CHAPTER 2 Partnership for a New Medical Child Support Paradigm

CHAPTER 2
Partnership for a New Medical Child Support Paradigm

CHAPTER 2 AT A GLANCE
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INTRODUCTION, 2-1
How Medical Support Enforcement Works (the Child Support Enforcement Perspective), 2-2
Procedures Under Current Law for IV-D Implementation of Medical Support, 2-6
How Medical Support Enforcement Works (the Employer and Plan Community Perspective), 2-6
Current Law Employer and Plan Procedures Necessary for Implementation of Medical Support, 2-8
PRIOR ASSUMPTIONS AND INADEQUATE SOLUTIONS, 2-9
ASSUMPTIONS FOR THE NEW MEDICAL SUPPORT PARADIGM, 2-17
SUMMARY, 2-20
Theme
The Medical Support Working Group offers a new paradigm for ensuring health care coverage for children. Many of the old notions of how to get children into coverage needed to be examined and discarded in light of the complex interplay of trends in health care, labor market characteristics, public program eligibility and participation, and family structure changes. The new paradigm looks to the private health care coverage resources available from both parents and to the availability of public health care coverage when private coverage is not available; it also gives the IV-D program responsibility for coordination of information between the providers of public and private health care and parents. Only by working in partnership will coverage be expanded and maintained.

Introduction

Parents, as well as private and public stakeholders, must cooperate to make sure that health care coverage is available to all children. Among the "players" in this complex process are Federal, State, and local child support and health agencies; the U.S. Department of Labor (DOL); judges; court administrators; attorneys; parents' and children's advocates; employers; health plan administrators; members of the payroll and human resource communities; insurance industry representatives; and labor unions. Thus, laws, policies, and procedures designed to remove impediments to medical support enforcement must emphasize coordination and cooperation among all of these individuals and entities. Given the complexity of the issues and the legitimate, competing concerns of the stakeholders, reform is challenging but necessary if health care coverage for child support-eligible children is to be maximized.

“The Child Support Enforcement Program will put children first by helping both parents assume responsibility for the economic and social well-being, health and stability of their children.”

~ Child Support Enforcement Strategic Plan, with Outcome Measures for FY 2000-2004

This chapter describes the medical child support enforcement mechanisms currently in place. While several recently enacted laws will change some of these procedures,¹ some of these recent provisions are not yet effective and therefore not reflected in this discussion. This chapter does, however, describe the way the system will work after implementation of many of these new provisions.

How Medical Support Enforcement Works (the Child Support Enforcement Perspective)

The pursuit of private health care coverage for child support-eligible children has been a requirement of the child support enforcement program since Congress passed the Child Support Amendments of 1984. This provision required that the Secretary of HHS issue regulations requiring that States petition for medical child support in all IV-D cases in which such coverage is available at reasonable cost. In the regulations, HHS defines reasonable cost as any health care coverage available through the obligor's employment.² Regulations also require that State child support guidelines take into account children's health care needs when a child support order is established. Every State has enacted a child support guideline that presumptively determines how parents' financial obligations are set.³ Although the approach is left to the State and varies widely, these guidelines generally address how the child's health care needs are to be met.

The Child Support Enforcement Perspective
The child support enforcement perspective encompasses not just the Federal and State child support enforcement stakeholders but also public programs-such as TANF, Medicaid, and SCHIP-that refer families to child support or whose clients are affected by medical support coverage, as well as the courts and attorneys who are involved in setting and enforcing support orders.

Many of the early legislative efforts were designed to assist in reducing the cost of providing publicly-funded health care coverage through the Medicaid program. All Medicaid beneficiaries applying on behalf of children with a parent living elsewhere were required to assign their medical support rights to the State and cooperate with the child support enforcement program. (This was later modified to exclude pregnant and post-partum mothers). Child support and Medicaid agencies were allowed to enter into cooperative agreements to pursue medical support assigned to the State, and child support agencies were required to notify Medicaid agencies when private family health coverage was obtained or discontinued for a Medicaid-eligible person.⁴

In recent years, important legislative changes have been made to strengthen medical support enforcement. The Omnibus Budget Reconciliation Act of 1993 (OBRA '93) amended the Employee Retirement Income Security Act of 1974 (ERISA), creating the Qualified Medical Child Support Order (QMCSO). This amendment clarified that child support orders requiring the provision of health care coverage could be enforced under ERISA-covered group health plans. Such enforcement is applicable to child support orders with medical support provisions that are enforced directly by the IV-D agencies and the custodial parent. OBRA '93 also amended Title XIX of the Social Security Act to require States to have specific laws that would enhance the eligibility of many children for health coverage under their parents' health plans. The State laws impose requirements on insurers and employers designed to increase enrollment opportunities for children, facilitate the filing of claims by custodial parents, and establish new payment disbursement criteria. In addition, OBRA '93 afforded State Title XIX agencies the authority to garnish wages, salary, and other income, and also to withhold State tax refunds from a parent obligated under a medical support order who has received reimbursement from a third party but has not reimbursed the other parent or the service provider.

