Title of Regulation: 12VAC30-20. Administration of Medical Assistance Services (amending 12VAC30-20-210).

Statutory Authority: §§ 32.1-324 and 32.1-325 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: March 18, 2011.

Agency Contact: Patricia Taylor, Program Operations Division, Department of Medical Assistance Services, 600 East Broad Street, Richmond, VA 23219, telephone (804) 371-6333, FAX (804) 786-1680, or email patricia.taylor@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. Section 32.1-324 of the Code of Virginia authorizes the Director of 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 regulatory action is intended to clarify that the Health Insurance Premium Payment Program (HIPP) eligibility evaluation includes whether family healthcare coverage exists at the time that HIPP participation is evaluated, regardless of whether the eligibility evaluation is at the time of initial application or during a reevaluation. Upon implementation of this change, having existing family health care coverage will be considered in the HIPP eligibility determination. This change will require the amendment of regulations addressing HIPP eligibility, family healthcare coverage, and a clarification of the cost-effectiveness methodology. These changes are needed to ensure that HIPP payments made for the participants enrolled in the HIPP program are overall cost effective for the Commonwealth.

Substance: When the HIPP program was enacted in 1991 by the federal government it was envisioned as a means to reduce the cost of the Medicaid program by shifting the cost of medical expenses onto the employer health plan if one was available. The HIPP regulations require a cost-effectiveness determination of the employer health plan for enrollment. Cost effectiveness is defined as meaning that it is likely to cost the state less to pay the employee's share of the health insurance premium and any cost sharing items for the Medicaid eligible household members than it would cost otherwise under Medicaid. As a result of Medicaid eligibility rules, circumstances exist that allow a family member to be evaluated for Medicaid without evaluating family income. Eligibility is based on the individual's income only. These Medicaid enrollees whose eligibility is not determined based on family household income are likely to be covered under a family health insurance policy that includes family members not enrolled in Medicaid. Under the current changes being made in this regulation, a family that would have family health coverage for three or more members not enrolled in Medicaid would not be eligible for the HIPP program. The family would have the family coverage regardless if a family member was enrolled in Medicaid; therefore, the Commonwealth will no longer enroll Medicaid recipients in HIPP who would otherwise remain enrolled in the family health insurance if HIPP were not available.

High deductible health plans (HDHPs) are not cost effective for the HIPP program. In recent years as a result of increased insurance costs, many health care plans have adopted "high deductible" plans. An HDHP is defined in § 232(c)(2) of the Internal Revenue Code of 1986. The Department of Treasury updates the deductible amounts on an annual basis. These plans were nonexistent at the inception of the HIPP program; however, they have become more prevalent in recent years as health insurance premiums have increased. Medicaid would be paying all medical expenses until the deductible is met as well as the monthly premium. Because Medicaid eligibility only exists on a month-to-month basis, HDHPs are not cost effective for the HIPP program. Inclusion of this language provides clarity to the process that is currently followed today and is consistent with current federal regulations. The Child Health Insurance Program Reauthorization Action of 2009 included additional options for Premium Assistance Program under § 1906A of the Social Security Act and specifically excludes HDHP coverage for consideration.

Program participation requirements have been defined to ensure participants initially found eligible continue to meet the cost-effectiveness requirements. Additionally, program termination reasons have been included in the regulations. Current regulations provided reasons for terminating payments; however, nothing was defined regarding termination from the program. Including termination reasons provides clear authority to terminate participation in the program when participation requirements are not met. These regulations respond to the General Assembly's mandate clarifying several aspects of the HIPP cost effectiveness methodology, including promulgating several new definitions and addressing family healthcare issues with regard to HIPP.

Current regulations provided a clause for consideration for extraordinary circumstances of some recipients who are not eligible for HIPP. This language was removed because these eligibles are not cost effective for the HIPP program as they have limited eligibility, reside in a nursing home, or are Medicare eligible. Revisions were made to clarify that premium assistance subsidies begin the month after a completed application is received rather than at the time the cost effectiveness determination is made. This change reflects the current methodology used.

Language was revised regarding the submission of documentation required for premium assistance subsidy reimbursement. The HIPP program became an optional program effective July 23, 2009; participation in HIPP is no longer a condition for Medicaid eligibility. Language regarding the Department of Social Services receiving the required premium documentation has been removed from the regulation as the information is to be submitted directly to DMAS.

