliven, HCFA Desk Officer, Office of
Information and Regulatory Affairs, Room 3001, New Executive Office
Building, Washington, DC 20503.
FOR FURTHER INFORMATION CONTACT: Mark Ross, (410) 966-5855.
SUPPLEMENTARY INFORMATION:
I. Background
Medicaid is the Federally assisted State program authorized under
title XIX of the Social Security Act (the Act) to provide medical care
to persons of limited means. Among these persons are those individuals
who receive financial assistance under title IV-A (Aid to Families of
Dependent Children (AFDC)), and title XVI (Supplemental Security Income
(SSI)) and mandatory State supplements (SSP) and in the territories
title XVI (Old-Age Assistance (OAA), Aid to the Blind (AB), Aid to the
Permanently and Totally Disabled (APTD), Aid to the Aged, Blind or
Disabled (AABD)). Each State determines the scope of its program,
within limitations and guidelines established by the law and the
implementing regulations at 42 CFR part 430 et seq. Each State submits
a State plan that, when approved by HCFA, provides the basis for
granting Federal funds to cover part of the expenditures incurred by
the State for medical assistance and the administration of the program.
Section 1902(a) of the Act specifies the eligibility requirements
that individuals must meet in order to receive Medicaid. Other sections
of the Act describe the eligibility groups in detail and specify
limitations on what may be paid for as ``medical assistance.''
II. Legislative Changes and Discussion of Regulatory Provisions
A. Medicaid Payments for Medicaid Eligibles Under Group Health Plans
1. Statutory Provisions
Under section 1905(a) of the Act, States may pay health insurance
premiums on behalf of eligible recipients. In such cases, the insurer
is liable to pay for benefits covered under its plan but Medicaid
continues to pay for services covered under the Medicaid plan (but not
covered under the insurer's plan). In addition, State payment of a
health insurance premium must not have the effect of limiting a
recipient's rights under Medicaid (for example, freedom of choice among
providers). Section 4402(a)(2) of the Omnibus Budget Reconciliation Act
of 1990 (OBRA '90), Public Law 101-508, enacted on November 5, 1990,
added section 1906 to title XIX of the Act to require States to
provide, as a condition of Medicaid eligibility, for mandatory
enrollment of certain Medicaid eligibles in employer-based group health
plans determined to be cost-effective under guidelines established by
the Secretary. This provision applies to the 50 States and the District
of Columbia and includes any State providing Medicaid to its recipients
under an experimental, pilot, or demonstration project under the waiver
authority of section 1115 of the Act. A group health plan is defined
under section 1906(e)(1) as having the same meaning given the term in
section 5000(b)(1) of the Internal Revenue Code of 1986, and included
in the provision of COBRA continuation coverage by a plan under title
XXII of the Public Health Service Act, section 4980B of the Internal
Revenue Code of 1986, or title VI of the Employee Retirement Income
Security Act of 1974 (ERISA).
In addition to adding section 1906 to the Act, section 4402 of OBRA
'90 made the following conforming amendments:
Added a new section 1902(a)(25)(G) to specify that State
plans must meet the new requirements of section 1906 for enrollment of
individuals under group health plans (Section 4402(a)(1)).
Added a new section 1902(e)(11)(A) to allow States to
continue Medicaid payments of premiums, deductibles, coinsurance, and
other cost-sharing obligations on behalf of a Medicaid recipient
required to enroll in a group health plan for a State-defined period of
up to 6 months after the effective date of the recipient's enrollment,
even if the enrollee ceases to be eligible for Medicaid during that
period, but only for services covered under the group health plan.
Added a new subparagraph (XI) in the matter following
section 1902(a)(10)(F) to allow Medicaid coverage for the cost of
premiums, deductibles, coinsurances, and other cost-sharing obligations
for individuals in cost-effective group health plans without requiring
the availability of comparable services of the same amount, duration
and scope to any other individuals (Section 4402(d)(1)).
Revised section 1903(u)(1)(D)(iv) to specify that in
determining the amount of erroneous excess payments for purposes of
Federal financial participation (FFP), HCFA will not include any error
with respect to Medicaid payments made in violation of section 1906 of
the Act (Section 4402(b)).
Revised section 1905(a) by adding language to indicate
that ``medical assistance'' may include expenditures for Medicare cost-
sharing and premiums under Part B for individuals who are eligible for
medical assistance and are AFDC, SSI, OAA, AB, APTD, or AABD recipients
or SSP beneficiaries and are eligible for medical assistance made
available to individuals described in section 1902(a)(10)(A); and,
except in the case of individuals 65 years of age or older and disabled
individuals entitled to Medicare who are not enrolled under Medicare
Part B, other insurance premiums for medical or any other type of
remedial care or cost.
Revised section 1903(a)(1) to delete the reference to
Medicaid expenditures for Medicare cost-sharing and premiums under Part
B. This language was added to section 1905 of the Act in the definition
of medical assistance.
Section 4402 of OBRA '90 has also undermined the legal basis of
Pottgeiser v. Sullivan, 906 F.2d 1319 (9th Cir. 1990). In Pottgeiser,
the United States Court of Appeals for the Ninth Circuit affirmed a
lower court's ruling that the definition of ``medical assistance''
under section 1905(a) of the Act did not include the payment of medical
insurance premiums. We note that the Ninth Circuit issued its
Pottgeiser decision on June 25, 1990. However, section 4402 of OBRA '90
subsequently amended section 1905(a) of the Act to include the payment
of medical insurance premiums expressly within the definition of
``medical assistance.'' Therefore, we regard section 4402 of OBRA '90
as superseding legislation, which effectively nullifies any legal
effect of Pottgeiser.
2. Identification of Cost-Effective Plans
Section 1906(a)(1) requires States to implement guidelines that are
established by the Secretary to identify cases in which enrollment of a
Medicaid eligible individual in a group health plan (in which the
individual is otherwise eligible to be enrolled) is cost-effective. In
section 1906(e)(2) of the Act, the term ``cost-effective'' means the
cost of paying the premiums and cost-sharing obligations under a group
health plan is likely to be less than the cost of providing services
covered under the State plan.
To determine cost-effectiveness, we would require States to use the
cost-effectiveness methodology included in their approved State plan.
States are required to use either the methodology described in
Sec. 3910.11 of the State Medicaid Manual (HCFA Pub. 45-3), or an
alternative methodology that could be supported by documentation
furnished by a State. The State's alternative methodology, at a
minimum, must include factors accounting for the employee's premiums,
coinsurance, deductibles, and other cost-sharing obligations under the
group health plan. It must compare these factors to the State's average
Medicaid expenditures for an equivalent set of services for an
individual with similar characteristics.
To comply with the section 1906 requirement that the Secretary
establish cost-effectiveness guidelines, we are restating the
information contained in the State Medicaid Manual as an example of an
acceptable methodology that a State must include in its State plan.
Our guidelines consist of the following steps:
Step 1--Policy Information. The agency obtains information on all
group health plans available to the Medicaid recipient. The Medicaid
recipient is responsible for providing the State with all the necessary
plan information and reporting changes with respect to plan benefits.
This information must include the effective date of the policy, any
exclusions to enrollment, the services covered under the policy, the
employee's share of premiums paid to the health plan and other costs
that may be necessary for enrollment in the plan.
Step 2--Average Medicaid Costs. Using the Medicaid Management
Information System (MMIS), the agency obtains the average total annual
Medicaid costs of persons having characteristics similar to the
applicant (age, sex, categorical group and geographic data).