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) also mandated changes in medical support enforcement. PRWORA requires every IV-D child support order to include a provision for health care coverage, not just to petition for inclusion, as under previous law. This provision had the effect of requiring that medical support be established and enforced in all orders, not just when a Medicaid assignment was in effect. Prior to PRWORA, medical support in non-Medicaid cases was only enforced with the consent of the custodial parent. PRWORA also added a provision to help avoid lapses in children's family health coverage.⁵ States must notify the new employer of a noncustodial parent about any existing medical support orders.⁶ Upon receipt of a notice from the IV-D agency, the new employer must enroll qualified children in its health plan, unless the noncustodial parent contests the notice. Orders issued to ERISA-covered plans are also subject to QMCSO requirements.⁷

What is The Employee Retirement Income Security Act of 1974 (ERISA)-
ERISA regulates most group health plans that are established or maintained by an employer, an employee organization, or jointly by both. However, ERISA does not cover those plans established or maintained by governmental entities or churches for their employees. Title I of ERISA⁸ imposes various duties and obligations on covered plans and their "fiduciaries" (such as the plan administrators). The administrators of covered plans must provide to participants and beneficiaries certain information regarding their plans. Each plan also must provide internal procedures for determination of benefit claims. Those individuals who manage covered plans (such as the administrators), and other fiduciaries with respect to those plans, must meet certain standards of conduct in performing their duties. The Pension and Welfare Benefits Administration of the Department of Labor has principal jurisdiction over these provisions.
Of particular importance to State IV-D agencies is ERISA's preemption of State laws. Subject to certain exceptions (such as the exception related to "qualified medical child support orders" described below) the provisions of ERISA supersede, or preempt, any State laws that "relate to" any ERISA-covered plan. Unless one of the exceptions applies, ERISA-covered plans are not required to follow (or may be precluded from following) such State law. For these purposes, the term "State law" includes all laws, decisions, rules, regulations, or other State action having the effect of law in any State.

The broad preemption of State law contained in ERISA serves several important functions. Primary among these is to ensure that employee benefit plans are subject to a single, consistent set of rules. Particularly with respect to employers who operate in more than one State and collectively bargained plans whose participants work in different States, differing, and sometimes conflicting, State regulations could make plan design and administration extremely burdensome. A single set of Federal rules has greatly eased the creation and adoption of benefit plans across the country. However, Congress has also recognized that the broad preemption of State laws may, in some instances, cause problems with respect to areas that have traditionally been the province of the States, such as insurance regulation and domestic relations law. Accordingly, several exceptions to preemption have been included in ERISA.

One exception to ERISA preemption is for the application of State insurance laws. In relation to this, it is important to understand that some group health plans ("self-insured plans") provide benefits either from the plan's or from the sponsor's general assets. Other health plans ("insured plans") provide benefits through the purchase of insurance (this generally includes situations in which a plan contracts with a managed care organization for the provision of benefits). Under the preemption exception for State insurance laws, insurance contracts purchased by ERISA-covered plans (and the insurance companies that sell them) remain subject to most State insurance laws, such as those that mandate the provision of particular benefits. Therefore, certain State laws may continue to affect ERISA-covered plans through the insurance contracts they purchase. For purposes of this exception, however, an employee benefit plan will not be deemed an insurer.

Congress later added other important exceptions to ERISA preemption. First, in response to ambiguity regarding the applicability of State domestic relations orders to ERISA-covered plans, Congress amended ERISA in 1984 (the Retirement Equity Act of 1984 [REA]) to permit the division of pension plan benefits in certain circumstances. Specifically, REA requires plans to pay benefits in accordance with "qualified domestic relations orders," or QDROs. The REA amendments were limited to pension plans. Then, in response to similar issues regarding the applicability of medical child support orders to ERISA-covered group health plans, Congress amended ERISA in 1993 (OBRA 93) by adding §609(a), which requires group health plans to provide benefits in accordance with certain State court and administrative orders that provide for health coverage of children of plan participants (QMCSOs). The QMCSO provisions were modeled on the QDRO provisions.

Section 609(a) has been amended several times, most recently by CSPIA and the Balanced Budget Act of 1997 (BBA) in an effort to bring the QMCSO requirements into accord with the standards of Title IV-D of the Social Security Act. For instance, the BBA amended §609(a) to provide that a notice that is issued through an administrative process established under State law, and that has the force and the effect of law, and that provides for medical support for a child of a participant in a group health plan as described in §609(a) would be a QMCSO, provided that the other requirements of §609(a) are met. CSPIA further mandated the joint development of the NMSN that will result in a uniform notice that will be used by all states and local child support enforcement agencies, and that plan administrators must deem a QMCSO when it is appropriately completed. This will assist the States in automating their processes, as well as assuring plan administrators that the Notice they receive from IV-D agencies will be uniform in structure and content, reducing the confusion that currently exists regarding the adequacy of the notices used by such agencies. States are mandated to begin using the NMSN by October 1, 2001.

Making changes in ERISA consistent with PRWORA, the Balanced Budget Act provided that the name and address of a State or local official could substitute for the address of a child named in a QMCSO, and that administrative notices issued by child support enforcement agencies to enforce medical support provisions of child support orders could be recognized as QMCSOs.⁹

What is a Qualified Medical Child Support Order (QMCSO)-
In order to be "qualified" (i.e., to be a QMCSO) within the meaning of §609(a) of ERISA, a medical child support order must clearly specify: (1) the name and last known mailing address (if any) of the participant and the name and mailing address of each child covered by the order; (2) a reasonable description of the type of coverage to be provided, or the manner in which the coverage will be determined; and (3) the period to which the order applies.¹⁰ A qualified medical child support order cannot require a group health plan to provide any type or form of benefit, or any option, not otherwise provided under the plan, except to the extent necessary to comply with a State law described in §1908 of the Social Security Act.¹¹

Section 1908 of the Social Security Act, which, like the QMCSO provisions, was enacted as part of OBRA '93, specifies certain laws that States are required to enact in order to qualify for Medicaid matching funds. The §1908 laws generally increase the availability of family health coverage to children. For example, some of these laws prohibit an insurer (defined to include all group health plans) from denying enrollment of a child under the coverage of the child's parent on the ground that the child was born out of wedlock, is not claimed as a dependent on the parent's tax return, or does not reside with the parent or in the insurer's service area.¹² Others set rules for insurers and employers to follow when a parent is ordered by a court or administrative agency to provide health coverage for a child and the parent is eligible for health coverage through that insurer or employer.¹³ Congress also amended ERISA so that preemption of the §1908 State laws is explicitly lifted to the extent they apply to a QMCSO.