Note: At the time of the emergency regulation promulgated as a precursor to this proposed regulation, 12VAC30-20-210 was also the subject of a fast-track regulatory action. Due to the difficulties of effecting changes in this section at the time another action is taking effect in the same regulatory subsection, DMAS elected to make the emergency changes both in 12VAC30-20-210 and in a new mirror image subsection, 12VAC30-20-211. The changes of the text in 12VAC30-20-210 made in the fast-track regulation are now final, and there is no further need to have two separate regulatory sections to address the current changes in 12VAC30-20-210. DMAS is therefore inserting all the emergency changes from 12VAC30-20-211 into 12VAC20-30-210 in this proposed regulation. This will leave 12VAC30-20-210 as the only regulatory subsection in this action going forward to the proposed and final stages.

Note: DMAS noted in the published emergency regulation background document that the agency intended to address several other issues in this proposed and later final regulations that follow the prior emergency action. Therefore, DMAS is modifying 12VAC30-20-210 to address several issues pertinent to the HIPP program, but which are not part of Item 306 AAA of Chapter 781 of the 2009 Appropriation Act. These issues include, but are not limited to, requirements regarding consent forms in the HIPP program, termination from the program, and program eligibility and participation requirements.

Issues: The primary disadvantage of this regulatory action for the public is that the families that were enrolled in HIPP with family coverage have been canceled and new applications with existing family health insurance are being denied. The families were accustomed to receiving reimbursement for the cost of the health insurance plan and these funds have now been discontinued. However, these participants incurred the cost of the insurance prior to applying to the HIPP program. The intent of the HIPP program is to provide for premium assistance for an employer group health insurance plan when the Medicaid recipient otherwise would not be enrolled in the group health plan. The families impacted by this regulatory change are already enrolled in their employer group health plan and most likely will continue to be enrolled in their employer group health plan for the family members who are not enrolled in Medicaid regardless of whether they participated in HIPP. Although through this program there has been a cost savings for individual policy holders and their families, the purpose of the program is a cost savings measure for the Commonwealth. Removing these families from the HIPP program does not mean that an enrollee's Medicaid eligibility is lost. Recipients who remain otherwise eligible for Medicaid continue their Medicaid coverage.

The primary advantage to the Commonwealth is cost savings by ensuring that the HIPP program provides for premium assistance as appropriate by not enrolling participants who would otherwise be covered under private insurance. The HIPP program is intended to be an overall cost savings program for the Commonwealth. Medicaid enrollment has changed over the years with the inclusion of additional covered groups in which family income is not evaluated only the individual's income is taken into consideration, while the HIPP program regulations have not been revised to reflect these eligibility changes. The HIPP program was intended to provide premium assistance for Medicaid eligibles enrollment in their employer group health when they would otherwise not be enrolled without being in the HIPP program. The HIPP program was not intended to provide premium assistance for families who would have family coverage for the household members who are not enrolled in Medicaid. Participants being denied HIPP participation under this regulatory change are dissatisfied with this change; however, in most instances they were in HIPP when only one family member was enrolled in Medicaid. These current regulatory changes do not permit HIPP enrollment with family employer policies where three or more insured family members are non-Medicaid recipients.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The proposed regulations make Medicaid recipients with a family health care coverage for three or more non-Medicaid family members ineligible for participation in Health Insurance Premium Payment program, update the regulations to conform to the practice of handling high deductible health plans, and clarify some of the current requirements.

Result of Analysis. There is insufficient data to accurately compare the magnitude of the benefits versus the costs. Detailed analysis of the benefits and costs can be found in the next section. A different design would likely yield greater benefits for at least one proposed change.

Estimated Economic Impact. The proposed regulations make Medicaid recipients with family health care coverage for three or more non-Medicaid family members ineligible for participation in the Health Insurance Premium Payment program (HIPP). Under HIPP, Medicaid pays for the employee's 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.

Prior to the proposed changes, a Medicaid recipient who is covered under a family health insurance program was eligible to receive a premium assistance subsidy for the entire cost of the plan. Chapter 781, Item 306 AAA of the 2009 Appropriation Act directed the Department of Medical Assistance Services (DMAS) to promulgate regulations making existing family healthcare coverage a factor in the determination of cost effectiveness. In response, the proposed regulations make participation in HIPP ineligible for those with a family health insurance plan for three or more non-Medicaid family members. Emergency regulations have been in effect and DMAS has been denying premium assistance to those with family health coverage with three or more non-Medicaid family members since October 5, 2009.

