CHAPTER 3
Taking the First Step: Establishing Health Care Coverage in Child Support Orders

CHAPTER 3 AT A GLANCE
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STATE CHILD SUPPORT GUIDELINES, 3-1
ROLE OF THE DECISION MAKER - ADMINISTRATIVE AGENCY, COURT, OTHER "TRIBUNAL," 3-4
    Coverage Options - Need for Information, 3-4
    Decisionmaking Principles, 3-6
    Children with Special Needs, 3-16
    The Decision "Matrix," 3-17
    Establishment of Orders for Publicly-Funded or Other Alternative Health Care Coverage, 3-22
        Public Payment for Private Coverage, 3-23
    Role of the IV-D Agency, 3-24
        Enrollment Authority, 3-25
    Contribution by the Noncustodial Parent, 3-26
    Birthing Costs, 3-29
    Apportioning Responsibility for Unreimbursed Health Care Expenses, 3-31
    Drafting the Medical Support Provisions of a Child Support Order, 3-34
Theme
The place to start reform is at the beginning, with order establishment. State child support guidelines are required to address how health care coverage will be provided, and it is important that each order include the health care coverage that is best for the child. The guidelines presented in this chapter lay out a matrix that directs the decision maker to consider the entire range of coverage options available to the child, including private coverage from either parent and, when appropriate, public coverage. In determining which coverage is best, the decision maker should consider not only availability, but other factors that influence the likelihood that the child will be appropriately and consistently insured, such as accessibility, comprehensiveness, and affordability. When the child is ordered into the appropriate coverage from the start, it will not only benefit the child, but will also reduce administrative and enforcement activity on the part of the IV-D agency, the insurer, and the parents.

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State Child Support Guidelines

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As discussed in the introduction to this Report, the current medical child support model is based on a number of outdated assumptions. They include: (1) mothers are not in the paid labor force, (2) fathers are employed at the same job for most of their working lives, and (3) employers provide free or nearly free dependent health care coverage to their employees. Because presumptive State child support guidelines may be based upon these erroneous assumptions, they fail to maximize private family health coverage enrollment for children in single-parent households.

The first assumption, that mothers are not in the paid labor force, is clearly incorrect, as is testified to both by most people's experience as well as by government and academic studies. In the majority of households, both parents participate in the workforce. Thus, either parent may have access to employment-based family health care coverage.

In families with a formal child support order, 16 percent of these agreements order the custodial family to provide coverage and 37 percent order the noncustodial parent to provide it.¹ Among all custodial mother families, with or without a court order for support, 35 percent of the custodial parent families actually provide health care coverage for the child support-eligible children. The noncustodial parent, or someone else outside the household, provides health care coverage for 24 percent of these families.²

Yet the Working Group found that only 27 States' child support guidelines direct the decision maker to consider both parents as potential sources of health care coverage.³ Within these States, recognizing the custodial parent's employer as a potential source of insurance has clearly paid off.

The remaining States' child support guidelines do not require consideration of coverage available to the custodial parent. In the worst case scenario in these States, children may not be enrolled in family health coverage at all. If no coverage is available through the noncustodial parent, and if the noncustodial parent has not been ordered to contribute to the cost of coverage under the custodial parent's plan, then the children may remain uncovered, as the cost of coverage is often prohibitive for the custodial parent alone. In other instances, the children in these States may indeed have family health coverage, but they may not be enrolled in the family health coverage plan that best meets their needs because the custodial parent's coverage has not been considered.

“[W] hat I want to press home is [that] the great [child support] legislation that's [been] enacted by the Congress of the United States just happens to [be]...best practices that have been tested, that have been validated, and that have been proven reliable by other states. So what about this—what some of you may think to be a revolutionary thought—involving custodial parents in medical support: we found that there are some 27 States that are enforcing medical support against both the biological parents.”

~Richard Harris, Director, Division of Child Support Enforcement, Mississippi

For these reasons, the Working Group recommends amendment of Federal regulations to require States to revise their child support guidelines so that decision makers are required to explore health care coverage available to both parents.⁴

The Working Group also found that even when the State's child support guidelines direct the decision maker to look at coverage available to both parents, IV-D programs focus almost exclusively on the noncustodial parent. This is because Federal child support statutes and regulations assume that the noncustodial parent is the only possible source of coverage mandated, as well as because the historical mission of the IV-D program was to establish and enforce obligations against noncustodial parents.⁵ Some States reported that they did not pursue custodial parent coverage because they believed it was not a proper IV-D program activity. This practice has to change in order to maximize the number of children who receive private coverage.