CSPIA made additional changes to the medical support provisions of Title IV-D. These provisions eliminated the requirement that States pass laws to ensure the continuation of coverage due to employment changes, instituting instead the use of the NMSN to be implemented through regulations issued by HHS and DOL. The development and mandated use of the Notice was intended to make medical child support enforcement more amenable to the highly automated processes being developed for use for other child support enforcement actions. Federal laws that relate to the child support enforcement agencies' medical support responsibilities are contained in various sections of Titles IV and XIX of the Social Security Act.¹⁴

Federal requirements currently in effect relating to medical child support are presented below.

Procedures Under Current Law for IV-D Implementation of Medical Support

1- Establishing a Medical Support Order

Require disclosure of health care coverage in all support proceedings.
Include a provision for health care coverage in every order.
Consider the availability of health care coverage from noncustodial parents.
Ensure that health care coverage must be provided regardless of restrictions such as seasonal enrollments, residence of the child, or marital status of the parents.
Determine, if participant not enrolled and not specified in the order, in which benefit plan to enroll participant.

2- Enforcing Medical Support

Develop system for monitoring whether or not employer-based health care coverage as ordered by the court or administrative agency is obtained by the noncustodial parent.
Enforce health care coverage by administrative notice.
Ensure that the administrative notice is immediately issued upon an order being entered that requires coverage and thereafter, anytime a noncustodial parent employer becomes known (for example, through a New Hire lead, employment verification, etc.).
Monitor and enforce employer compliance with the administrative notice.

3- Communicating Availability of Health Care Coverage

Establish procedure for the State to communicate the availability of health care coverage through the noncustodial parent's employer (that is, name and address of insurance carrier, type of coverage, group number, and policy number) to the Temporary Assistance to Needy Families (TANF) and Medicaid programs for public assistance-related cases and to the custodial parent.

The Employer and Plan Community Perspective
The employer and plan community perspective includes the U.S. Department of Labor, employers, and other entities such as health plan administrators and payroll administrators, insurance industry representatives and regulators, and labor unions.

How Medical Support Enforcement Works (the Employer and Plan Community Perspective)
Private health coverage through an employment-based group health plan is a significant benefit available to many employees. Employers often make health care coverage available as part of a package of benefits offered to some or all of its employees. This benefit package helps employers compete for and retain the workers they need. Cost and competitiveness are twin factors that help employers decide what benefits to make available to their employees. Employers generally have discretion in deciding whether to establish a group health plan and in designing various aspects of the plan, such as eligibility and participation requirements and types of available benefits. Most group health plans maintained by private employers for their employees are subject to the provisions of ERISA. Contracts between plans and insurers (including Health Maintenance Organizations [HMOs]) may be governed by State insurance regulators.

Because of the broad scope of ERISA "preemption," whether a group health plan is subject to ERISA will determine the extent to which the plan will be subject to various State laws, including those related to medical child support, and whether enforcement of a medical support obligation requires a QMCSO. ERISA also contains certain provisions related to continuation and portability of health coverage that were added by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA), respectively. COBRA and HIPAA also added corresponding provisions to the Internal Revenue Code and the Public Health Services Act.¹⁵

Under the current medical support system, the IV-D program's point-of-contact is the employer, but it is generally the plan administrator who makes the determination of whether a medical support order is qualified under ERISA and notifies the employee, the custodial parent, and the IV-D agency accordingly.

An employer who maintains a group health plan generally has discretion in designating the party that will act as its plan administrator. In some cases, the employer may act as plan administrator.¹⁶ In other cases, an unrelated party may act as plan administrator. The latter is common in plans established pursuant to a collective bargaining agreement. In addition, the plan may employ a third-party contract administrator (TPA) to carry out the administrative functions of the plan.

ERISA-covered group health plans must provide benefits under any medical child support order, including the new NMSN, that meets QMCSO requirements. Such an order must be submitted to the plan administrator to determine whether it is "qualified." Each such plan also must have reasonable written procedures available to all parties for determining whether medical child support orders are qualified, and for administering the provision of benefits in accordance with such orders. Upon receipt of a medical support order, the plan administrator must promptly notify the participant and each child named in the order that the order has been received and indicate the process that will be used to determine if the order is qualified. Within a reasonable time after receipt, the administrator must determine whether the order is qualified and notify the participant and each child named in the order of its determination.

It is important to note that qualification as a QMCSO is not limited to orders that are established or enforced under the Title IV-D program nor to orders issued in the State where the employer normally does business. Plans have to provide the same benefits pursuant to any child support order that meets the ERISA definition of qualified. This means that plans (sometimes through their sponsoring employers) receive medical support orders (including administrative notices based on an underlying support order) from IV-D agencies, from private lawyers acting on behalf of clients, from noncustodial parents who want to enroll their children in their health benefit plan, and from custodial parents directly in situations where the noncustodial parent is unwilling to enroll the child(ren) as directed in the order. Because population mobility is high, the order or administrative notice may be issued in a State different from the one where the worker and employer currently have residence.

After an order is determined to be qualified, the administrator then notifies the employer or the employer's payroll agent of the premium amount to be withheld from the employee's wages or salary.

The Federal laws that relate to the employer's and plan's medical support responsibilities are contained in ERISA, Titles IV and XIX of the Social Security Act, the Public Health Services Act and Internal Revenue Code.¹⁷ Understanding how these provisions and procedures all fit together is difficult and the varied requirements of ERISA,¹⁸ COBRA,¹⁹ and HIPAA²⁰ can easily confuse employers, plan administrators, child support agencies, courts, private attorneys, and parents trying to implement medical child support orders.

Key provisions and procedures relating to medical child support, which the employer and plan community must implement in order to comply with Federal law, are presented below.

Current Law Employer and Plan Procedures Necessary for Implementation of Medical Support

1- Employer Responsibility²¹

Provide information under private discovery or at the request of the IV-D agency about the employee's eligibility for or enrollment in dependent health care coverage.
For any qualified order, deduct premiums from employee's pay (not to exceed the Consumer Credit Protection Act [CCPA] limits).

