Titles of Regulations: 12VAC30-10. State Plan Under Title XIX of the Social Security Act Medical Assistance Program; General Provisions (amending 12VAC30-10-325).

12VAC30-20. Administration of Medical Assistance Services (adding 12VAC30-20-205).

Statutory Authority: § 32.1-325 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: October 24, 2012.

Effective Date: November 8, 2012.

Agency Contact: Cindy Olson, Department of Medical Assistance Services Eligibility Supervisor, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 225-4282, FAX (804) 786-1680, or email cindy.olson@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Sections 32.1-324 and 32.1-325 of the Code of Virginia authorize the Director of the Department of Medical Assistance Services (DMAS) to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by § 1902(a) of the Social Security Act (42 USC § 1396a) provides governing authority for payments for services.

Purpose: This change is to put in place the language added to Item 296 L of Chapter 874 of the 2010 Acts of Assembly directing DMAS to develop enrollment and retention provisions, consistent with those outlined in § 104 of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA), and implement provisions determined to be budget neutral, cost effective, or that would lead to an award of a CHIPRA performance bonus.

Rationale for Using Fast-Track Process: The agency is using the fast-track rulemaking process since this action is designed to save tax dollars and brings substantial additional federal money into the state. Using the fast-track process will get this regulation implemented as quickly as possible, as there was no emergency regulatory authority included in the General Assembly's mandate.

Substance: The Children's Health Insurance Program Reauthorization Act of 2009 authorizes the Centers for Medicare and Medicaid Services (CMS) to award annual financial bonuses to states that: (i) implement certain enrollment and retention provisions in their children's Medicaid and Children's Health Insurance Program (CHIP) programs and (ii) exceed enrollment goals in their children's Medicaid program. Funding for the annual CHIPRA performance bonus payments is available through federal fiscal year (FFY) 2013.

In order for the department to ensure that Virginia is eligible for a CHIPRA performance bonus in FFY2011, two new enrollment and retention strategies must be implemented. One enrollment and retention strategy, Administrative Renewals, is being implemented to streamline the renewal process for current FAMIS enrollees. While this is a positive step forward for the Children's Health program, this provision alone will not secure a performance bonus for the Commonwealth. A second enrollment and retention strategy is needed to obtain this funding. Without significant expense and administrative changes, the department can implement a § 1906A premium assistance program, and thereby qualify for federal performance bonuses for the next three years. Premium assistance programs use federal and state Medicaid funds to help subsidize the purchase of group health coverage for children who have access to employer-sponsored coverage, but who may need assistance in paying for their premiums.

Virginia currently operates a premium assistance program, known as the Health Insurance Premium Payment Program (HIPP) under the authority of § 1906 of the Social Security Act. HIPP provides reimbursement for the Medicaid individual's share of the cost of the health insurance premium when it is cost-effective for the state to do so. The current HIPP program does not restrict enrollment to children under age 19 and opens enrollment up to most Medicaid eligible individuals covered under employer-sponsored health insurance.

CHIPRA added § 1906A to the Social Security Act and provides states with an additional premium assistance option for children under age 19 enrolled in Medicaid. This new provision is intended to give states the opportunity to build on existing § 1906 programs to augment coverage options for children.

The premium assistance option offered through CHIPRA allows states to provide health insurance premium assistance to children under age 19, who are eligible for Medicaid and who have access to qualified employer-sponsored coverage. The CHIPRA premium assistance provision would also require the department to pay cost sharing for the ineligible parent who holds the insurance as well as for enrolled children under age 19. It is estimated that this will cost the department approximately $947,614 in total funds ($446,326 in general funds) each year. Individual enrollment in the CHIPRA premium assistance program is voluntary and is not a condition of enrollment for those applying for Medicaid. This program will not require an administratively burdensome cost effectiveness calculation for each participant as is currently required in the HIPP program. Program guidelines require that cost effectiveness will be met as long as the employer covers at least 40% of the health insurance premium. Implementation of this provision will provide an alternative method for subsidizing employer-sponsored coverage and will encourage parents of Medicaid children to enroll in private health insurance.