The main economic impact of these regulations falls on the families whose HIPP eligibility will now be denied. These families will no longer receive the subsidy they used to receive. Prior to the emergency regulations, Medicaid was paying 100 percent of the employees share of the family health plan which may have covered Medicaid ineligible parents or other children. Under the proposed changes, individuals with a family health plan for three or more non-Medicaid family members are ineligible to participate in HIPP. In response to the proposed changes, these families may or may not keep the Medicaid eligible family member in the family health plan.

If the families keep the Medicaid eligible member in their family health plan, then the Commonwealth enjoys expected savings in terms of the reduced subsidy payments without an increase in total Medicaid expenditures. This scenario is more likely in cases where dropping Medicaid eligible family member from the family health plan does not reduce the plan premiums or the family plan coverage is superior for the Medicaid eligible family member.

However, if families drop the Medicaid eligible family member from the family health plan, the medical expenses of that Medicaid eligible family member would be paid 100% by Medicaid. In this scenario, the Commonwealth would realize savings by not paying the subsidy, but would incur additional costs by paying for all healthcare expenses. Families may be inclined to use this option if dropping the Medicaid eligible family member from the family health plan reduces the plan premiums or Medicaid coverage is better than the family plan coverage for the Medicaid eligible individual.

DMAS estimates that this change produces $1.3 million savings annually in premium assistance subsidy to approximately 362 recipients. One half of these funds represents savings to the Commonwealth and the remaining half represents savings to the federal government. However, the additional expenditures the Medicaid program may incur because families drop the Medicaid eligible family member from the family health plan is not known. If the additional expenditures to the Medicaid exceed $1.3 million, the proposed changes may result in net costs to Virginia Medicaid.

It is important to note that the net economic effect of the proposed regulations on Virginia Medicaid depend on whether families keep the Medicaid eligible member in the family insurance plan. The proposed regulations do not contain any incentives for the families to keep the Medicaid eligible member in the family insurance plan. If there are enough cases where the Medicaid eligible family member is dropped from the family health plan, the additional health expenditures Medicaid would have to pay may exceed $1.3 million. Thus, there is chance that the proposed regulations may actually produce net costs rather than net benefits.

If incentives are provided to families to keep the Medicaid eligible member in the family insurance plan, the proposed changes would be more likely to produce net savings. For example, a subsidy may be given for the incremental cost of covering the Medicaid eligible member in the family insurance plan. If it is impossible to determine this incremental cost of coverage, the subsidy may be determined by prorating the number of children on the plan or the number of individuals on the plan. In short, instead of counting on families to keep their Medicaid eligible member in the family insurance plan, the proposed regulations could be designed to actually provide them with incentives to do so to ensure that the proposed changes actually provide net savings to Virginia Medicaid. It also appears that providing a subsidy for the Medicaid eligible members share of the family insurance premium would be more consistent with the intent of the HIPP program.

The proposed changes also update the regulations to conform to the practice of handling high deductible health plans. According to DMAS, since 2008 high deductible health plans have been considered ineligible to participate in HIPP. The proposed changes will reflect this change in practice. Although no immediate economic impact is expected upon promulgation of this particular change, DMAS estimates that from June 2008 through March 2010, 66 cases have been cancelled for high deductible plans representing $277,719 savings in premium assistance subsidy.

All of the remaining proposed changes are clarifications of the current requirements. None of these clarifications are expected to have any significant economic impact other than improving the clarity of the regulations and preventing potentially costly misunderstandings.

Businesses and Entities Affected. The proposed family health care related changes are estimated to affect 362 participants and the changes related to high deductible health plans are estimated to affect 66 participants in the HIPP program.

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

Projected Impact on Employment. The proposed changes are not expected to have a significant direct impact on employment.

Effects on the Use and Value of Private Property. The proposed changes are not expected to have a significant direct impact on the use and value of private property.

Small Businesses: Costs and Other Effects. The proposed regulations do not introduce any direct costs or other effects on small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed regulations do not introduce an adverse impact 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 107 (09). 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 DPBs best estimate of these economic impacts.