Step 3--Medicaid Costs for Included Services. The agency determines
the amount of the total yearly Medicaid expenditures for services
covered by the specific group health policy. Compute the percentage of
expenditures for group health plan services to expenditures for
Medicaid services. Then adjust the average total annual Medicaid costs
specified in step 2 by this percentage. This is the ``Medicaid average
covered expense amount.''
Step 4--Group Health Plan Costs for Included Services. The agency
adjusts the Medicaid average covered expense amount (amount calculated
in step 3) for the higher prices employer plans typically pay. The
agency may use a single State-specific factor derived from experience
with third party liability (TPL) claims or use group health plan
specific information. Alternatively, the agency may use a national
average factor which HCFA supplies and updates periodically. The
Medicaid covered expense is multiplied by this factor to produce an
estimated covered expense as recognized by the employer health plan.
This is the ``health plan cost.''
Step 5--Adjustment for Coinsurance and Deductible Amounts. The
health plan cost (amount from step 4) is multiplied by an average
employer health insurance payment rate to obtain the ``employer
recognized covered expense'' amount. The agency derives the average
employer health insurance payment rate from State specific tables, if
available, or group health plan specific information. Alternatively,
for State agency use, HCFA supplies and periodically updates national
tables. This health insurance average payment rate number will vary in
relation to the amount of the average employer recognized covered
expense.
Step 6--Administrative Costs. The agency accounts for any
additional Medicaid administrative costs incurred in processing the
group health information by determining the average increase in cost
per recipient. These costs may include all up-front administrative
costs associated with the implementation of this provision. These costs
must be amortized over a 5-year period.
Step 7--Cost-Effectiveness Calculation. Compare the costs under the
group health plan to those costs under Medicaid. This comparison is as
follows:
Group Health Plan
Subtract the employer recognized covered expense (step 5)
from the health plan cost (step 4) (the figure obtained is the proxy
for deductibles, coinsurance and limitations within group health
plans);
Add the employee's share of premiums paid (step 1); and
Add the additional administrative costs (step 6) (the
figure obtained is the total State costs under the group health plan).
Medicaid Expenditures
Subtract the total State costs, obtained above, from the
Medicaid average covered expense amount (step 3).
Cost-effectiveness is achieved if costs calculated under
the group health plan are lower than costs calculated for the same
services under Medicaid. (See example on determining cost-
effectiveness.)
Note: When non-Medicaid eligible family members are enrolled in
group health plans in order to enroll the Medicaid eligible family
member, do not include the deductible, coinsurance, and other cost-
sharing obligations for non-Medicaid eligible family members in
calculations.
To illustrate implementation of the cost-effectiveness guidelines,
we include the following example:
Example of Cost-Effectiveness Guidelines
Step 1--Policy Information. Obtain information on all group health
plans available to the Medicaid recipient. This information must
include the effective date of the policy, exclusions to enrollment, the
covered services under the policy and the employee's share of premiums
paid to the health plan.
Individual:
Ms. Smith, age 25, AFDC, county X.
Daughter, age 6, AFDC, county X.
Group Health plan:
Effective date 1/1/91.
No exclusions.
Six Covered Services--Hospital Inpatient, Hospital Outpatient,
Physician Services, Clinic, Laboratory and X-ray, and Prescription
Drugs.
Premiums: $840.00 yearly.
Step 2--Average Medicaid Costs. Using the Medicaid Management
Information System (MMIS), obtain the average total costs per person
per year for Medicaid services to persons having characteristics
similar to the applicant (age, sex, Medicaid eligibility category and
geographic data).
MMIS Data:
25 year old female, AFDC, county X...................... = $1,550.00
6 year old female, AFDC, county X....................... = 1,250.00
------------
Total Medicaid Expenses............................. $2,800.00
Step 3--Medicaid Costs for Included Services. Determine the amount
of the total yearly Medicaid expenditures for the services covered by
the specific group health plan.
Ten services offered under the State plan:
Inpatient Hospital
Clinic--
SNF and Home Health
Physician Service
Physical Therapy
Outpatient Hospital
Laboratory and X-ray
EPSDT
Family Planning Services
Prescription Drugs
Six services offered under the group health plan:
Inpatient Hospital
Clinic--
Physician Services
Outpatient Hospital
Laboratory and X-ray
Prescription Drugs
Here, the services covered by the group health plan are the most
frequently used services under both the group health plan and under the
Medicaid State plan. For purposes of this example, these six services
happen to comprise 82 percent of the Medicaid costs in the example
State. On an average annual basis, the costs to Medicaid of providing
the six services offered under the group health plan are:
Ms. Smith's expenses at 82%................................ $1,271.00
Daughter's expenses at 82%................................. 1,025.00
------------
Medicaid average covered expense amount.................... $2,296.00
Step 4--Group Health Plan Costs for Included Services. Adjust the
Medicaid average covered expense amount (amount from step 3) for the
higher prices employer plans typically pay. Use either a single State
specific factor derived from experience with TPL, group health plan
specific information, or a national factor supplied by HCFA. For the
purpose of this example, 1.3 was used as a factor. The Medicaid covered
expense is multiplied by this factor to produce an estimated covered
expense as recognized by the employer plan.
Medicaid average covered expense amount.................... $2,296.00
National average factor.................................... x 1.3
------------
The health plan cost....................................... $2,984.00
Step 5--Adjustment for Coinsurance and Deductible Amounts. The
health plan cost (amount from step 4) is multiplied by an average
employer health insurance payment rate to obtain the employer
recognized covered expense amount. Derive the average employer health
insurance payment rate from State specific tables, national tables, or
group health plan specific information. Assume the number is 75 percent
for the purpose of this example. This average payment rate number will
vary in relation to the amount of average employer recognized covered
expense.
Costs to health plan for services.......................... $2,984.80
Average employer payment rate (75%)........................ x .75
------------
Employer recognized amount................................. $2,238.60
Step 6--Administrative Costs. Account for any additional Medicaid
administrative costs incurred in processing the group health
information by determining the average increase in cost per recipient.
These costs may include all up-front administrative costs associated
with the implementation of this provision. These costs must be
amortized over a 5-year period.
Increased cost to process information...................... $50.00
Number of recipients....................................... x .2
------------
Additional administrative costs............................ $100.00
Step 7--Cost-Effectiveness Calculation. Compare the costs under the
group health plan to those costs under Medicaid.
Group health plan cost (step 4)............................ $2,984.80
Employer recognized covered expense (step 5)............... -2,238.60
------------
Proxy for deductible, coinsurance and limitations within
types of services covered under the group health plan..... $746.20
Employee's premiums (step 1)............................... 840.00
Additional admin. costs (step 6)........................... +100.00
------------
Total State costs...................................... $1,686.20
Cost-effectiveness is achieved if the State's additional
expenditures under the group health plan are likely to be lower than
the State's expenditures for services under Medicaid.