2- Plan Administrator Responsibility²²

If not provided as part of the discovery process when establishing an order, provide information under private discovery, or at the request of the IV-D agency, about the employee's eligibility for or enrollment in dependent/family health care coverage.
Upon receipt of a medical child support order, promptly notify the participant and each child named in the order (and the IV-D agency if appropriate) that the order has been received and indicate the process that will be used to determine if the order is qualified.
Within a reasonable time after receipt, determine whether the order is qualified and notify the participant/employee and each child named in the order (and the IV-D agency if appropriate) of its determination.
Provide immediate coverage without regard to "enrollment season" restrictions or other factors, such as born out of wedlock, not claimed as dependent for income tax purposes, not living with parent, living outside insurer's service area.
Provide a method for custodial parent to enroll the covered children in the plan (if noncustodial parent refuses to enroll), to obtain benefits, file claims directly, and receive payments.
Make benefit payments to custodial parent, or child, if they paid expenses.
To not terminate coverage unless the order is not in effect or dependent child is being enrolled in another plan.

Prior Assumptions and Inadequate Solutions

The Working Group looked at the assumptions that underlie the current medical support model and identified five outdated assumptions about private dependent health coverage that appear to limit the development of a system that can ensure health care coverage for all child support-eligible children. These assumptions are:

Custodial parents are not employed, therefore, only noncustodial parents can provide employer-based health care coverage.
Noncustodial parents are employed at the same job for most of their working lives; therefore, once established, health care coverage will be stable.
Employer-provided dependent health care coverage is free or nearly free to employees; therefore, the cost of employer-provided dependent health care is reasonable.
Private family health coverage is fully portable, that is, it can provide health care coverage for the children even when children and the parent with coverage live far apart. Accordingly, the type of coverage offered and the geographic location of parent and child do not have to be taken into account.
The majority of children receiving publicly-funded health care (Medicaid and SCHIP) have noncustodial parents who could provide private health care coverage as an alternative to public funded care; therefore pursuit of private health care coverage will reduce the number of children on Medicaid and SCHIP.

1- Prior Assumption #1: Custodial Parents Are Not Employed and Do Not Have Access to Health Care Coverage

In contemporary society, most custodial parents participate in the paid labor force-by choice, financial necessity, or the imposition of public policy-and thus may have access to family health coverage. In 1995, over three-fourths of all custodial parents were employed during the year and 48 percent were employed for a full year, on a full-time basis.²³ Because private, employer-based insurance is the predominant form of health care coverage in the United States,²⁴ when parents are employed they are more likely to have private health care coverage. For example, households with two employed parents are more likely to have family health coverage than two-parent households with only one employed parent, presumably because having two workers increases the likelihood of at least one parent having employment-based health care coverage.²⁵ But when the custodial parent is employed, children in single-parent households also have access to family health coverage. On average, over half of all children in employed single-parent households are covered by dependent health care coverage and an additional one-quarter are offered health care coverage but have not enrolled²⁶. In single-parent households with incomes over 200 percent of poverty, more than 60 percent of children are covered by family health coverage provided by the custodial parent.²⁷ As custodial parents' full-time, full-year participation in the workforce increases, their access to dependent health care coverage also increases.

2- Prior Assumption #2: Employment and Health Care Coverage are Stable

Some custodial and noncustodial parents have seasonal employment, part-time employment or frequently move from job to job. Even regular full-time employees typically change jobs as their children grow up. In 1998, median employee tenure (the number of years workers have been with their current employer) was approximately three and a half years.²⁸ Estimates of job turn-over within the IV-D noncustodial parent population are even more frequent. For example, in one study, the median length of time for a wage assignment was 11 months. Termination of employment is the usual basis for termination of a wage-assignment.²⁹ Obviously, stability of employment affects stability of health care coverage as well. In a review of custodial parents' reports of health care coverage by the noncustodial parent, of the 2.5 million noncustodial fathers who provided health care coverage in at least one month of the year, about two-fifths, or 42 percent, provided coverage in all months.³⁰ Of the remaining, about one-fifth lost insurance during the year, one-fifth gained insurance during the year, and one-fifth were in and out of coverage several times.³¹ This coverage churning reduces access for the children and increases administrative burden for the IV-D agencies.

3- Prior Assumption #3: Dependent Coverage is Available and Costs are Reasonable

The majority of employers offer dependent health care coverage to their employees, but eligibility often is limited based on length of employment, hours worked, or employment status.³² Health care coverage is typically available only to permanent, full-time, year-round employees. Part-time and temporary employees are usually not extended benefits under the employer's health care plan.³³ Low-wage workers are most likely to be part-time, temporary workers, which makes them ineligible for coverage. Indeed, data show that low-wage employees are not offered family health coverage as often as higher-income employees.³⁴ In 1996, 42 percent of workers who earned less than $7.00 an hour had access to employer-sponsored family health coverage, while 90 percent of those who were paid more than $15.00 per hour benefited from employer-sponsored health care plans.³⁵ (See graph, Percent of Workers with Employer Coverage by Wage, 1996.)

When family coverage is offered, employees may not enroll their children because-even when subsidized by the employer-the employee's share of the premium may be too high relative to income. This is particularly true for low-wage employees.³⁶ According to an HHS analysis of Consumer Expenditure data, the employee's contribution to health care coverage cost represents less than two percent of after tax income for families with incomes of more than $30,000 but nine percent of after-tax income for families with income of less than $10,000 per year.³⁷ (See graph, Average Health Care Expenditures as a Percent of Income, 1997.)