Issues: The primary advantage of this action is that it will permit DMAS to extend the Health Insurance Premium Payment program to children, saving the state money and providing for private health insurance coverage for children. In addition, implementing this program qualifies Virginia for substantial extended federal match money. There are no disadvantages to the Commonwealth or to the public.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapter 874 of the 2010 Acts of Assembly Item 296 L, the proposed regulations will establish an additional premium assistance option for children enrolled in Medicaid.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The federal Children's Health Insurance Program Reauthorization Act of 2009 authorized the Centers for Medicare and Medicaid Services to award annual performance bonuses through federal fiscal year (FFY) 2013 to states that implement certain enrollment and retention provisions in their children's Medicaid and Children's Health Insurance Program (CHIP) programs and exceed enrollment goals in their children's Medicaid program. Consequently, the 2010 General Assembly directed the Department of Medical Assistance Services (DMAS) to develop enrollment and retention provisions that would lead to an award of a performance bonus.

In order to get the bonus, a state must implement at least five of the eight program features that simplify the application and enrollment process. The goal is to encourage and assist states in reaching and enrolling more uninsured children who are eligible for Medicaid. The eight program features are: 1) liberalization of asset or resource requirements, 2) elimination of in-person interviews, 3) the same application and renewal process for Medicaid and CHIP, 4) automatic/administrative renewals, 5) premium assistance, 6) continuous eligibility, 7) presumptive eligibility for children, and 8) express lane eligibility.

During the last year, Virginia met the first three of the eight criteria above. Also, the fourth criterion was implemented administratively October 1, 2010. DMAS proposes to add the fifth criteria, premium assistance, through these regulations to qualify for the bonus.

Virginia Medicaid currently operates an optional premium assistance program known as the Health Insurance Premium Payment Program (HIPP). Under HIPP, Medicaid pays for the employees share of the health insurance premium and any other cost sharing fees if participation is found to be cost effective for Medicaid. Participation is considered cost effective if the premium assistance subsidy is likely to be less than the expected total expenditures that will be spent on that persons Medicaid coverage. The current HIPP program does not restrict enrollment to children under age 19 and opens enrollment up to most Medicaid eligible individuals covered under employer-sponsored health insurance.

The proposed new premium assistance program is different than the current HIPP program in three main ways. First, the new program provides health insurance premium assistance to children under age 19 while the current program does not restrict enrollment to children under age 19. Second, the new program requires Medicaid to pay cost sharing for the ineligible parent who holds the insurance as well as for enrolled children. Third, the proposed program does not require a cost effectiveness calculation for each participant as is currently required in the HIPP program as long as the employer covers at least 40% of the health insurance premium.

DMAS estimates that 1,186 families will enroll in the proposed premium assistance program. The new program enrollees are expected to come from the current HIPP program and from the Medicaid program. Some of the families in the current HIPP program who have a child under age 19 are expected to apply for the new program because of the available cost sharing for the ineligible parents or because Medicaid will no longer require the cost effectiveness determination which may be administratively burdensome. Also, some of the families in the Medicaid program whose employer pays at least 40% of the health insurance premium and who did not pass the cost effectiveness test for the current program are expected to apply for the new program as there is no cost effectiveness test required.

It is estimated that DMAS will pay $585,107 in FFY 2011, $600,057 in FFY 2012, and $600,057 in FFY 2013 for cost sharing¹, one time system changes in the first year, and two full time staff positions. Approximately one half of these amounts will be paid by the federal government and the remaining half will be paid by the Commonwealth.

The main benefit of the proposed program is the expected bonus. The projected performance bonus for FFY 2011 is $32.4 million, for FFY 2012 it is $43.6 million, and FFY 2013 it is $59.2 million. Based on the 1,186 anticipated enrollment level, the expected bonus per enrollee varies from $27,393 to $49,959 which is significantly greater than $799 expected cost sharing per enrollee. Also, the influx of the federal funds coming into the Commonwealth is expected to have expansionary economic effects on Virginia's economy.

In addition, a reduction in cost sharing expenditures in the current HIPP program would be expected as some individuals leave the current program to join the new program. Also, a reduction in administrative expenses may be expected as the new program does not require the time consuming administrative cost effectiveness determination. Furthermore, a reduction in Medicaid expenditures would be expected as some individuals who were ineligible for HIPP become eligible for premium assistance under the new program.² All of these anticipated fiscal effects would offset the additional cost sharing, system changes, and staff costs discussed above.

Finally, the proposed premium assistance program is expected to benefit the enrollees by paying for their and their ineligible parents' health insurance premiums. Since this is a completely optional program, applicants reveal that the benefits to them are greater than the costs by choosing to participate in the program.

Businesses and Entities Affected. The number of individuals anticipated to enroll in the proposed premium assistance program is 1,186.

Localities Particularly Affected. The proposed regulations do not affect any locality more than others.