Agency's Response to the Department of Planning and Budget's Economic Impact Analysis:

The Department of Medical Assistance Services has reviewed the economic impact analysis prepared by the Department of Planning and Budget regarding the regulations concerning the HIPP program, 12VAC30-20-210. The department concurs with the greater part of the analysis, but wishes to clarify one major point from the agency's standpoint.

The HIPP regulations require a cost-effectiveness determination of the employer health plan for enrollment. Cost effectiveness here means that it costs the state less to pay the employee's share of the family health insurance premium and cost sharing than pay the full medical costs for the enrollee. As a result of Medicaid eligibility rules, there are circumstances that allow a Medicaid applicant to be Medicaid eligible without regard for the income of the applicant's family. Such enrollees are likely to be covered under a family health insurance policy that includes family members who are not enrolled in Medicaid. Under the current changes being made in this regulation, a family that has family health coverage for three or more non-Medicaid family members would not be eligible for the HIPP program. Most families in these circumstances would have the family health coverage even if Medicaid were not paying their family premiums. Because the HIPP program is intended for families that cannot afford health insurance premiums, DMAS determined that it will no longer enroll Medicaid recipients in HIPP who would otherwise retain family coverage. These enrollees do not lose their Medicaid coverage. This regulatory change means, however, that DMAS will no longer make premium payments for both Medicaid and non-Medicaid family members.

DPB suggests an alternative approach in which the agency makes prorated premium payments based upon the number of non-Medicaid members in the family. This approach, however, creates an untenable administrative burden on the agency that would likely outweigh its fiscal benefits. In response to DPB's concerns, DMAS intends to revise the final HIPP regulations to create two exceptions for families with financial need who would be ineligible for the HIPP under the new rule. The first exception is for families who have a family health plan with three or family members not enrolled in Medicaid but have family income below the family income limit for eligibility. Some families have children who have aged out of Medicaid eligibility but are still covered under the family's insurance. With Health Care Reform, children can remain enrolled in a parent's health plan until age 26, so this change should address this issue in part.

The second exception is for families where at least one child is enrolled in Medicaid and the family would meet the income eligibility criteria for the Family Access to Medicaid Insurance Security (FAMIS) program, but because they have health insurance they are not eligible for FAMIS. In both types of these cases described here, where the family income is below the Medicaid or FAMIS income limits, the families will be considered for HIPP participation.

In addition, effective October 1, 2010, DMAS expanded the HIPP program by adopting the optional premium assistance program available under § 1906(A) of the Social Security Act. While this program is targeted toward Medicaid eligible children under the age of 19, it does not exclude existing family health plans. Therefore, some cases denied or canceled under the current HIPP regulations may meet the criteria under the 1906(A) premium assistance program. 1906A utilizes a more simplistic cost effective evaluation that only requires that the employer contribute at least 40% of the health insurance cost. DMAS intends to contact policy holders canceled from HIPP or denied participation under the current regulations to inform them of the expanded program available under 1906(A) for which they may be eligible.

DMAS acknowledges that a family may elect to drop a Medicaid-enrolled family member from their health plan if they are excluded from the HIPP program. However, from a review of cases affected by the new policy DMAS has concluded that families continue their private insurance regardless of whether HIPP premium assistance is available. If, in light of this regulatory change, a family drops the Medicaid eligible individual from the family plan, their estimated private premium costs will not decrease. It is far more likely that such families will keep the Medicaid eligible on their private health plan where it makes no difference in the amount of their premium.

DMAS continues to monitor the impact of the cases that have been canceled or denied premium assistance to determine those situations in which the Medicaid eligible has been removed from the family health plan. The agency will analyze these findings to determine if further modification to the regulations is warranted.

Summary:

Item 306 AAA of Chapter 781 of the 2009 Appropriation Act directed the Department of Medical Assistance Services to amend the State Plan for Medical Assistance to clarify that existing family healthcare coverage is a factor in the determination of eligibility under the Health Insurance Premium Payment program. More specifically, cases resulting in a determination that participation is denied based upon the existence of family health care coverage will be denied premium assistance.

The proposed amendments make Medicaid recipients with a family health care coverage for three or more non-Medicaid family members ineligible for participation in the Health Insurance Premium Payment program, update the regulations to conform to the practice of handling high deductible health plans, and clarify some of the current requirements.

12VAC30-20-210. State method on cost effectiveness of employer-based group health plans.

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

"Average monthly Medicaid cost" means average monthly medical expenditures based upon age, gender, Medicaid enrollment covered group, and geographic region of the state.