Because of rising health care costs, employers have tended to reduce coverage or to increase the amount of the employee's contribution. For example, from 1988 to 1996 the per capita cost for employers to obtain employee coverage rose by eight percent, while employee contributions to those costs increased by 18 percent.³⁸ During the same time period, the median earnings of American households increased less than two percent.³⁹ Such trends put health care coverage enrollment for low-income parents in competition with earnings needed for food, clothing, shelter, and, if a noncustodial parent, payment of child support.

Custodial and noncustodial parents of child support-eligible children fall disproportionately into the income categories of individuals who have less access to employer-based health care coverage and less ability to pay for coverage, even if offered. As "Percent of Workers with Employer Coverage by Wage, 1996" graph indicates, over one half of individuals making less than $7.00 an hour, or below $14,500 per year, do not have employer-based coverage, and a third of individuals earning between $14,500 and $20,000 do not have coverage. Almost 45 percent of all custodial parents have incomes below $20,000. For custodial parents in the IV-D system that proportion is even higher-about 55 percent.⁴⁰ While noncustodial parents have slightly higher incomes, a significant minority, about 38 percent, have incomes below $20,000 per year. While it is not possible to know from existing survey data which noncustodial fathers are associated with children in the IV-D system, an examination of noncustodial and custodial parent characteristics, such as race and ethnicity, marital status, and education would lead to an expectation that, like the custodial parents in the IVD system, the IV-D client noncustodial parents are also slightly poorer than the typical noncustodial parent.⁴¹

"IV-D agencies have the ability to help families identify the best choices for health care coverage. This coverage should include using a case triage as follows, see what kind of insurance would work best for your family:

which parent has family health insurance at no cost; if none, then

which parent has family health insurance at the lowest cost or determine if the custodial parent wishes to provide insurance coverage and if she/he is willing to pay a higher premium to ensure stability of coverage......; if none, then

are these parents eligible for Medicaid or CHIP coverage for the children; if no, then

use a medical support schedule which divides the cost of heath care between the parents.

~ Geraldine Jensen, National President, ACES

4- Prior Assumption #4 : Distance Doesn't Matter

One of the pervasive problems of the child support enforcement system has been how to handle interstate cases.⁴² But the interstate perspective does not just affect collection of cash support; it also affects the provision of health care coverage. Between 25 and 30 percent of all noncustodial parents live in a different State from their children.⁴³ An additional 20 percent of fathers live in the same State, but not the same county or city as their children.⁴⁴ When health care coverage was primarily offered through fee-for-service plans, this long-distance relationship complicated establishing and enforcing medical support, but it did not by itself affect the accessibility of that coverage for the children. The custodial parent could take the children to any doctor and the doctor, parent. or Medicaid agency would be reimbursed for the cost of care.

What is Medicaid-
Overview
Medicaid, the largest health insurer in the United States, provided health coverage for 20.8 million children in 1998. Annual Medicaid expenditures for American children (including premium payment for prepaid health care) were $26.2 billion, an average of nearly $1260 per enrolled child.⁴⁵ Approximately 40 percent of children who are eligible for IV-D services participate in the Medicaid program.⁴⁶
Medicaid Eligibility

There are several mandatory and optional Medicaid eligibility pathways for children and low-income families. The primary mandatory pathways for children include: coverage for infants under age one (and pregnant women) with family income at or below 133 percent of the Federal poverty level (some States are required to cover children in this group up to 185 percent of the Federal poverty level because they were already providing coverage at the higher level); coverage for children age one to six with family income at or below 133 percent of the Federal poverty level; and coverage for children born after September 30, 1983 who have not attained age 19 with family income at or below 100 percent of the Federal poverty level. States can expand coverage under these groups to children in families with higher income; this is possible under authority which allows them to disregard more income in the eligibility determination than is the case under the usual rules.

The primary pathway for coverage of low-income families with dependent children (including two-parent families) is the so-called "§1931 eligibility group" (§1931 of the Social Security Act). Coverage under this group is linked to certain requirements the State had in effect on July 16, 1996 under the former Aid to Families with Dependent Children (AFDC) program. The State has the option to use certain less restrictive requirements, such as less restrictive financial requirements, than were in effect on July 16, 1996.

Families that lose coverage under §1931 because of hours of work or income from employment (or loss of the earned income disregard) must be provided extended Medicaid benefits ("transitional Medicaid") for six months. A second six-month period of coverage must be provided to any family who received transitional Medicaid during the initial six-month period, as long as the family meets certain reporting requirements and has earned income (minus necessary child care expenses) that does not exceed 185 percent of the Federal poverty level for the size of the family. To be eligible for transitional Medicaid, a family must have received Medicaid under §1931 in three out of the preceding six months before becoming ineligible under this category.

In addition, States must provide Medicaid coverage to all pregnant women, infants, and children up to six years of age, as long as their family incomes are at or below 133 percent of the Federal poverty level for a family of three.⁴⁷ In 2000, this cut-off point was $18,819.50.⁴⁸ Some States cover all children under age 19 to higher percentages of poverty.⁴⁹

Medicaid eligibility is not affected by an individual's enrollment in private health care coverage. When there is private coverage, individuals can still receive service through the Medicaid program, however, the Medicaid program is the payer of last resort. That is, the private health care coverage is responsible for payment of services. Medicaid only pays for those services not covered under the private plan.

Changes over the last decade in the way health care is provided have made "distance" a larger issue. In 1996, only 27 percent of enrollees in employer health care plans were enrolled in conventional or fee-for-service coverage. About one-third of enrollees were enrolled in HMOs and slightly more than 40 percent were enrolled in other managed care plans that had some provider choice limitations.⁵⁰ In these plans, "out-of-network" providers could be used, but with higher cost sharing or lower level of coverage. These trends reduce the utility of having the out-of-State or out-of-area noncustodial parent be the preferred parent to obtain private health care coverage. To complicate the story, these trends vary significantly across the country. For example, 68 percent of enrollees in California are in HMO plans, while only 12 percent of enrollees in North Dakota have HMO coverage.⁵¹

5- Prior Assumption #5: Most MEDICAID/SCHIP Enrolled Children Could Have Private Coverage

There is not much difference in the availability of employment-based health care coverage for custodial and noncustodial parents when employment and income are taken into account. As full-time employment increases and income rises, private health care coverage becomes more available and more affordable. To the extent that noncustodial parents have more full-time employment and higher incomes than custodial parents, they are likely as a group to have more access to affordable private health care coverage. However, to the extent that some custodial and noncustodial parents share similar barriers related to employability, such as inadequate education, low job skills, or substance abuse problems, their lack of access to private health care coverage will be similar.