For this reason, the Working Group also recommends that Federal regulations at 45 CFR §303.31 be amended to make it clear that IV-D agencies can and should consider health care coverage available to either parent when they establish or modify a medical child support order.

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Recommendation 1 (Federal Regulation)
The HHS should require each State to maximize the enrollment of children in appropriate health care coverage; the first recourse should be appropriate private coverage of either parent. ("Appropriate coverage" is defined in Recommendation 8.)

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Ensuring that IV-D agencies consider health care coverage available to either parent when they establish or modify a medical child support award is, however, just a first step. It is also necessary to set clear guidelines regarding allocation of the costs between the parents. When the custodial parent provides and pays for the children's health care coverage, the noncustodial parent should share the cost of any required premiums. The child support order should require the noncustodial parent to do so, and the amount of the child support payment should increase accordingly. On the other hand, when the noncustodial parent provides and pays for the children's health care coverage, the cash support obligation may need to be adjusted (and in many cases already is) to reflect the cost of the coverage.

Towards this end, the Working Group recommends that child support guidelines include formulas for determining how the amount of the cash support award should increase or decrease in order to account for health care premiums, and child support orders should clearly specify how such amounts are to be allocated between the parents. Specifically, HHS should amend 45 CFR §302.56 to require that State child support guidelines include clear methods of adjusting child support awards to reflect the manner in which the parents will share the cost of premiums associated with the children's health care coverage.⁶

At this time, States use different approaches to allocate health care costs between the parents. Nineteen States and the District of Columbia⁷ deduct the premium cost from the income of the parent who provides the coverage before calculating the amount of the child support obligation. Twenty- nine States⁸ calculate the basic child support obligation and then they add some or all of the children's family health coverage cost to the support award if the custodial parent is providing coverage, or they deduct the amount from the child support obligation if the noncustodial parent is providing coverage. Two States⁹ treat family health coverage costs as a reason to deviate from the presumptive amount determined under the child support guidelines.

Furthermore, the 29 States that allocate premium costs between the parents and add/subtract the amount from the basic cash award vary substantially in how costs are allocated. In four of these States, for example, the parent providing the coverage bears the entire cost.¹⁰ In other States, the cost is split fifty-fifty.¹¹ In still others, the cost is prorated.¹² Where an allocation takes place, most States include only the marginal cost of covering the children, while the rest allocate the entire cost of family coverage.¹³

Clearly, there is currently no agreement between States as to a "best practice" regarding adjusting child support obligations to include health care premiums, so at this time the Working Group is not recommending a national standard for allocating premium costs.

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Recommendation 2 (Federal Regulation)
Each State's child support guidelines should show how the cost of health care coverage will be allocated between the parents.

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Role of the Decision Maker - Administrative Agency, Court, Other "Tribunal"
Coverage Options - Need for Information

The decision maker needs information about health care plans that are available to both parents in order to: (1) determine whether either has reasonable access to private health care coverage that is accessible to the child, (2) allocate costs, and (3) draft the medical support order. The parents themselves are the best source of this information.

Recognizing this, Alabama and New York enacted statutes that require both parents in all child support proceedings to provide information about any group health plans available to them.¹⁴

The Working Group recommends that HHS amend 45 CFR §303.31 to oblige all States to require each parent to disclose information about available private group health care coverage as a part of the State child support guidelines.

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Recommendation 3 (Federal Regulation)
Each State should develop mechanisms that require both parents to disclose information about actual and potential private health care coverage in order to help the decision maker determine whether private coverage is available to either parent.

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Furthermore, while IV-D agencies currently have the authority to request information about health care coverage available or potentially available to a parent from employers,¹⁵ many agencies are either not aware of this or they do not understand the potential value of gathering family health coverage information before a support order is established or modified.

Section 466(c) of the Social Security Act permits IV-D agencies to request information from employers and engage in individual case discovery. This will help States learn which employers offer dependent coverage to at least some of their employees and which do not. As State child support agencies obtain this information, they can begin (or continue) to build their own databases. They can supplement this information with data from other sources, such as Temporary Disability Insurance carriers or the Medicaid agency. States should be encouraged to do this so that they can begin to determine when they should request further information and when such a request would be futile. For example, if the State database shows that Corporation ABC does not provide dependent coverage to any of its employees, the IV-D agency would not request health care information from Corporation ABC.