Medicaid average covered expense amount (step 3)........... $2,296.00
Total State costs.......................................... -1,686.20
------------
Savings from group health plan......................... $609.80
3. Condition of Eligibility
Under section 1906(a)(2) of the Act, an otherwise Medicaid eligible
individual who is also eligible to enroll in an employer-based group
health plan, which the State determines under the Secretary's
guidelines to be cost-effective, must enroll in the group health plan
as a condition of his or her continued eligibility for Medicaid. We
interpret this requirement to mean that if a Medicaid recipient is
currently enrolled in a non-employer-based health plan and is also
eligible to enroll in a cost- effective employer-based group health
plan, the recipient must enroll in the cost-effective group health plan
to maintain his or her Medicaid eligibility. However, continued
enrollment in the non-employer-based plan is not mandatory. This
requirement must be met at the time of determination of initial
eligibility or, for current Medicaid recipients, at the time of an
eligibility redetermination with certain exceptions as provided by the
statute. If more than one cost-effective group health plan is
identified by the State, the individual has the option of enrolling in
the cost-effective plan of his or her choice.
Note: If an individual meets the plan enrollment requirements
and the request is denied by the plan, he or she will have met the
conditions of this provision.
Under section 1906(b)(1) of the Act, the Secretary (and,
consequently, States) must take into account that an individual may
only be eligible to enroll in group health plans at limited times (open
season) and only if other individuals (not necessarily eligible for nor
entitled to medical assistance under the State plan) are also enrolled
in the group health plan simultaneously.
If the availability for enrollment in the group health plan and
eligibility to Medicaid benefits do not coincide, the State should have
a procedure in place for recontacting individuals prior to the next
enrollment period. The Medicaid recipient will be entitled to receive
Medicaid services pending that recipient's application to enroll in the
group health plan during the next open season.
Although enrollment in a cost-effective group health plan is a
condition of Medicaid eligibility, an individual's disenrollment from a
group health plan is permissible under these circumstances: (1) The
State reevaluates the cost-effectiveness of the group health plan
during the State's redetermination of the individual's eligibility, (2)
the group health plan is no longer available, for example, due to the
individual leaving employment or changing jobs, or (3) the individual
was enrolled through a spouse who is no longer willing to enroll the
individual.
Section 1906(a)(2) requires every individual entitled to receive
Medicaid to apply for enrollment in a cost- effective group health plan
as a condition of initial or continued eligibility for Medicaid.
However, under section 1906(b)(2), enrollment in the group health plan
is not a condition of initial or continued Medicaid eligibility for a
child if a parent fails to enroll that child. We also note that where a
Medicaid eligible spouse (for example, a wife) cannot apply for
enrollment in her husband's group health plan if her husband fails to
enroll her, she will not lose eligibility for Medicaid by virtue of his
failure to enroll her. This is because the section 1906(a)(2)
requirements do not apply to a Medicaid eligible spouse who does not
have the independent ability to apply for enrollment in a cost-
effective group health plan.
4. Services Covered
Under section 1906(c)(2) of the Act, an individual's enrollment in
a group health plan does not change the individual's eligibility for
benefits under the State plan. However, under section 1902(a)(25),
Medicaid is a payer of last resort with respect to services covered
under the group health plan. In other words, the group health plan's
payment is considered primary to any Medicaid payments. The State must
pay for services covered under the State plan which are not otherwise
included in the group health plan under the terms and conditions
applicable to all other Medicaid recipients. States must establish
their own procedures to pay for Medicaid services that are not included
under the group health plan.
We recognize that some providers that participate in group health
plans may not be Medicaid-participating providers. Of course, States
should always encourage all providers to participate in Medicaid.
However, in the interest of State flexibility, we are offering several
options that States may elect to resolve problems that may arise from
non-Medicaid-participating providers furnishing services to Medicaid
recipients.
First, States that deem providers to be Medicaid-participating
providers merely through the submission of a bill for services to the
State Medicaid agency (as is currently permitted for qualified Medicare
beneficiaries) may similarly do so for providers in cost-effective
group health plans. In lieu of this voluntary provider arrangement,
States could require that all providers in a cost-effective group
health plan bill States directly for residual charges on services
provided to Medicaid recipients. In other words, States may deem all
providers in cost-effective group health plans to be Medicaid-
participating providers by billing the State directly for any care or
services provided under the group health plan, which are otherwise
covered under the State Medicaid plan, but which are not fully paid by
the group health plan.
Alternatively, States may ascertain what percentage of providers in
a group health plan participate in Medicaid, and incorporate that
percentage into the determination of whether a group health plan is
cost-effective. If the State determines that fewer than a certain
percentage (specified by the State) of all providers in a group health
plan are not Medicaid-participating providers, the group health plan
would not be cost-effective.
If either of these options is not feasible for a State, we will
allow a State to reimburse recipients directly in the event a recipient
is billed directly for any care or services provided under the group
health plan, which are otherwise covered under the State Medicaid plan,
but which are not fully paid by the group health plan. We will allow
States to pay recipients directly where a State demonstrates that
failure to do so would render section 1906 of the Act a nullity. A
situation in which the provisions of section 1906 could not be
effectuated but for direct payment to recipients presents extraordinary
circumstances sufficient to justify direct payment to recipients. Under
any of these scenarios, a State would have to pay for all cost-sharing
obligations, even if such costs are above the State's usual Medicaid
rate for services provided to Medicaid recipients.
In addition, the State agency must pay for an eligible enrollee's
premiums for a group health plan determined cost- effective, and for
all deductibles, coinsurance, and other cost-sharing obligations under
the group health plan for items and services otherwise covered under
the State plan, under section 1906(a)(3). Further, when a non-Medicaid
eligible family member must first be enrolled in a group health plan in
order for the Medicaid eligible member to receive coverage, section
1906(c)(1)(B) provides that where it is determined to be cost-effective
(taking into account payment of all such additional premiums), Medicaid
payment is available for the premiums (but no other forms of cost-
sharing) of the non-Medicaid eligible member.
5. Payment Procedures
As noted above, the State must treat payment for services covered
under the group health plan as a third party liability under section
1902(a)(25) of the Act. Where Medicaid must participate in cost-sharing
for deductibles and coinsurance, the State is required to reimburse all
cost-sharing at the employer-based group health plan payment rate. The
State is not required to pay for the nominal cost-sharing amounts
otherwise permitted under section 1916 of the Act which are the
recipient's responsibility.
Section 1902(e)(11) of the Act provides States with the option to
continue payments to the group health plan on behalf of a Medicaid
recipient after the recipient ceases to be eligible for Medicaid for a
maximum period of 6 months from the effective date of the recipient's
required enrollment in the group health plan under section 1906(a). A
State electing this option must include this provision in its State
plan, and should specify the length of the applicable period.
6. Federal Financial Participation
Section 1906(c)(1) specifies that, for purposes of section 1903(a)
of the Act, FFP is available as ``medical assistance'' for all
premiums, deductibles, coinsurance and other cost-sharing obligations
under the group health plan for services covered under the State plan.
However, if the State imposes nominal cost sharing under section 1916
of the Act, payment of such amounts are the recipient's responsibility
and are not paid for under section 1906. Therefore, FFP is not
available for the nominal cost-sharing amounts otherwise permitted
under section 1916 of the Act.
If a non-Medicaid eligible family member must be enrolled in the
group health plan in order to obtain coverage for the Medicaid
eligible, FFP is available for premiums only (but not for any other
cost-sharing expenses) for the non-Medicaid eligible family member(s)
as payment for medical assistance for the eligible individual.
If a Medicaid recipient's group health plan offers a wider array of
services than those services covered under the State plan, no FFP is
available for the deductibles, coinsurance and other cost-sharing
obligations for non-covered services. For States that elect to cover
individuals during the optional period allowed under section
1902(e)(11), FFP would be restricted to the individual's premiums and
appropriate deductibles and coinsurance for services provided to the
individual under the group health plan, and would not be available for
payment for any other items and services covered by the State plan.