"Average monthly wraparound cost" means the average monthly aggregate costs for services not covered by private health insurance but covered under the State Plan for Medical Assistance, also includes copayments, coinsurance, and deductibles.

"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.

"Cost effective" and "cost effectiveness" mean the reduction in Title XIX expenditures, which are likely to be greater than the additional expenditures for premiums and cost-sharing items required under § 1906 of the Social Security Act (the Act), with respect to such enrollment.

"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, or legal custody.

"Family health plan" and "family care coverage" means a group health plan that covers three or more individuals. Family health plans that cover three or more non-Medicaid eligible individuals are not eligible for the HIPP premium assistance subsidy.

"Group health plan" means a plan which meets § 5000(b)(1) of the Internal Revenue Code of 1986, and includes continuation coverage pursuant to Title XXII of the Public Health Service Act, § 4980B of the Internal Revenue Code of 1986, or Title VI of the Employee Retirement Income Security Act of 1974. Section 5000(b)(1) of the Internal Revenue Code provides that a group health plan is a plan, including a self-insured plan, of, or contributed to by, an employer (including a self-insured person) or employee association to provide health care (directly or otherwise) to the employees, former employees, or the families of such employees or former employees, or the employer.

"High deductible health plan" means a plan as defined in § 223(c)(2) of 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 such Code).

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

"Premium" means that portion of the cost for the group health plan which is the responsibility of the person carrying the group health plan policy the fixed cost of participation in the group health plan; such cost may be shared by the employer and employee or paid in full by either party.

"Premium assistance subsidy" means the portion that DMAS will pay of the family's employee's cost of participating in an employer's health plan to cover the Medicaid eligible members under the employer-sponsored plan if DMAS determines it is cost effective to do so.

"Recipient" means a person who is eligible for Medicaid as determined by the Department of Social Services.

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

1. Enroll To enroll recipients who have an available group health plan that is likely to be cost effective;

2. Provide To provide premium assistance subsidy for payment of the employee share of the premiums and other cost-sharing obligations for items and services otherwise covered under the State Plan for Medical Assistance (the Plan); and

3. Treat To treat coverage under such employer group health plan as a third party liability consistent with § 1906 of the Social Security Act.

C. Application required. A completed HIPP application must be submitted to DMAS to be evaluated for HIPP program eligibility; if HIPP program eligibility is established, DMAS shall then evaluate the group health plan for cost effectiveness. The HIPP application consists of the forms prescribed by DMAS and any necessary information as required by the program to evaluate eligibility and perform a cost-effectiveness evaluation.

D. Recipient eligibility. DMAS shall obtain specific information on all group health plans available to the recipients 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, the exclusions to the plan, and the amount of the premium. Coverage that is not comprehensive shall be denied premium assistance. Cases that result in a determination that the applicant is not eligible for the HIPP program shall be denied premium assistance and shall not undergo further review as described in subsection E of this section. All family members who are eligible for coverage under the group health plan and who are eligible for Medicaid shall be eligible for consideration for HIPP, except those any one or more of the factors identified in subdivisions 1 through 7 of this subsection. below. The agency will consider recipients in this subsection for consideration for HIPP when extraordinary circumstances indicate the group health plan might be cost effective.

1. The recipient is Medicaid eligible due to "spend-down"; .

2. The recipient is currently enrolled in the employer sponsored health plan and is only retroactively eligible for Medicaid; .

3. The recipient is in a nursing home or has a deduction from patient pay responsibility to cover the insurance premium; or .

4. The recipient is eligible for Medicare Part B, but is not enrolled in Part B .

5. The recipient's family has, or would have, family healthcare coverage for three or more members who are not Medicaid eligible.

6. Medicare eligibility. Medicaid recipients eligible for, or enrolled in, Medicare Part A and/or Part B who are also covered by an employer group health plan are not eligible for HIPP.

7. High Deductible Health Plans (HDHPs) are defined in § 223(c)(2) of the Internal Revenue Code of 1986. HDHPs are not cost effective for the HIPP program and shall be denied premium assistance and shall not undergo further review as described in subsection E of this section. The annual deductible amount for a HDHP is defined by the Department of Treasury and is updated annually.

D. Application required. A completed HIPP application must be submitted to DMAS to be evaluated for eligibility and cost effectiveness. The HIPP application consists of the forms prescribed by DMAS and any necessary information as required by the program to evaluate eligibility and perform a cost-effectiveness evaluation.