Projected Impact on Employment. Implementation of the new program is estimated to require two full time staff positions and expected to increase in the demand for labor. Also, the expansionary effects of the influx of federal funds are expected to increase demand for labor. On the other hand, expected reduction in the administratively burdensome cost effectiveness determinations would reduce the need for some staff time and reduce the demand for labor, offsetting some of the expected increase in labor demand.

Effects on the Use and Value of Private Property. The proposed regulations are not expected to have an effect on the use and value of private property.

Small Businesses: Costs and Other Effects. The proposed regulations do not have a direct effect on small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. There is no anticipated adverse effect on small businesses.

Real Estate Development Costs. No effect on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

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¹ According to DMAS, $799 per year is the national average for cost sharing.

² Even though no actual cost effectiveness determination is required, employer paying at least 40% of the health insurance premium is expected to result in cost effectiveness in majority of the cases.

Agency's Response to Economic Impact Analysis: The agency has reviewed the economic impact analysis prepared by the Department of Planning and Budget regarding the regulations concerning Health Insurance Premium Payment (HIPP) for Kids Program (12VAC30-20). The agency concurs with this analysis.

Summary:

This action implements Item 296 L of Chapter 874 of the 2010 Appropriations Act, which directed the Department of Medical Assistance Services to develop enrollment and retention provisions, consistent with those outlined in § 104 of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA), P.L. 111-3, and implements provisions determined to be budget neutral, cost effective, or that would lead to an award of a CHIPRA performance bonus.

12VAC30-10-325. Premiums, deductibles, coinsurance and other cost sharing obligations.

A. The Pursuant to § 1906 of the Act, the Medicaid agency pays all premiums, deductibles, coinsurance, and other cost sharing obligations for items and services covered under the State plan (subject to any nominal Medicaid copayment) for eligible individuals in employer-based cost-effective group health plans.

B. When coverage for eligible family members is not possible unless ineligible family members enroll, the Medicaid agency pays premiums for enrollment of other family members when cost-effective. In addition, the eligible individual is entitled to services covered by the State plan which are not included in the group health plan. Guidelines for determining cost effectiveness are described in 12VAC30-10-610 H.

C. Pursuant to § 1906A of the Act, the Medicaid agency pays all premiums, deductibles, coinsurance, and other cost sharing obligations for items and services covered under the State Plan, as specified in the qualified employer-sponsored coverage, without regard to limitations specified in § 1916 or § 1916A of the Act, for eligible individuals under age 19 who have access to and elect to enroll in such coverage. The eligible individual is entitled to services covered by the State Plan that are not included in the employer-sponsored coverage. For qualified employer-sponsored coverage, the employer must contribute at least 40% of the premium cost.

When coverage for eligible family members under age 19 is not possible unless an ineligible family member enrolls, the Medicaid agency pays premiums for enrollment of the ineligible family member and, at the option of the parent or legal guardian, other family members that are eligible for coverage under the employer-sponsored plan. The agency also pays deductibles, coinsurance, and other cost-sharing obligations for items and services covered under the State Plan for the ineligible family member. 12VAC30-20-205 provides a detailed description of this program.

C. D. The Medicaid agency pays premiums for individuals described in subsection 19 of 12VAC30-30-10.

12VAC30-20-205. Health Insurance Premium Payment (HIPP) for Kids.

A. Definitions. The following words and terms when used in this section shall have the following meanings unless the context clearly indicates otherwise:

"Case" means all family members who are eligible for coverage under the group health plan and who are eligible for Medicaid.

"Code" means the Code of Virginia.

"DMAS" means the Department of Medical Assistance Services consistent with Chapter 10 (§ 32.1-323 et seq.) of Title 32.1 of the Code of Virginia.

"DSS" means the Department of Social Services consistent with Chapter 1 (§ 63.2-100 et seq.) of Title 63.2 of the Code of Virginia.

"Family member" means individuals who are related by blood, marriage, or adoption.

"High deductible health plan" means a plan as defined in § 223(c)(2) of the Internal Revenue Code of 1986, without regard to whether the plan is purchased in conjunction with a health savings account (as defined under § 223(d) of the Internal Revenue Code of 1986).

"HIPP" means the Health Insurance Premium Payment Program administered by DMAS consistent with § 1906 of the Act.

"HIPP for Kids" means the Health Insurance Premium Payment Program administered by DMAS consistent with § 1906A of the Act.