If a Medicaid recipient is currently enrolled in a non-employer-
based health plan and is also eligible to enroll in a cost-effective
group health plan, the recipient must enroll in the cost-effective
group health plan to maintain his or her Medicaid eligibility. If
enrollment in both health plans remains cost-effective, FFP is
available for the premiums of the non-employer-based plans specified in
section 1905(a) of the Act. However, continued enrollment in the non-
employer-based plan is not mandatory.
Note: Many cost-effective prepaid type group health plans (for
example, health maintenance organizations (HMOs)), impose strict
requirements on care and services that are reimbursed under the
plan. These requirements may include use of certain providers
exclusively and/or prior authorization for the need for care or
services. If an enrollee receives services which are not in
compliance with plan requirements, and the group health plan
consequently refuses reimbursement for services usually covered by
the plan, under section 1902(a)(17)(B) of the Act, FFP would not be
permitted for any service that is generally available to the
recipient without cost.
7. Determination and Redetermination of Eligibility
Our rules concerning determination and redetermination of
eligibility for the 50 States and the District of Columbia are found in
42 CFR part 435, subpart J. These rules are not affected by this
proposed rule.
8. Changes in the Regulations
We propose to amend part 435 (Eligibility in States, the District
of Columbia, the Northern Mariana Islands, and America Samoa) as
follows:
(a) Eligibility Requirements
We would revise Sec. 435.3, Basis, to add new bases for
part 435 resulting from amendments to title XIX of the Act by section
4402 of OBRA '90. Section 1902(e)(11) concerns the 6-month maximum
optional enrollment period in a cost-effective group health plan.
Section 1903(u)(1) concerns treatment of erroneous payments made in
violation of section 1906 of the Act. Section 1905(a) concerns
expenditures for Medicare cost-sharing and premiums under Part B.
Section 1906 concerns the requirement that Medicaid eligibles enroll in
group health plans determined to be cost-effective under guidelines
established by the Secretary.
Section 435.10, State plan requirements, would be revised
to specify that State plans must require that, as a condition of
eligibility, individuals must enroll in group health plans where the
State agency determines it is cost-effective to pay for that
individual's premiums, deductibles and other cost-sharing obligations,
using guidelines established by the Secretary. The plan also must
comply with the requirements in a new Sec. 435.186, Medicaid payment
for recipients enrolled in cost-effective group health plans. In that
new section, we would require that the State pay for all premiums, and
deductibles, coinsurance and other cost-sharing obligations (other than
nominal copayments permitted under section 1916 of the Act) for
Medicaid recipients for items and services covered under the State
plan. We would require the State to pay premiums only for a non-
Medicaid recipient when that person must enroll in a group health plan
in order for the Medicaid eligible individual to be enrolled, and only
when the State determines it to be cost-effective to do so. We would
require the State to treat the group health plan as a third party
resource in accordance with third party liability requirements
specified in Sec. 433.138, except that FFP would be available in
expenditures for services provided to recipients who were eligible in
the month in which services were provided as provided under
Sec. 435.1002.
A new Sec. 435.611, Limitation of payment for special
groups of individuals, would be added to specify the exceptions and
conditions of eligibility (of individuals otherwise eligible for
Medicaid), for enrollment and payment of premiums, deductibles,
coinsurance, and other cost-sharing obligations for items and service
in a group health plan.
(b) Federal Financial Participation
Section 435.1002 would be revised to provide for FFP in
expenditures for payment of premiums, deductibles, coinsurance, and
other cost-sharing obligations on behalf of a recipient enrolled in a
cost-effective group health plan, on behalf of individuals who are no
longer eligible but deemed eligible under the 6-month enrollment option
and for premiums for individuals who must be enrolled.
B. COBRA Continuation Coverage
1. Statutory Provisions
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA
'85), Public Law 99-272, requires an employer with 20 or more employees
that offers a group health plan to offer employees the opportunity to
elect continuation coverage under that plan after certain qualifying
events (explained more fully below), that ordinarily result in loss of
such coverage. This provision is popularly known as COBRA continuation
coverage.
Section 4713 of OBRA '90 amended title XIX of the Social Security
Act by adding a new section 1902(a)(10)(F) and a new section 1902(u) to
specify an additional group of individuals who may be eligible for a
limited Medicaid benefit payment of COBRA premiums for insurance
coverage. These provisions allow a State Medicaid agency the option to
pay the group health insurance premiums for certain individuals who are
entitled to elect COBRA continuation coverage. However, this provision,
unlike the 20-employee requirement in COBRA '85, only applies to group
health plans provided by employers with 75 or more employees.
The term ``qualifying event'' with respect to any covered employee,
is defined by section 601 of ERISA, as amended by section 4980B of the
Internal Revenue Code of 1986, to mean any of the following events
which, but for the continuation coverage, results in a loss of coverage
of a qualified beneficiary: death of the covered employee; termination
for reasons other than an employee's misconduct, or reduction of hours,
of the covered employee's employment; divorce or legal separation of
the covered employee from the employee's spouse; entitlement of the
employee under Medicare (title XVIII of the Act); cessation of a
dependent child to meet the applicable ``dependent child'' requirements
of the group health plan; or with respect to retirees, a filing by an
employer for protection under Title 11 of the United States Bankruptcy
Code of 1978, as amended, 11 U.S.C. Sec. 101 et seq.
Section 1902(a)(10)(F), as added by section 4713 of OBRA '90,
provides States with the option of making medical assistance available
for COBRA premiums, as defined in section 1902(u)(2), for qualified
COBRA continuation beneficiaries (CCBs), as defined in section
1902(u)(1) of the Act. Section 1902(u)(1) defines a CCB as an
individual who meets the following requirements:
He or she is entitled to elect COBRA continuation
coverage;
He or she has income that does not exceed 100 percent of
the official Federal poverty line applicable to a family of the size
involved;
He or she has resources which do not exceed twice the
maximum amount of resources that an individual may have to be eligible
for benefits under the Supplemental Security Income (SSI) program, as
determined under section 1613 of the Social Security Act; and
The State has determined that the likely savings in
Medicaid expenditures resulting from enrollment in COBRA continuation
coverage is expected to exceed the cost of the COBRA premiums.
With respect to the cost-effectiveness determination for CCBs,
States must determine that likely Medicaid expenditures on individuals
would be higher (if the individuals were not enrolled in the COBRA
plan) than the cost the State would pay in COBRA continuation premiums.
In other words, the State must determine that enrolling the individuals
in COBRA continuation coverage results in savings in likely Medicaid
expenditures that exceed the cost of paying the COBRA premiums. This
requires the State to make a reasonable decision that the individuals
(or family members that would be covered by the COBRA coverage) are
likely to become eligible for Medicaid during the COBRA continuation
period and that enrollment is expected to save money for the Medicaid
program. This decision would include an assessment of whether the
individuals would be likely to become Medicaid eligible.