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Recommendation 4 (Federal Regulation)
States should use existing automated databases providing information about private health care coverage available through employers or use insurers' databases. Such databases need not contain information about the types of benefits offered, only whether dependent coverage is offered by an employer. For further details about the development of or modification to such databases, see Recommendation 64.

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For this reason, in addition to recommending that States require parents to disclose family health coverage information, the Working Group also recommends that the Federal Office of Child Support Enforcement (OCSE) inform State child support agencies that they need to request health coverage information from employers. This disclosure of coverage information by employers and plan administrators is particularly important since many employers offer more than one plan to their employees,¹⁶ and the decision maker must be familiar with all of the available options in order to determine the best health care choice for the children.

In addition, DOL should make it clear to plan administrators that they must provide information on ERISA-covered health care plans when it is requested for the purpose of drafting a QMCSO, including completing a NMSN.¹⁷ The Working Group suggests that DOL include this information in the booklet that is proposed in Recommendation 32.

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Recommendation 5 (Federal Guidance)
To further expand the ability of IV-D agencies to obtain information about actual and potential health care coverage available to both parents, OCSE should inform these agencies that §466(c)(1)(C) gives the agencies the authority to request health care benefits information from employers before they establish a medical support order. In conjunction with this, the DOL should inform plan administrators subject to ERISA that they must respond to such IV-D requests when they are made for the purpose of drafting a Qualified Medical Child Support Order (QMCSO). (See Recommendation 29.)

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Decisionmaking Principles

There are three basic principles that should be considered when making decisions about coverage options for children's health care:

• Coverage should be comprehensive.
• Coverage should be accessible and stable.
• Coverage should be affordable.

Because continuity of care is very important, existing family health coverage should be maintained-regardless of which parent provides it-if it is comprehensive, affordable, and reasonably accessible. In Massachusetts, the law provides that if the custodial parent is currently providing coverage at a lower cost, or if the custodial parent prefers to maintain the coverage, irrespective of cost, the decision maker should not move the child to the noncustodial parent's coverage.¹⁸

The decision maker, however, should have authority to order a change of coverage if that is in the best interest of the child. If, for example, the noncustodial parent has coverage that is accessible to the child and is available at no cost, while the custodial parent's coverage is very expensive, there is good reason to change. If the custodial parent's coverage is maintained, there will be less money available to meet the child's other basic needs. In such a case, then, the child would probably benefit from a change in coverage.

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Recommendation 6 (Federal Legislation)
If the child is presently enrolled in either parent's private health care coverage and the coverage is accessible to the child, that coverage should be maintained. If, however, one of the parents has more appropriate coverage (as determined in accord with Recommendation 8 through Recommendation 11) and either parent requests that the child be enrolled in this plan, the decision maker shall determine whether or not to maintain the existing coverage based upon the best interests of the child.

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Central to this decisionmaking process regarding the appropriateness of coverage is a determination of comprehensive coverage. States need to establish a definition of comprehensive coverage that will be used to evaluate insurance options.

Some plans are so limited, for example, that they do not meet the child's basic needs. Ordering such limited coverage may make the child ineligible for the State's CHIP, since SCHIP is limited to children with no coverage.¹⁹ The Working Group determined that to be considered comprehensive, coverage must include at least medical and hospital coverage; provide for preventive, emergency, acute, and chronic care; and impose reasonable deductibles and co-payments. When comparing different plans to determine which is most comprehensive, the decision maker should consider basic dental coverage, orthodontics, eyeglasses, mental health services, and substance abuse treatment, and how such benefits meet each child's unique needs. When both parents have access to private coverage, an established definition of comprehensive coverage will provide States with a standard for determining which of the available plans is superior.

In addition to ensuring that the most comprehensive coverage is ordered, decision makers must also ensure that the selected health care will be geographically accessible to the child-if it is not accessible, it is useless. Fee-for-service coverage is usually portable and does not raise access issues, but HMO and Preferred Provider Organization (PPO) coverage is frequently available only in limited geographic areas. Alternatively, reimbursement for the utilization of out-of-network providers may result in a lesser reimbursement payment and/or higher deductible and copayments. When the child lives in a different community from the parent who is ordered to provide coverage, the child may only be able to utilize the coverage for emergency services. These problems are minimal if the HMO has agreements with providers outside its service area. Such agreements allow the child to use alternate providers if the child lives outside its service area but in an area covered by one of these agreements.