A recent HHS study looked at the potential for noncustodial parents (only fathers) to provide private health care coverage for their children. The ability of the noncustodial parent to provide for such coverage was found to be largely dependent on the individual's income.⁵² Nearly half of the noncustodial parents who do not provide coverage for their children do not have access to employer-sponsored dependent health care coverage, are self-employed, not employed, or incarcerated.⁵³ Access to dependent coverage is greater for fathers who have incomes at 200 percent of poverty or above; only one-third of these fathers do not have access.

Medicaid and Child Support Enforcement
As a condition of eligibility, individuals applying for medical assistance must cooperate with the State in establishing paternity and obtaining medical support and payments and in identifying and providing information to assist the State in pursuing third parties who may be liable for payment. In situations where a parent is filing for Medicaid on behalf of themselves and a child, it is a condition of the parent's eligibility that the parent cooperate in establishing paternity and obtaining medical support.⁵⁴ However, in cases where a parent (or legal guardian) is filing only on behalf of a child and not for him or herself, it is not a condition of the child's eligibility for the parent to cooperate.

There are two circumstances in which exceptions to the cooperation requirements may be made. A woman eligible for Medicaid under the poverty level pregnant woman category does not have to cooperate in establishing paternity and obtaining medical support payments from the father of an unborn child or a child born out of wedlock. In addition, if the State determines that an individual has good cause for refusing to provide the information sought, the applicant is not required to disclose the required information.

What is the State Children's Health Insurance Programs (SCHIP)-

Concerned that many low-income families did not qualify for Medicaid and could not afford private insurance, Congress established the State Children's Health Insurance Program (SCHIP) in 1997.⁵⁵ SCHIP is the single largest expansion of family health coverage for children since the enactment of Medicaid. This program allows States to provide free or affordable health care coverage to uninsured children in families whose incomes are too high to qualify for Medicaid but too low to afford private coverage.⁵⁶ SCHIP is not intended to replace private insurance but rather to serve as the provider of last resort, where private health care coverage is unaffordable or unavailable.

The Federal government provides matching funds for SCHIP programs, and States have flexibility to structure the program to meet local needs. A State can expand its coverage for uninsured, low-income children by using its Medicaid program to provide services to SCHIP-eligible children or establishing a separate child's health care coverage program, or do both.

SCHIPs, like Medicaid, are not fully utilized by all eligible children. However, State reported enrollment data for the Federal Fiscal Year 1999 show that SCHIP is making a significant contribution toward the goal of reducing the number of uninsured children in the United Sates. As of September 1999, nearly two million children were served by SCHIP: close to 700,000 children were served by State expansions of existing Medicaid programs and over 1.2 million children have been covered through separate SCHIP funded child health programs.⁵⁷ Enrollment remains a top priority. Almost 75 percent of the 3 million uninsured child support-eligible children have family incomes below 200 percent of poverty, making them potentially eligible for SCHIP or Medicaid.⁵⁸

Eligibility

In general, children are eligible to participate in SCHIP if their family income exceeds the maximum limit for Medicaid coverage in their State, but is at or below 200 percent of the Federal poverty level. In some States, eligibility extends beyond this to 350 percent.⁵⁹ States can impose premiums or require co-payments and deductibles from parents of children in the SCHIP program, so long as the total amount required does not exceed five percent of the families' monthly gross income.⁶⁰

However, the picture is much bleaker for fathers with incomes below 200 percent of poverty; almost three-fourths of these fathers have no access to dependent health care coverage. The study estimates that over four million noncustodial parents, three million low-income fathers, and one million fathers with incomes over 200 percent of poverty, have no access to employer-provided dependent coverage.⁶¹ These fathers are likely to be the noncustodial parents of children enrolled in or eligible for Medicaid and SCHIP.

Assumptions for the New Medical Support Paradigm

When old assumptions do not fit the facts, new ones need to be formulated. Based on the extensive information the Working Group heard, read, and discussed, a set of new underlying assumptions about access to health care coverage emerged.

New Assumption #1

Because both custodial and noncustodial parents are likely to be employed, both parents should be looked to for the possibility of private health care coverage. When both parents are considered, children have a better chance of getting private coverage.

New Assumption #2

Lack of job stability affects a parent's ability to provide health care coverage. Pursuing private coverage from parents who have a history of frequent job changes can increase administrative costs for both IV-D agencies and employers without children being better off. Stability of employment should be a factor in considering whether to pursue private health care coverage.

New Assumption #3

Dependent health care coverage is income-sensitive. Relative to income, it is much more expensive for low-and moderate-income parents to carry coverage than for middle- and upper-income families. Unless coverage is offered at no or very low cost, neither custodial nor noncustodial parents whose income is at or near the poverty line should be required to provide private health care coverage.

New Assumption #4

Accessibility to coverage needs to be considered as part of the decisionmaking process. If children do not have geographic access to the dependent health care coverage available from their noncustodial parent, purchase of such coverage should not be required.

New Assumption #5

Not all child support-eligible children will have access to private family health coverage because many noncustodial parents have the same type of access limitations to private health care coverage as low- and moderate-income custodial parents. Private health care coverage should be pursued when it is available to determine if it could expand coverage options. But when private coverage is not available or appropriate, other means of coverage, such as Medicaid, SCHIP, or other group plans should be pursued.