In contemplating scenarios under which this cost-effectiveness
could be satisfied, we have identified a number of situations in which
individuals would appear ``likely'' ultimately to generate Medicaid
expenditures in the absence of COBRA continuation coverage, even if
they were not currently Medicaid eligible. This would be true, for
example, of a COBRA-eligible individual who is HIV positive, and
accordingly is determined ``likely'' to become Medicaid eligible based
upon disability, and to incur Medicaid costs that exceed the cost of
COBRA premiums. A COBRA eligible individual who is not eligible for
Medicaid may have Medicaid-eligible family members who would be covered
by a COBRA continuation plan if COBRA premiums were paid by the State.
In this case, savings in Medicaid expenditures would be likely to
result from the individual's enrollment even though he or she is not
Medicaid eligible, nor expected to become Medicaid eligible. Finally, a
COBRA-eligible individual may be eligible for Medicaid as ``medically
needy'' upon the satisfaction of some modest ``spend-down''
requirement. In such a case, it may well be reasonable for the State to
conclude that ``likely'' Medicaid expenditures would exceed the cost of
paying COBRA continuation premiums that would have the effect of
precluding the individual from incurring expenses sufficient to make
him or her Medicaid eligible.
Section 1902(u)(2) defines the term ``COBRA premiums'' as the
applicable premium imposed with respect to COBRA continuation coverage.
Section 1902(u)(3) defines COBRA continuation coverage as coverage
under a group health plan provided by an employer with 75 or more
employees provided under title XXII of the Public Health Service Act,
section 4980B of the Internal Revenue Code of 1986, or title VI of the
Employee Retirement Income Security Act of 1974.
Clause (XI) in the matter following section 1902(a)(10)(F), as
amended by section 4713(a)(1)(D) of OBRA '90, requires that medical
assistance available to an individual defined in section 1902(u)(1) who
is eligible for medical assistance only because of section
1902(a)(10)(F) be limited to medical assistance for COBRA continuation
premiums (as defined in section 1902(u)(2)).
Section 1905(a)(x), as added by section 4713(b) of OBRA '90 amends
the definition of medical assistance to include the new group of
individuals described in section 1902(u)(1) who may be eligible for
Medicaid through payment of premiums for COBRA continuation insurance
coverage.
Section 1902(u)(4) specifies that, for individuals who may qualify
for Medicaid payment for COBRA continuation coverage and who are
receiving an optional State supplementary payment, the State must apply
an income standard (as determined under section 1612 of the Act) of no
more than 100 percent of the Federal poverty level applicable to a
family of the size involved. In determining income, except for costs
described under section 1612(b)(4)(B)(ii) of the Act for certain
functionally disabled individuals, the State must exclude costs
incurred for medical care and for any other type of remedial care under
this provision.
Because individuals identified in section 1902(u)(4) are by
definition already eligible for Medicaid, we are unaware of the
relevance of this provision to individuals eligible under section
1902(a)(10)(F). Moreover, we are unaware of anything in the legislative
history of section 4713 which indicates what Congress intended to
accomplish by this provision.
2. Eligibility Conditions
In interpreting the provisions of section 1902(u)(1), we propose to
require that a CCB must also meet the existing general non-financial
requirements or conditions of eligibility for medical assistance
contained in our regulations in 42 CFR part 435. These general
requirements include, for example, the filing of an application for
Medicaid (Sec. 435.907), furnishing a social security number
(Sec. 435.910), providing citizenship and residency information
(Secs. 435.406 and 435.408), and assigning rights to third party
payments to the State Medicaid agency (Sec. 435.604). However, these
individuals do not have to meet the categorical requirements of either
the SSI or AFDC programs. An individual who is otherwise eligible for
Medicaid under the State plan may also be eligible as a CCB. An
individual who is eligible for Medicaid as a CCB as well as under some
other Medicaid eligibility group may choose, as specified in
Sec. 435.404, to have eligibility determined only under one category.
However, the individual is not required to make such a choice. The
individual is entitled to have eligibility determined under all
categories for which he or she may qualify.
If an individual does not specifically and voluntarily choose to
have his or her eligibility determined under a specific category, and
if he or she is eligible both as a CCB and under another group in the
State plan, the individual is designated as being eligible both as a
CCB and the other group for which he or she is eligible.
3. Determination of Financial Eligibility
In determining the income and resource eligibility for CCBs under
section 1902(u)(1)(B) and (C), we would require the State to use the
income and resources methodologies of the SSI program under sections
1612 and 1613 of the Act, respectively. By methodologies, we mean the
methods for determining the individual's countable income and
resources, that is, the amounts that may be considered to be available
to the individual.
4. Determination and Redetermination of Eligibility
The rules for timely determination of eligibility and periodic
redetermination of eligibility set forth in existing Secs. 435.911 and
435.916 would apply to determinations and redeterminations of CCB
eligibility. Specifically, Sec. 435.911 requires the State to establish
time standards for determining eligibility, and inform the applicant of
what they are. Section 435.916 requires the State agency to redetermine
Medicaid eligibility, with respect to circumstances that may change, at
least every 12 months or when it has knowledge of changes that may
affect eligibility, and requires States to have procedures for
recipients to report changes that may affect their eligibility.
Section 1902(f) States may use more restrictive eligibility
criteria than are used by the SSI program in determining eligibility
for CCBs.
5. Effective Date for Payment of Premiums as Medical Assistance
An individual's effective date for Medicaid payment of COBRA
premiums under sections 1902(a)(10)(F) and 1902(u) can be no earlier
than January 1, 1991, the effective date of section 4713 of OBRA '90.
The individual's effective date of eligibility date is based on the
date of application and the date on which all eligibility criteria,
including election of COBRA continuation coverage, are met. CCBs are
subject to the existing policy of up to 3 months retroactive
eligibility as specified in Sec. 435.914.
6. Federal Financial Participation
FFP is available for medical assistance for COBRA premiums to
individuals who are entitled to elect COBRA continuation coverage.
7. Changes in the Regulations
We propose to amend part 435 (Eligibility in States, the District
of Columbia, the Northern Mariana Islands, and American Samoa) and part
436 (Eligibility in Guam, Puerto Rico, and the Virgin Islands) as
follows: Eligibility Requirements.
Sections 435.10 and 436.10 would be revised and new Secs. 435.240
and 436.274 would be added to specify criteria for determining COBRA
continuation coverage.
Federal Financial Participation
Sections 435.1002 and 436.1002 would be revised to provide for FFP
in expenditures for medical assistance on behalf of CCBs for COBRA
premiums.
Conforming Changes
We would also make conforming changes to Secs. 435.2, 435.3,
435.400, 435.600, 436.2, 436.400 and 436.600.
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 regulation
would not have a significant economic impact on substantial number of
small entities. Individuals and States are not included in the
definition of small entity.
In addition, section 1102(b) of the Act requires the Secretary to
prepare a regulatory impact analysis for any final rule that may have a
significant impact on the operations of a substantial number of small
rural hospitals. Such analysis must conform to the provisions of
section 603 of the RFA. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital with fewer than 50 beds
located outside a Metropolitan Statistical area.