"Member" means a person who is eligible for Medicaid as determined by DMAS, a DMAS designated agent, or the Department of Social Services.

"Parent" means the biological or adoptive parent or parents, or the biological or adoptive parent and the stepparent, living in the home with the Medicaid-eligible child. The health insurance policyholder shall be a parent as defined herein.

"Premium" means the fixed cost of participation in the group health plan, which cost may be shared by the employer and employee or paid in full by either party.

"Premium assistance subsidy" means the amount that DMAS will pay of the employee's cost of participating in the qualified employer-sponsored coverage to cover the Medicaid eligible member or members under age 19.

"Qualified employer-sponsored coverage" means a group health plan or health insurance coverage offered through an employer:

1. That qualifies as creditable coverage as a group health plan under § 2701(c)(1) of the Public Health Service Act;

2. For which the employer contribution toward any premium for such coverage is at least 40%; and

3. That is offered to all individuals in a manner that would be considered a nondiscriminatory eligibility classification for purposes of paragraph (3)(A)(ii) of § 105(h) of the Internal Revenue Code of 1986 (but determined without regard to clause (i) of subparagraph (B) of such paragraph).

"State Plan" means the State Plan for Medical Assistance for the Commonwealth of Virginia.

B. Program purpose. The purpose of the HIPP for Kids program shall be to:

1. Enroll members who are eligible for coverage under a qualified employer-sponsored coverage plan.

2. Provide premium assistance subsidy for payment of the employee share of the premiums and other cost-sharing obligations for the Medicaid eligible child under age 19. In addition, to provide cost sharing for the child's noneligible parent for items and services covered under the qualified employer-sponsored coverage that are also covered services under the State Plan. There is no cost sharing for parents for services not covered by the qualified employer-sponsored coverage.

3. Treat coverage under such employer group health plan as a third party liability consistent with § 1902(a)(25) of the Social Security Act.

C. Member eligibility. DMAS shall obtain specific information on qualified employer-sponsored coverage available to the members in the case including, but not limited to, the effective date of coverage, the services covered by the plan, the deductibles and copayments required by the plan, and the amount of the premium paid by the employer and employee. Coverage that is not comprehensive shall be denied premium assistance. All Medicaid eligible family members under the age of 19 who are eligible for coverage under the qualified employer-sponsored coverage shall be eligible for consideration for HIPP for Kids except the following:

1. The member is Medicaid eligible due to "spenddown"; or

2. The member is currently enrolled in the qualified employer-sponsored coverage and is only retroactively eligible for Medicaid.

D. Application required. A completed HIPP for Kids application must be submitted to DMAS to be evaluated for program eligibility. The HIPP for Kids application consists of the forms prescribed by DMAS and any necessary information as required by the program to evaluate eligibility and determine if the plan meets the criteria for qualified employer-sponsored coverage.

E. Exceptions. The term "qualified employer-sponsored coverage" does not include coverage consisting of:

1. Benefits provided under a health flexible spending arrangement (as defined in § 106(c)(2) of the Internal Revenue Code of 1986) or

2. A high deductible health plan (as defined in § 223(c)(2) of the Internal Revenue Code of 1986), without regard to whether the plan is purchased in conjunction with a health savings account (as defined under § 223(d) of the Internal Revenue Code of 1986).

3. For self-employed individuals, qualified employer-sponsored coverage obtained through self-employment activities shall not meet the program requirements unless the self-employment activities are the family's primary source of income and the insurance meets the requirements of the definition of qualified employer-sponsored coverage in subsection A of this section. Family for this purpose includes family by blood, marriage, or adoption.

F. Payments. When DMAS determines that a qualified employer-sponsored coverage plan is eligible and other eligibility requirements have been met, DMAS shall provide for the payment of premium assistance subsidy and other cost-sharing obligations for items and services otherwise covered under the State Plan, except for the nominal cost-sharing amounts permitted under § 1916 of the Social Security Act.

1. Effective date of premium assistance subsidy. Payment of premium assistance subsidies and other cost-sharing obligations shall become effective on the first day of the month in which DMAS receives a complete HIPP application or the first day of the month in which qualified employer-sponsored coverage becomes effective, whichever is later. Payments shall be made to either the employer, the insurance company, or the individual who is carrying the group health plan coverage.