A chart of the major components of the new paradigm that encompasses the recommendations of the Working Group is presented on the following page.

In the new medical support model, private health care coverage remains central and employers remain key stakeholders to accessing private health care coverage for children. The IV-D child support agencies and courts would consider health care coverage that is available to both the custodial parent and the noncustodial parent. The new model would consider the stability of parent's employment and family health coverage so that administrative efforts by all stakeholders would be commensurate with the gain in health care coverage for children. The new model also would look at the relationship between premium cost and gross income to determine if employment-based coverage is reasonable in cost.
Children's ability to actually receive services through private coverage would be an important consideration. Where private insurance is unavailable or unreasonable given the financial resources of the parents, State child support enforcement agencies would advise families that they may qualify for public health care coverage (or help them obtain such benefits). The lack of reciprocal referrals are a critical failing within the present system. Private health care coverage currently is sought when children are in publicly-funded health care programs, but when private health care coverage is not available, families are not usually informed about their children's eligibility for publicly-funded health care.

“Determine which parent has the better health plan, ... sign up the child for that health plan and then apportion costs according to the parent's ability to pay. If only one parent has a health plan, sign up the child for that health plan, and then apportion costs accordingly. If neither parent has a health plan, you might consider what we've learned California has....[a] new health plans just for kids.... If you don't find two parents with plans or even one parent with a plan, in California you can sign up your child in a low-cost plan.”

~David Levy, President, Children's Rights Council

The Working Group’s New Paradigm
Increase the Number of Children in Single- Parent Households with Health Care Coverage	It is in the best interest of both children and the nation that the maximum number of children have access to health care coverage. Lack of such coverage affects children's current and future health and their ability to be productive citizens. Moreover, when lack of care leads to poor health, the short- and long-term costs to employers, insurers, and publicly-funded health programs such as Medicaid and Medicare increases.
Appropriate Private Dependent Health Care Coverage Comes First	Parents share primary responsibility for meeting their children's needs. When one or both parents can provide comprehensive, accessible, and affordable health care coverage that coverage should be provided to the child.
Look to Both Parents as a Source of Coverage	Coverage available to both parents should be considered in setting a medical support obligation. If only the custodial parent has coverage, that coverage should be ordered and the noncustodial parent should contribute toward the cost of such coverage. When both parents are potentially able to provide coverage, the coverage available through the custodial parent (with a contribution toward the cost by the noncustodial parent) should normally be preferred as it: 1) is most likely to be accessible to the child; 2) involves less difficulty in claims processing for the custodial parent, the provider, and the insurer; and 3) minimizes the enforcement difficulties of the child support agency or private attorney responsible for the case.
Affordable Coverage	In deciding whether to pursue private coverage, the cost of coverage should be considered. To the maximum extent possible, public dollars (through, for example, enrollment in Medicaid/SCHIPs) should be the payment of last resort. However, private insurance should not be ordered when its cost significantly lowers the amount of cash support available to meet the child's basic needs and the child is eligible for some other form of coverage.
Accessible Coverage	When private health care coverage is available to a child, the child support enforcement agency should consider the accessibility of covered services before it decides to pursue the coverage. Children should not be enrolled in any plan whose services/providers are not accessible to them, unless the plan can provide financial reimbursement for services rendered by alternate providers.
Seamless Coverage	The child support (IV-D) program should work in close conjunction with Medicaid/SCHIPs to ensure that children who have access to private coverage obtain such coverage, and those who are eligible for publicly-subsidized coverage are covered by Medicaid or SCHIPs.

Summary

Twenty-one million children will be affected by this new medical child support model. Once implemented, the new model will improve the ability of mothers and fathers to fulfill their shared responsibility of providing for their children's health care needs. It will assist private attorneys, courts, and the IV-D system to identify all coverage options and to enroll children in the most appropriate private or public health care coverage. The new model will also improve the efficiency with which the IV-D system, employers, and plan administrators can get children enrolled in private coverage to ensure that lapses in coverage are minimized. Lastly, the new model will provide for better coordination between the IV-D system and publicly-funded health programs, so that children without private coverage can be enrolled in Medicaid or SCHIP. The goal of the new model is clear: To increase private health care coverage and to reduce the number of children with no coverage without a significant increase in cost for parents, health services providers, employers, insurance companies, and the American taxpayer.

Endnotes

[1] Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), Pub. L. 104-193 and the Child Support Performance and Incentive Act (CSPIA), Pub. L. 105-200.

[2] 45 CFR sections 302.80, 303.30 and 303.31 (1990).

[3] 42 U.S.C. §667(b) (1998). The State guideline applies to all orders for child support whether or not the custodial parent is receiving services under the IV-D Program.

[4] 45 CFR 303.30 and 303.3.

[5] 42 U.S.C. §652(f) (1999).

[6] 42 U.S.C. §666(a)(19) (1999).

[7] 29 U.S.C. §1169(a).

[8] 29 U.S.C. §1001 et. seq

[9] Pub. L. 105-33, §5611 and §5613. Note that recognition as a QMCSO requires that the order satisfies the requirements of §609(a).

[10] 29 U.S.C. §1169(a)(3).

[11] 29 U.S.C. §1169(a)(4).

[12] 42 U.S.C. §1396g(a)(1).

[13] 42 U.S.C. §1396g(a)(2) and (3).

[14] Pub.L.105-33.

[15] Pub.L. 99-272 (COBRA) and Pub.L. 104-191 (HIPAA). For full citations to these Acts, see U.S.C. Tables volumes.

[16] 29 U.S.C. §1002(16).

[17] The provisions of ERISA are located at 29 U.S.C. §1001 et. seq.; Title IV of the Social Security Act at 42 U.S.C. §601 et. seq.; Title XIX of the Social Security Act at 42 U.S.C. §1396 et. seq.; the Public Health Service Act at 42 U.S.C. §300 et. seq.; and the Internal Revenue Code at 26 U.S.C.