Although these regulations do not themselves have a significant
impact on the general economy, the statutory provisions on which they
are based are expected to have an impact. In particular, we have
determined that the part of the regulation dealing with section 4402 of
OBRA '90 has the following savings impact for the Medicaid program:
Federal and State Savings
[Dollars in Millions]
------------------------------------------------------------------------
FY 1994 FY 1995 FY 1996 FY 1997
------------------------------------------------------------------------
Federal..................... $130 $140 $150 $160
State....................... 100 105 110 115
-------------------------------------------
Total..................... 230 245 260 275
------------------------------------------------------------------------
We used the following methodology to estimate these savings. We
used data from the Current Population Survey (CPS) and the National
Medical Expenditure Survey (NMES) to estimate the fraction of Medicaid
recipients having access to employer-sponsored insurance (ESI) but not
currently enrolled in it: about 3 percent for children and \1/2\
percent for adults (including the disabled). We assumed that about 75
percent of these individuals would be subject to the group health
enrollment requirements. In addition, we assumed that ESI premiums
rates are based on utilization which is 80 to 90 percent of that of
Medicaid enrollees for adults and children and 30 to 40 percent of
these premiums on average. Employee cost-sharing was estimated at 20
percent, and the ratio of Medicaid to employer plan recognized charges
was assumed to be about two-thirds.
At present, we do not have the data to estimate the impact of
section 4713 of OBRA '90 regarding optional Medicaid payment of group
health plan premiums for COBRA continuation beneficiaries. Although
this legislation creates a new eligibility group, we do not believe a
significant number of individuals would become eligible. Further, this
provision is optional for the States. To the extent these individuals
become eligible for Medicaid, we believe this provision would reduce
expected future Medicaid costs through continued coverage by employer
group health plans in lieu of Medicaid coverage for a period of up to
29 months.
The Secretary certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities
and will not have a significant impact on the operation of a
substantial number of small rural hospitals. We have, therefore, not
prepared a regulatory flexibility analysis.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
IV. Collection of Information Requirements
Sections 435.10 and 436.10 of these proposed rules contain
information collection requirements that are subject to review by the
Office of Management and Budget (OMB) under the authority of the
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.). We estimate
that any State plan amendments required by these provisions will take a
total of not more than 50 hours total. A notice will be published in
the Federal Register when approval is obtained. Organizations and
individuals desiring to submit comments on the information collection
and recordkeeping should direct them to the OMB official whose name
appears in the ADDRESSES section of this preamble.
V. Response to Public Comments
Because of the large number of items of correspondence we normally
receive on a proposed rule, we are unable to acknowledge or respond to
them individually. However, we will consider all comments that we
receive by the date and time specified in the COMMENT PERIOD section of
this preamble to the final rule.
List of Subjects
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 Part 436
Aid to families with dependent children, Grant programs--health,
Guam, Medicaid, Puerto Rico, Supplemental Security Income (SSI), Virgin
Islands.
Note: We have reprinted in the following proposed regulations
text certain provisions included in a final rule with comment period
that was published in the Federal Register on January 19, 1993 (58
FR 4908). The January 19, 1993 rule made numerous changes to the
organization and numbering of the Medicaid regulations. Therefore,
we have reprinted the provisions in order to set forth appropriate
text for the provisions of this proposed rule. The effective dates
for the January 19 final rule have been delayed (58 FR 9120,
February 19, 1993; 58 FR 44457, August 23, 1993; and 59 FR 8138,
February 18, 1994). If at the time we issue the final rule for these
proposed regulations, the reprinted text has been revised or is not
in effect, we will make appropriate changes to ensure that the
existing CFR text is reflected.
42 CFR chapter IV, subchapter C would be amended as follows:
A. Part 435 is 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. Section 435.2 is revised to read as follows:
Sec. 435.2 Purpose and applicability.
(a) Eligibility and coverage in general. This part sets forth, for
the 50 States, the District of Columbia, the Northern Mariana islands,
and American Samoa--
(1) The eligibility provisions that a State plan must contain;
(2) The mandatory and optional groups of individuals to whom
Medicaid is provided under a State plan;
(3) The eligibility requirements and procedures that the Medicaid
agency must use in determining and redetermining eligibility, and
requirements it may not use;
(4) The availability of FFP for providing Medicaid and for
administering the eligibility provisions of the plan; and
(5) Other requirements concerning eligibility determinations, such
as use of an institutionalized individual's income for the cost of
care.
(b)-(d) [Reserved]
(e) Payments on behalf of COBRA continuation beneficiaries. This
part also sets the requirements for determining COBRA continuation
beneficiary status, which at State option entitles individuals to have
Medicaid pay COBRA premiums for continuation coverage in a group health
plan. These payments are optional in the 50 States, the District of
Columbia, the Northern Mariana Islands, and American Samoa.
(f) Payments of premiums, coinsurance, deductibles, and other cost-
sharing obligations on behalf of recipients under group health plans
where it is cost-effective to do so. This part also sets forth the
requirement that the State determine as a condition of eligibility that
an individual must enroll in a group health plan, where the enrollment
is cost-effective. Enrollment in cost-effective plans is mandatory in
the 50 States and the District of Columbia.
3. Section 435.3 is amended by adding the following statements in
numerical order to read as follows:
Sec. 435.3 Basis.
* * * * *
1902(a)(10)(E) Makes medical assistance available for payment for
Medicare cost-sharing (as defined in section 1905(p)) for qualified
Medicare beneficiaries.
1902(a)(10)(F) At State option, pay COBRA premiums for individuals who
are entitled to elect COBRA continuation coverage under a group health
plan provided by an employer with 75 or more employees.
* * * * *
1902(e)(11) Optional continued Medicaid eligibility of up to 6 months
for certain group health plan enrollees.
* * * * *
1902(u)(1) Definitions of COBRA continuation beneficiaries.
* * * * *
1903(u)(1) Allows FFP to be available for erroneous payments made in
violation of section 1906 of the Act.
* * * * *
1905(a) Expenditures for Medicare cost-sharing and premiums under Part
B.
* * * * *
1906 Mandatory enrollment of Medicaid eligibles in cost-effective
group health plans.
* * * * *
4. Section 435.10 is revised to read as follows:
Sec. 435.10 State plan requirements.
(a) General rule. A State plan must provide that the requirements
of this part are met, and include the specifications required by
paragraphs (b), (c), (d), and (e) of this section.
(b) Covered groups. The plan must specify the groups (as described
in subparts B, C, and D of this part) to whom the State provides
Medicaid, and the eligibility conditions for individuals in those
groups.
(c)-(D) [Reserved]
(e) Requirements for COBRA continuation coverage. A State may elect
to provide COBRA continuation coverage. If a State elects to do so, the
State must--
(1) Specify that the State must pay all premiums on behalf of
recipients enrolled in the group health plan as provided in
Sec. 435.240;
(2) Specify a methodology for determining the cost-effectiveness of
an individual's enrollment in a COBRA group health plan. This
methodology, at minimum, must account for the employee's COBRA
premiums. It also must compare these costs to the likely Medicaid
expenditures for the individual. The methodology must also include an
assessment explaining why the State would be likely to incur Medicaid
expenditures on behalf of the individual in the absence of enrollment
in COBRA continuation coverage.
(3) Treat the COBRA group health plan as a third party resource in
accordance with the third party liability requirements specified in
Sec. 433.138, except FFP is available as provided in Sec. 435.1002.
(4) Specify the basic requirements for payment of group health
insurance premium expenses on behalf of any individual specified in
Sec. 435.240.
(f) Requirements for Medicaid payments for recipients under group
health plans. In the case of the 50 States and the District of
Columbia, the agency must specify that it meets the requirements of
Sec. 435.186 of this part.
5. The title of subpart B is revised to read as follows:
Subpart B--Mandatory Coverage of the Categorically Needy and for
Special Groups
6. A new undesignated center heading and Sec. 435.186 are added at
the end of subpart B to read as follows:
Eligibility for Special Groups
Sec. 435.186 Medicaid payments for recipients under group health
plans.