2. Payments for deductibles, coinsurances, and other cost-sharing obligations.

a. Medicaid eligible children under age 19 pursuant to § 1906A of the Act. The Medicaid agency pays all premiums, deductibles, coinsurance, and other cost-sharing obligations for items and services covered under the State Plan, as specified in the qualified employer-sponsored coverage, without regard to limitations specified in § 1916 or § 1916A of the Act, for eligible individuals under age 19 who have access to and elect to enroll in such coverage. The eligible individual is entitled to services covered by the State Plan that are not included in the qualified employer-sponsored coverage.

b. Ineligible family members. When coverage for Medicaid-eligible family members under age 19 is not possible unless an ineligible parent enrolls, the Medicaid agency pays premiums only for enrollment of the ineligible parent and, at the parent's option, other family members who are eligible for coverage under the qualified employer-sponsored coverage. In addition, the agency provides cost sharing for the child's ineligible parent for items and services covered under the qualified employer-sponsored coverage that are also covered services under the State Plan. There is no cost-sharing for ineligible parents for items and services not covered by the qualified employer-sponsored coverage.

3. Documentation required for premium assistance subsidy reimbursement. A person to whom DMAS is paying a qualified employer-sponsored coverage premium assistance subsidy shall, as a condition of receiving such payment, provide documentation as prescribed by DMAS of the payment of the employer group health plan premium, as well as payment of coinsurances, copayments, and deductibles for services received.

G. Program participation requirements. Participants must comply with program requirements as prescribed by DMAS for continued enrollment in HIPP for Kids. Failure to comply with the following may result in termination from the program:

1. Submission of documentation of premium expense within specified time frame in accordance with DMAS established policy.

2. Report changes in the qualified employer-sponsored coverage within 10 days of the family's receipt of notice of the change.

3. Completion of annual redetermination.

4. Completion of consent forms. Participants may be required to complete a consent form to release information necessary for HIPP for Kids participation and program requirements as required by DMAS.

H. HIPP for Kids redetermination. DMAS shall redetermine the eligibility of the qualified employer-sponsored coverage periodically, at least every 12 months. DMAS shall also redetermine eligibility when changes occur with the group health plan information that was used in determining HIPP for Kids eligibility.

I. Program termination. Participation in the HIPP for Kids program may be terminated for failure to comply or meet program requirements. Termination will be effective the last day of the month in which advance notice has been given (consistent with federal regulations).

1. Participation may be terminated for failure to meet program requirements including, but not limited to, the following:

a. Failure to submit documentation of payment of premiums;

b. Failure to provide information required for reevaluation of the qualified employer-sponsored coverage (noncompliance);

c. Loss of Medicaid eligibility for all household members;

d. Medicaid household member no longer covered by the qualified employer-sponsored coverage;

e. Medicaid-eligible child turns age 19; or

f. Employer-sponsored health plan no longer meets qualified employer-sponsored coverage requirements.

2. Termination date of premiums. Payment of premium assistance subsidy shall end on whichever of the following occurs the earliest:

a. On the last day of the month in which eligibility for Medicaid ends;

b. The last day of the month in which the member loses eligibility for coverage in the group health plan;

c. The last day of the month in which the child turns age 19;

d The last day of the month in which adequate notice has been given (consistent with federal requirements) that DMAS has determined that the group health plan no longer meets program eligibility criteria; or

d. The last day of the month in which adequate notice has been given (consistent with federal requirements) that HIPP for Kids participation requirements have not been met.

J. Third-party liability. When members are enrolled in qualified employer-sponsored coverage health plans, these plans shall become the first sources of health care benefits, up to the limits of such plans, prior to the availability of payment under Title XIX.

K. Appeal rights. Members shall be given the opportunity to appeal adverse agency decisions consistent with agency regulations for client appeals (12VAC30-110).

L. Provider requirements. Providers shall be required to accept the greater of the group health plan's reimbursement rate or the Medicaid rate as payment in full and shall be prohibited from charging the member or the Medicaid program amounts that would result in aggregate payments greater than the Medicaid rate as required by 42 CFR 447.20.

FORMS (12VAC30-20)

Health Insurance Premium Payment HIPP for Kids (HFK) Program - Cost Sharing of Co-Pays, Deductibles and Co-insurance (undated).

Health Insurance Premium Payment Programs Application/Renewal/Employer Insurance Verification Form, DMAS-502 (rev. 2/2012).

Health Insurance Premium Payment (HIPP) and HIPP for Kids Program - Consent for Authorization for Release of Information - Family Member Eligibility Release (undated).

Health Insurance Premium Payment Program - Change Form (undated).

Health Insurance Premium Payment Program (HIPP) for Kids - Change Form (eff. 9/2010).