E. Cost-effectiveness evaluation. If the Medicaid eligible(s) is enrolled in the health plan and is not excluded from HIPP program participation under the criteria described in subsection D of this section, DMAS shall conduct the premium cost-effectiveness evaluation based upon the following methodology:

1. Recipient information. DMAS shall obtain demographic information on each recipient in each case including, but not limited to, Medicaid enrollment covered group, age, gender, and geographic region of residence in the state.

2. DMAS shall compute the average monthly Medicaid cost for each Medicaid enrollee on the group health insurance plan and compare the total cost to the employee's responsibility for the health insurance cost.

3. Wraparound cost. DMAS shall total the average monthly wraparound cost for each Medicaid enrollee on the HIPP case and subtract the amount from the average monthly Medicaid cost for the cost-effectiveness evaluation.

4. Administrative cost. DMAS shall total the administrative costs of the HIPP program and estimate an average administrative cost. DMAS shall subtract the administrative cost from the average monthly Medicaid cost for the cost-effectiveness evaluation.

5. Determination of premium cost effectiveness. DMAS shall determine that a group health plan is likely to be cost effective if subdivision a is less than subdivision b below:

a. The employee's responsibility for the group health plan premium.

b. The total of the average monthly Medicaid costs less the wraparound costs for each Medicaid enrollee covered by the group health plan and the administrative cost.

6. DMAS may reimburse up to the amount determined in subdivision 5 b of this subsection, if subdivision 5 a of this subsection is not less than subdivision 5 b of this subsection.

F. Payments. When DMAS determines that a group health plan is likely to be cost effective based on the DMAS established methodology, DMAS shall provide for the payment of premiums premium assistance subsidy and other cost-sharing obligations for items and services otherwise covered under the Plan, except for the nominal cost sharing amounts permitted under § 1916.

1. Effective date of premiums premium assistance subsidy. Payment of premiums premium assistance subsidy shall become effective on the first day of the month following the month in which DMAS makes the cost effectiveness determination receives a complete HIPP application or the first day of the month in which the group health plan coverage becomes effective, whichever is later. Payments shall be made to either the employer, the insurance company or to the individual who is carrying the group health plan coverage.

2. Termination date of premiums. Payment of premiums shall end:

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

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

c. The last day of the month in which adequate notice has been given (consistent with federal requirements) that DMAS has redetermined that the group health plan is no longer cost effective, whichever comes later.

3. Non-Medicaid eligible family members. Payment of premiums for non-Medicaid eligible family members may be made when their enrollment in the group health plan is required in order for the recipient to obtain the group health plan coverage. Such payments shall be treated as payments for Medicaid benefits for the recipient. 2. No payments for deductibles, coinsurances, and other cost-sharing obligations for non-Medicaid eligible family members shall be made by DMAS.

4. Evidence of enrollment required. A person to whom DMAS is paying the group health plan premium shall, as a condition of receiving such payment, provide to DSS or DMAS, upon request, written evidence of the payment of the group health plan premium for the group health plan which DMAS determined to be cost effective 3. Documentation required for premium assistance subsidy reimbursement. A person to whom DMAS is paying an employer group health plan 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 for the group health plan that DMAS determined to be cost effective.

F. Guidelines for determining cost effectiveness.

1. Enrollment limitations. DMAS shall take into account that a recipient may only be eligible to enroll in the group health plan at limited times and only if other non-Medicaid eligible family members are also enrolled in the plan simultaneously.

2. Plans provided at no cost. Group health plans for which there is no premium to the person carrying the policy shall be considered to be cost effective.

3. Non-Medicaid eligible family members. When non-Medicaid eligible family members must enroll in a group health plan in order for the recipient to be enrolled, DMAS shall consider only the premiums of non-Medicaid eligible family members in determining the cost effectiveness of the group health plan.