(a) Scope and applicability. The provisions of this section are
mandatory in the 50 States and the District of Columbia.
(b) Basic requirements. The agency must--
(1) Identify cases in which enrollment of a Medicaid recipient in
an employer-based group health plan is cost-effective and require, as a
condition of eligibility, that individuals (or in the case of a child,
the child's parent) apply for enrollment in such plans, except as
provided in paragraph (c) of this section;
(2) Specify a methodology for determining the cost-effectiveness of
an individual's enrollment in a group health plan that is acceptable to
HCFA. The agency may--
(i) Use the methodology established by the Secretary; or
(ii) Use an alternative methodology, which, at a minimum, must
include factors accounting for the employee's premiums, coinsurance,
deductibles, and other cost-sharing obligations under the group health
plan. It also must compare these factors to the State's average
Medicaid expenditures for an equivalent set of services for an
individual in similar circumstances, and may include factors not
specified in this paragraph, for example, considering recipients'
diagnosis.
(3) Include in its Medicaid plan provisions for payment of all
enrollee premiums necessary for such enrollment, and all deductibles,
coinsurance, and other cost-sharing obligations for services under the
State plan for Medicaid recipients enrolled in an employer-based group
health plan that has been determined by the State to be cost effective;
(4) Provide for payment for premiums for non-Medicaid eligible
family members only if the cost-effective employer-based group health
plan requires enrollment of a non-Medicaid eligible family member as a
condition for a Medicaid eligible family member to enroll in the group
health plan;
(5) Treat the group health plan as a third party resource in
accordance with third party liability requirements as specified in
Sec. 435.138, except FFP is available as provided in Sec. 435.1002; and
(6) Specify that the Medicaid recipient will receive Medicaid
services pending the submission of the group health plan application
during the group health plan's next open season.
(c) Exceptions. The agency may not require, as a condition of
Medicaid eligibility, that a child enroll in a cost-effective employer-
based group health plan, when the parent of that child fails to enroll
the child in a group health plan in accordance with paragraph (b)(1) of
this section.
7. In Sec. 435.201, the introductory text of paragraph (a) is
republished, and paragraph (a)(7) is added to read as follows:
Sec. 435.201 Individuals included in optional groups.
(a) The agency may choose to cover as optional categorically needy
any group or groups of the following individuals who are not receiving
cash assistance and who meet the appropriate eligibility criteria for
groups specified in the separate sections of this subpart:
* * * * *
(7) Individuals described in section 1902(u)(1) of the Act who are
entitled to elect COBRA continuation coverage (as specified in
Sec. 435.240).
8. A new undesignated center heading and Sec. 435.240 are added at
the end of subpart C to read as follows:
Options for Coverage of Special Groups Who Have Limited Eligibility
Sec. 435.240 COBRA continuation beneficiaries.
(a) Scope and applicability. The provisions of this section are
optional in the 50 States, the District of Columbia, the Northern
Mariana Islands, and American Samoa.
(b) Basic requirements. The agency that elects this option must
include in its Medicaid State plan the payment of group health
insurance premiums on behalf of any individual who--
(1) Is entitled to elect COBRA continuation coverage as defined in
paragraph (c) of this section;
(2) Has resources, as determined in accordance with the SSI
methodology at section 1613 of the Act, that do not exceed twice the
maximum amount established for SSI eligibility for that individual;
(3) Has income, as determined in accordance with the SSI
methodology at section 1612 of the Act, that does not exceed 100
percent of the Federal poverty guidelines (as defined by the Office of
Management and Budget, and revised and published annually by the
Department of Health and Human Services) applicable to a family of the
size involved; and
(4) The State has determined that COBRA continuation coverage
premiums to be paid by the State with respect to enrolling an
individual are expected to be less than the likely Medicaid
expenditures on behalf of the individual in the absence of enrollment.
(c) Definitions. As used in this subpart--
COBRA continuation coverage means coverage under a group health
plan provided by an employer with 75 or more employees under title XXII
of the Public Health Service Act, section 4980B of the Internal Revenue
Code of 1986, or title VI of the Employee Retirement Income Security
Act of 1974.
COBRA premiums means the applicable premium imposed with respect to
COBRA continuation coverage.
(d) Determination of COBRA continuation coverage--
(1) Except as provided in paragraph (d)(2) of this section, States
must use the SSI methodologies in sections 1612 and 1613 of the Act to
determine income and resource eligibility for COBRA continuation
benefits.
(2) States that have exercised their option under section 1902(f)
of the Act may use more restrictive income and resource standards,
methodologies, and criteria in determining eligibility for COBRA
continuation coverage.
(3) States may not apply more liberal income and resource
methodologies under section 1902(r)(2) of the Act to this group.
(e) Services available to COBRA continuation beneficiaries--(1) A
COBRA continuation beneficiary (CCB) who is not otherwise eligible for
Medicaid (that is, does not belong to any other eligibility group
covered under the State plan) is only eligible to have Medicaid pay
premiums specified under the COBRA plan on his or her behalf.
(2) A CCB who belongs to one of the other eligibility groups
covered under the Medicaid State plan may also be eligible for the full
range of Medicaid services provided under the State plan to members of
the other group to which the CCB belongs.
9. In Sec. 435.301, the introductory text of paragraph (b) and
(b)(2) are republished, paragraphs (b)(2)(vi) through (ix) are added
and reserved and paragraph (b)(2)(x) is added to read as follows:
Sec. 435.301 General rules.
* * * * *
(b) If the agency chooses this option, the following provisions
apply:
* * * * *
(2) The agency may provide Medicaid to any of the following groups
of individuals:
* * * * *
(vi)-(ix) [Reserved]
(x) Individuals described in section 1902(u)(1) of the Act who are
entitled to elect COBRA continuation coverage (Sec. 435.240).
10. Section 435.400 is revised to read as follows:
Sec. 435.400 Scope.
This subpart prescribes general requirements for determining
eligibility of categorically and medically needy individuals and of
special groups of individuals with limited eligibility specified in
subparts B, C, and D of this part.
11. In Sec. 435.600 the introductory text is republished and
paragraph (a) is revised to read as follows:
Sec. 435.600 Scope.
This subpart prescribes: (a) General financial requirements and
options for determining the eligibility of categorically and medically
needy individuals and of special groups of individuals specified in
subparts B, C, and D of this part. Subparts H and I prescribe
additional financial requirements.
* * * * *
12. A new Sec. 435.611 is added to read as follows:
Sec. 435.611 Limitation of payment for special groups of individuals.
(a)(1) Except as provided in paragraph (a)(2) of this section, a
State agency must require, as a condition of eligibility, that
individuals otherwise entitled to Medicaid (or in the case of a child,
the child's parent) apply for enrollment in a group health plan, where
such enrollment is determined to be cost-effective.
(2) The agency may not require, as a condition of Medicaid
eligibility, that a child enroll in a cost-effective employer-based
group health plan if the parent of that child fails to enroll the child
in a cost-effective group health plan in accordance with paragraph
(a)(1) of this section.
(b) A Medicaid recipient must--(1) As a condition of eligibility,
enroll in the group health plan described in paragraph (a)(1) of this
section to obtain or maintain his or her Medicaid eligibility; and
(2) Meet the general Medicaid eligibility requirements for State
residence, assignment of rights to third party payments, and furnishing
of his or her social security number, as set forth, respectively in
Secs. 435.403, 435.604, and 435.910.