[18] Pub. L. 93-406, 88 Stat. 829, which generally appears as 29 U.S.C. 1001 et. seq. For full classification of this Act, consult U.S.C. Tables volumes.

[19] Pub. L. 99-272, 100 Stat. 327 at 4001.

[20] Pub. L. 104-191, 110 Stat. 1992, codified in various sections of the U.S. Code.

[21] Under Social Security Act, §466(a)(19).

[22] Under ERISA, §609(a).

[23] Scoon-Rogers, Lydia. "Child Support for Custodial Mothers and Fathers: 1995." Census Bureau Current Population Reports (March 1999), 60-196.

[24] The U.S. Census Bureau reports that 63.3 percent of all children were covered by employment-based health plans in 1998 (U.S. Department of Commerce, Bureau of the Census, Health Insurance Coverage: 1998, Table 6).

[25] Weinick, Robin and Alan C. Monheit. "Children's Health Insurance and Family Structure." Medical Care Research and Review, 56:1 (March 1999), 66.

[26] Weinick and Monheit, 66.

[27] Wheaton, Laura. "Noncustodial Fathers: To What Extent do They Have Access to Health Care Coverage?" The Urban Institute (2000), 27.

[28] Bureau of Labor Statistics, Employee Tenure in 1998. See http://www.bls.gov/news.release/tenure.nws.htm

[29] Gordon, Anne. Income Withholding, Medical Support, and Services to Non-AFDC Cases after the Child Support Amendments of 1984, Volume 1, Mathematica Policy Research, Inc. (1991). Under Contract with the Department of Health and Human Services/Office of Child Support Enforcement.

[30] Gordon (1991).

[31] Wheaton (2000), 39.

[32] See O'Brien, Ellen and Judith Feder. Employment-Based Health Insurance Coverage and Its Decline: The Growing Plight of Low-Wage Workers. The Kaiser Commission on Medicaid and the Uninsured (May 1999).

[33] United States Government Accounting Office, Report to Congressional Committees, Employment Based Health Insurance (July 1998), GAO/HEHS-98-184, Table 3. (Eligibility rate of part time employees was about 31 percent, in contrast to a rate of more than 80 percent for full-time workers in 1997.)

[34] United States Government Accounting Office, Report to Congressional Committees, Employment Based Health Insurance (July 1998), Table 2.

[35] O'Brien, Ellen and Judith Feder, How Well Does the Employment-Based Health Insurance System Work for Low-Income Families? Kaiser Commission on Medicaid and the Uninsured (September 1998), 4.

[36] O'Brien and Feder (1999), 5.

[37] Unpublished estimates by the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, using the 1997 Consumer Expenditure Survey.

[38] O'Brien and Feder (1998), 5.

[39] McNeil, John. Changes in Median Household Income: 1969 to 1996. U.S. Bureau of the Census (July 1998), 23-196, Table 5b. http://www.census.gove/hhes/incom/mednhld/t5b.html

[40] Lyon, Matthew. "Characteristics of Families Using Title IV?D Services in 1995." U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (May 1999), Table 1.

[41] Sorensen, Elaine and Laura Wheaton, Income and Demographic Characteristics of Non-Resident Fathers in 1993, The Urban Institute, (forthcoming June 2000). Prepared under contract with the Department of Health and Human Services, HHS 100-95-0021. Note that information on custodial parents from the Lyon analysis includes both custodial mothers and custodial fathers, while information on noncustodial parents from the Sorensen and Wheaton report is available for fathers only.

[42] U.S. Commission on Interstate Child Support, "Supporting Our Children: A Blueprint for Reform."

[43] See, for example, Lyon (1999), 4; U.S. Commission on Interstate Child Support, "Supporting Our Children: A Blueprint for Reform," xii; andWheaton (2000), 19.

[44] Wheaton (2000), 15.

[45] HCFA, Office of the Actuary, President's FY 2001 Budget Baseline

[46] 1996 March-April Match File Current Population Survey. See data tabulations in APPENDIX D: Health Care Coverage for Child Support-Eligible Children, page A-32.

[47] 42 U.S.C. §1396a(10)(A)(i)(III) (1999).

[48] Annual update of the Department of Health and Human Services poverty guidelines for CY 2000-As published in the Federal Register, Vol. 65, No. 31, February 15, 2000, 7555?7557.

[49] They may cover children in families with incomes up to 185 percent of the poverty level for a family of three. 42 U.S.C. §§1396a; 1396r-6(b)(3)(B)(iii)(III) (1999). This level was $26,177.50 in 2000. Annual Update of the HHS Poverty Guidelines, published in the Federal Register 2/15/00.

[50] Levitt, Larry, Janet Lundy, and Srija Srinivasan. Trends and Indicators in the Changing Health Care Marketplace Chartbook. The Kaiser Family Foundations (August 1998), 18.

[51] Levitt, Lunday, and Srinivasan, 21.

[52] Wheaton (2000), 34.

[53] Wheaton (2000), 36.

[54] Section 1912(a)(1).

[55] 42 U.S.C. §1397aa et seq. (1999).

[56] 42 U.S.C. §1396aa (1999).

[57] U.S. Department of Health and Human Services, State Children's Family health coverage Program Annual Enrollment Report (Fiscal Year 1999) (January 2000).

[58] 1996 March-April Match File Current Population Survey. See data tabulations in APPENDIX D: Health Care Coverage for Child Support-Eligible Children, page A-32.

[59] New Jersey's separate SCHIP program includes eligibility up to 350 percent of the Federal poverty level. In Connecticut, Missouri, New Hampshire, Rhode Island, and Vermont SCHIP extends eligibility to 300 percent of the Federal poverty level.

[60] 42 U.S.C. §1397bb (1999).

[61] Wheaton (2000), 36.