4. DMAS shall make the cost effectiveness determination based on the following methodology:

a. Recipient and group health plan information. DMAS shall obtain demographic information on each recipient in the case, including, but not limited to: federal program designation, age, sex, geographic location. DMAS [or DSS] shall obtain specific information on all group health plans available to the recipients in the case, including, but not limited to, the effective date of coverage, the services covered by the plan, the exclusions to the plan, and the amount of the premium.

b. Average estimated Medicaid expenditures. DMAS shall estimate the average Medicaid expenditures for a 12-month period for each recipient in the case based on the expenditures for persons similar to the recipient in demographic and eligibility characteristics. Expenditures shall be adjusted accordingly for inflation and scheduled provider reimbursement rate increases. Average estimated Medicaid expenditures shall be updated periodically.

c. Medicaid expenditures covered by the group health plan. DMAS shall compute the percentage of expenditures for group health plan services against the expenditures for the same Medicaid services and then adjust the average estimated Medicaid expenditures by this percentage for each recipient in the case. These adjusted expenditures shall be added to obtain a total for the case.

d. Group health plan allowance. DMAS shall multiply an allowance factor by the Medicaid expenditures covered by the group health plan to produce the estimated group health plan allowance. The allowance factor shall be based on a state specific factor, a national factor or a group health plan specific factor.

e. Covered expense amount. DMAS shall multiply an average group health plan payment rate by the group health plan allowance to produce an estimated covered expense amount. The average group health plan payment rate shall be based on a state specific rate, national rate or group health plan specific rate.

f. Administrative cost. DMAS shall total the administrative costs of the HIPP program and estimate an average administrative cost per recipient. DMAS shall add to the administrative cost any pre-enrollment costs required in order for the recipient to enroll in the group health plan.

G. Determination of cost effectiveness. DMAS shall determine that a group health plan is likely to be cost effective if subdivision 1 of this subsection is less than subdivision 2 of this subsection:

1. The difference between the group health plan allowance and the covered expense amount, added to the premium and the administrative cost; and

2. The Medicaid expenditures covered by the group health plan.

If subdivision 1 of this subsection is not less than subdivision 2 of this subsection, DMAS shall adjust the amount in subdivision 2 of this subsection using past medical utilization data on the recipient, provided by the Medicaid claims system or by the recipient, to account for any higher than average expected Medicaid expenditures. DMAS shall determine that a group health plan is likely to be cost effective if subdivision 1 of this subsection is less than subdivision 2 of this subsection once this adjustment has been made.

3. Redetermination. DMAS shall redetermine the cost effectiveness of the group health plan periodically, not to exceed every 12 months. DMAS shall also redetermine the cost effectiveness of the group health plan whenever there is a change to the recipient and group health plan information that was used in determining the cost effectiveness of the group health plan. When only part of the household loses Medicaid eligibility, DMAS shall redetermine the cost effectiveness to ascertain whether payment of the group health plan premiums continue to be cost effective.

4. Multiple group health plans. When a recipient is eligible for more than one group health plan, DMAS shall perform the cost effectiveness determination on the group health plan in which the recipient is enrolled. If the recipient is not enrolled in a group health plan, DMAS shall perform the cost effectiveness determination on each group health plan available to the recipient.

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

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

2. Changes that impact the cost-effectiveness evaluation must be reported within 10 days.

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 participation and program requirements as required by DMAS.

H. HIPP redetermination. DMAS shall redetermine the cost effectiveness of the group health plan periodically, at least every 12 months. DMAS shall also redetermine cost effectiveness when changes occur with the recipient average Medicaid cost and/or with the group health plan information that was used in determining the cost effectiveness. When only part of the household loses Medicaid eligibility, DMAS shall redetermine the cost effectiveness to ascertain whether payment of the premium assistance subsidy of the group health plan continues to be cost effective.

I. Program termination. Participation in the HIPP program shall be terminated for failure to comply with 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 shall be terminated for:

a. Failure to submit documentation of payment of premiums (noncompliance);

b. Failure to provide information required for reevaluation of cost effectiveness (noncompliance);

c. Loss of Medicaid eligibility for all household members;

d. Medicaid household member no longer covered by employer health plan; or

e. Employer group health plan is determined to be not cost effective.

2. Participants terminated for noncompliance under subdivisions 1 a and 1 b of this subsection, shall be barred from reapplying to the HIPP program for three months from the date of cancellation.

3. 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 recipient loses eligibility for coverage in the group health plan;

c. 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 is no longer cost effective; or

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

H. J. Third party liability. When recipients are enrolled in group 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 Title XIX benefits.

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

J. 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 recipient or Medicaid 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)/HIPP For Kids Program Application and Instructions (rev. 9/10).

Employer Insurance Verification (rev. 10/10).

Re-evaluation Employer Insurance Verification (rev. 10/10).