CHIP Reauthorization Act gives States the option of covering Medicaid eligible children of working parents under employer group health plans

The Children’s Health Insurance Program Reauthorization Act of 2009 (“Act”) (enacted February 4, 2009) has the potential for shifting coverage of low-income children (and their families) to employer group health plans, if a parent of such a child is employed and the child remains eligible for coverage under Medicaid.

The relevant background of the Act is as follows:

Medicaid provides for health insurance programs for low income individuals, including children, under plans maintained by States. The portion of Medicaid covering children is called the Children’s Health Insurance Program (“CHIP”). In Hawaii, for example, all Medicaid programs for low income individuals are housed under the QUEST program.

The income limitation for coverage under QUEST for low income adults (who are not age 65 or over and are not certified as blind or disabled) is 100% of the Federal Poverty Guideline. For children, the income limitation is 200% of the Federal Poverty Guideline. (Click here for the 2009 Federal Poverty Guidelines.)

The Act extends CHIP by permitting States to elect to provide health insurance assistance to low income children by the means of paying for the coverage of such children under employer group health plans covering the children’s parents. In addition, the children's parents may also be covered under the employer's group health through such premium payments (if the parents are also eligible for Medicaid).

Thus, for example, instead of covering low income children only under QUEST, the State of Hawaii could now elect to cover the children through employer group health plans covering the children’s parents. Hawaii would give effect to this election by making premium assistance payments to pay for the children’s coverage, either directly to the group health plans or to the children’s parents. Further, if a targeted child’s parent or parents are also eligible for coverage under QUEST, then the State of Hawaii may now elect to make a premium payment to cover the entire family under the employer’s group health plan.

Some relevant details of the premium assistance program are as follows:
• Premium assistance under an employer’s group health plan must be elected by the targeted individual. In other words, the State cannot simply force coverage under the group health plan.
• An employer that offers dependent coverage under its group health plan may opt out of receiving premium subsidies directly from the State and may require that the premium subsidies be paid to the targeted individual.
• In the case of a child, the subsidy is equal to the difference between the employee contribution required for employee only coverage and the employee contribution required for coverage of the employee plus child. (N.B.: This will mean that to the extent that the employer subsidizes dependent coverage for any employee, the same subsidy will have to be provided with respect to children who are eligible for Medicaid coverage. Thus, a net fiscal effect of the Act is to shift a portion of the cost of covering low income children (and families) under Medicaid to employers.)
• In the case of coverage of one or more parents in addition to coverage of the child, the amount of the subsidy is increased to take into account the coverage of the parent(s), or, if cost effective in the State’s determination, the subsidy is equal to the cost of family coverage.
• In States which elect to provide premium assistance,
• The employer’s group health plan must permit enrollment of an employee who is eligible but not enrolled and of a dependent of any employee upon the occurrence of either of the following:
• the termination of the coverage of the employee or dependent under Medicaid or the State’s CHIP program (presumably owing to the choice of the employee to be covered under the employer’s group health plan), or
• the employee’s or dependent’s becoming eligible for premium assistance,
• provided that the employee enrolls within 60 days of the triggering event.
• The employer must give written notice to each employee of the opportunities for premium assistance that may be available.
• States opting to provide premium assistance with respect to coverage under employers’ group health plans are required to provide outreach and education services to families and employers.
• The Secretaries of Labor and Health and Human Services are directed to develop model notices within one year after the date of the Act’s enactment (which was February 4, 2009), and employers are required to issue such notices no later than the first plan year beginning after the anniversary of the Act’s enactment (e.g., January 1, 2011 for calendar year plans).

While April 1, 2009 is the effective date for the Act, employers should not rush into providing the required notices about the potential availability of premium payments through Medicaid. The Act requires States to elect to provide premium assistance and to offer outreach services, and obligates the two Secretaries to provide model notices within one year. Providing notice to employees at this point of opportunities for premium assistance that might become available to them through Medicaid would only serve to confuse the situation. Let the States act first.

It is highly likely, however, that States will act sooner rather than later to implement the options now available under the Act. States themselves carry part of the cost of Medicaid through cost sharing with the Federal government. To the extent that employers subsidize health care costs (which is the norm in Hawaii), then the State fisc will benefit through the employer group health plan option. Further, to the extent that limits are imposed on enrollment in State Medicaid health plans and those limits have already been reached, coverage through employer group health plans is the only means available for covering new Medicaid eligible individuals. In Hawaii, for example, QUEST is at its limit of 125,000 enrollees and cannot take new enrollees. Premium payments for coverage through employers is Hawaii’s only option for covering additional low income individuals.

Go here for text of Act (click Continue to GPO Site).

John, Sunday, February 22, 2009