13. Section 435.1002 is amended by adding and reserving paragraphs
(c) and (d) and adding a new paragraph (e) to read as follows:
Sec. 435.1002 FFP for services.
* * * * *
(c)-(d) [Reserved]
(e) FFP is available in expenditures for--
(1) Payment of COBRA premiums under group health plans, in
accordance with this part 435.
(2) Payment of premiums, deductibles, coinsurance, and other cost-
sharing obligations under group health plans on behalf of a recipient
in accordance with this part 435.
(3) Payment of premiums under group health plans on behalf of
individuals enrolled in a group health plan for a period defined by the
State of up to 6 months after enrollment (beginning on the date an
individual becomes Medicaid eligible in Sec. 435.186) even if the
enrollee ceases to be eligible for Medicaid during that period, but
only for services covered under the group health plan.
B. Part 436 is amended as set forth below:
PART 436--ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS
1. The authority citation for part 436 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. Section 436.2 is amended to add the following statements in
numerical order to read as follows:
Sec. 436.2 Basis.
* * * * *
1902(a)(10)(E) Makes medical assistance available for payment for
Medicare cost-sharing described in section 1905(p) for qualified
individuals.
1902(a)(10)(F) At State option, pay COBRA premiums for individuals who
are entitled to elect COBRA continuation coverage under a group health
plan provided by an employer with 75 or more employees.
* * * * *
1902(u)(1) Definition of COBRA continuation beneficiaries.
* * * * *
3. Section 436.10 is revised to read as follows:
Sec. 436.10 State plan requirements.
(a) General rule. A State plan must provide that the requirements
of this part are met, and include the specifications required by
paragraphs (b), (c), (d), and (e) of this section.
(b) Covered groups. The plan must specify the groups (as described
in subparts B, C, and D of this part) to whom the State provides
Medicaid, and the eligibility conditions for individuals in those
groups.
(c)-(d) [Reserved]
(e) Payments on behalf of COBRA continuation beneficiaries. A State
may elect to provide COBRA continuation coverage. If a State elects to
do so, the plan must--
(1) Specify that the State may pay all premiums on behalf of
recipients enrolled in the group health plan as provided in
Sec. 436.274;
(2) Specify a methodology for determining the cost-effectiveness of
an individual's enrollment in a COBRA group health plan. This
methodology, at minimum, must account for the employee's COBRA
premiums. It also must compare these costs to the likely Medicaid
expenditures for the individual. This methodology must also include an
assessment explaining why the State would be likely to incur Medicaid
expenditures on behalf of the individual in the absence of enrollment
in COBRA continuation coverage.
(3) Treat the COBRA group health plan as a third party resource in
accordance with the third party liability requirements specified in
Sec. 433.138, except FFP is available as provided in Sec. 436.1002.
(4) Specify the basic requirements for payment of group health
insurance premium expenses on behalf of any individual specified in
Sec. 436.274.
4. The title of subpart C is revised to read as follows:
Subpart C--Options for Coverage as Categorically Needy and for
Special Groups
5. A new undesignated center heading and Sec. 436.274 are added at
the end of subpart C to read as follows:
Limited Eligibility for Special Groups
Sec. 436.274 COBRA continuation beneficiaries.
(a) Scope and applicability. The provisions of this section are
optional in Guam, Puerto Rico, and the Virgin Islands.
(b) Basic requirements. The agency that elects this option must
include in its Medicaid State plan the payment of group health
insurance premiums on behalf of any individual who--
(1) Is entitled to elect COBRA continuation coverage as defined in
paragraph (c) of this section;
(2) Has resources, as determined in accordance with the SSI
methodology at section 1613 of the Act, that do not exceed twice the
maximum amount established for SSI eligibility for that individual;
(3) Has income, as determined in accordance with the SSI
methodology at section 1612 of the Act, that does not exceed 100
percent of Federal poverty guidelines (as defined by the Office of
Management and Budget, and revised and published annually by the
Department of Health and Human Services) applicable to a family of the
size involved; and
(4) The State has determined that the COBRA continuation coverage
premiums to be paid by the State with respect to enrolling an
individual are expected to be less than the likely Medicaid
expenditures on behalf of the individual in the absence of enrollment.
(c) Definitions. As used in this subpart--
COBRA continuation coverage means coverage under a group health
plan provided by an employer with 75 or more employees under title XXII
of the Public Health Service Act, section 4980B of the Internal Revenue
Code of 1986, or title VI of the Employee Retirement Income Security
Act of 1974.
COBRA premiums means the applicable premium imposed with respect to
COBRA continuation coverage.
(d) Determination of COBRA continuation coverage--(1) States must
use the SSI methodologies at sections 1612 and 1613 of the Act to
determine income and resource eligibility for COBRA continuation
benefits.
(2) States may not apply more liberal income and resource
methodologies under section 1902(r)(2) of the Act to this group.
(e) Services available to COBRA continuation beneficiaries--(1) A
COBRA continuation beneficiary (CCB) who is not otherwise eligible for
Medicaid (that is, does not belong to any other eligibility group
covered under the State plan) is only eligible to have Medicaid pay
premiums specified under the COBRA plan on his or her behalf.
(2) A CCB who belongs to one of the other eligibility groups
covered under the Medicaid State plan may also be eligible for the full
range of Medicaid services provided under the State plan to members of
the other group to which the CCB belongs.
6. In Sec. 436.301, the introductory text of paragraphs (b) and
(b)(2) is republished, paragraphs (b)(2)(vi) through (ix) are added and
reserved, and a new paragraph (b)(2)(x) is added to read as follows:
Sec. 436.301 General rules.
* * * * *
(b) If the agency chooses this option, the following provisions
apply:
* * * * *
(2) The agency may provide Medicaid to any or all of the following
groups of individuals:
* * * * *
(vi)--(ix) [Reserved]
(x) Individuals described in section 1902(u)(1) of the Act who are
entitled to elect COBRA continuation coverage (Sec. 436.274).
7. Section 436.400 is revised to read as follows:
Sec. 436.400 Scope.
This subpart prescribes general requirements for determining
eligibility of categorically and medically needy individuals and of
special groups of individuals with limited eligibility specified in
subparts B, C, and D of this part.
8. In Sec. 436.600 the introductory text is republished and
paragraph (a) is revised to read as follows:
Sec. 436.600 Scope.
This subpart prescribes:
(a) General financial requirements and options for determining the
eligibility of categorically and medically needy individuals and of
special groups of individuals with limited eligibility specified in
subparts B, C, and D of this part. Subparts H and I prescribe
additional financial requirements.
* * * * *
9. Section 436.1002 is amended by adding and reserving paragraphs
(c) and (d) and adding a new paragraph (e) to read as follows:
Sec. 436.1002 FFP for services.
* * * * *
(c)-(d) [Reserved]
(e) FFP is available in expenditures for medical assistance on
behalf of COBRA continuation beneficiaries for COBRA premiums, in
accordance with Secs. 436.10 and 436.274.
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program)
Dated: August 24, 1993.
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
Approved: December 3, 1993.
Donna E. Shalala,
Secretary.
Editorial note: This document was received by the Office of the
Federal Register on June 14, 1994.
[FR Doc. 94-14792 Filed 6-17-94; 8:45 am]
BILLING CODE 4120-01-P