However, in the absence of such agreements, serious problems arise. Children have theoretical coverage, but that coverage is useless because it is geographically inaccessible. Moreover, children may be in an even worse position than uninsured children-the "uninsured" children may be eligible for SCHIP, while these theoretically "insured" children are not.

A standard for determining geographic accessibility should be established so that access to a provider is not an unreasonable distance. The decision maker should determine if the primary care is available within 30 minutes or 30 miles of the child's residence. In lieu of a 30 minute/30 mile standard, an alternative standard may be adopted, such as those used by States that contract with a Medicaid managed care plan or that regulate managed care provider networks.

HCFA has issued guidance for organizations that contract with Medicare and Medicaid.²⁰ As a general rule, the primary care services and commonly used specialty and referral services are to be available within 30 minutes driving time from any point in the service area. Longer travel times may be permissible when residents in part or all of the service area customarily travel greater distances to obtain that service (e.g., in rural areas, or when there is only one provider of a given type in a broad region). Other factors to be considered are the means of transportation. In areas where low-income residents rely heavily on public transportation, the organization is to ensure that providers are accessible through these means.

Child support-eligible children face unique barriers in terms of access to health care coverage. One such barrier, as highlighted in Chapter 2 of this report, is that much of the health care coverage available to parents through their employers is provided through managed care organizations that limit the choice of service providers by geographic location or by a limited network of providers. If a noncustodial parent provides medical support through a restricted insurance plan, such as an HMO, available services may be inadequate when the covered child does not reside within or near the applicable service area (usually only emergency care is covered outside of the service area). The Working Group found that coordination agreements between plans that permit covered children to receive benefits outside the insurer's ordinary service area are a useful tool in expanding the health care coverage options that a decision maker may consider when establishing the medical support provisions of a child support order. Therefore, the Working Group recommends that the National Association of Insurance Commissioners (NAIC) encourage insurance providers to enter into coordination agreements.

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Recommendation 7 (Best Practice)
DOL and HHS should request the NAIC to encourage insurance providers with limited coverage areas to enter coordination agreements under which children who are covered under a geographically inaccessible plan can obtain services from a plan that is geographically accessible to them. Child support enforcement should publicize the availability of such plans and encourage States to take into account the possibility that out-of-area coverage may be available when assessing whether a particular plan is accessible to the child.

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In addition to taking geographic accessibility factors into account, a determination of accessibility must also take into account the stability of coverage. Many parents have access to dependent health care coverage at the time an order is entered but lose coverage shortly thereafter. Similarly, parents with seasonal employment (such as summer camp staff), those whose hours of employment vary at different times of the year (such as construction workers and fishermen), and those who frequently change jobs can afford to help pay for family health coverage at some times of the year but not at others. The decision maker may thus order available coverage only to find that it is no longer available or affordable by the time the paperwork is completed. This is an exercise in futility and should be avoided when possible.

When determining accessible coverage, then, the decision maker should consider the likelihood that coverage will be stable for at least one year. In short, decision makers should not order private coverage when it will not be available for an extended period of time, or when it is geographically inaccessible to the child.²¹

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Recommendation 8 (Federal Regulation)
If a child is not enrolled in private coverage, the decision maker shall determine whether one or both parents are able to obtain appropriate coverage for the child based on three factors: (1) comprehensiveness of the plan, (2) access to services, and (3) affordability. Each factor should be assessed individually and then considered together in accord with Recommendation 13.

If a child has special needs, the decision maker should consider this circumstance in conjunction with the needs of the primary plan member and other dependents (see Recommendation 12).

Coverage is comprehensive if it includes at least medical and hospital coverage; provides for preventive, emergency, acute, and chronic care; and imposes reasonable deductibles and co-payments. In determining which coverage is more comprehensive when both parents have such coverage, the decision maker should consider the following: basic dental coverage, orthodontics, eyeglasses, mental health services, and substance abuse treatment.

Coverage is accessible if the covered children can obtain services from a plan provider with reasonable effort by the custodial parent. When the only health care option available through the noncustodial parent is a plan that limits service coverage to providers within a defined geographic area, the decision maker should determine whether the child lives within the plan's service area. If the child does not live within the plan's service area, the decision maker should determine whether the plan has a reciprocal agreement that permits the child to receive coverage at no greater cost than if the child resided in the plan's service area. The decision maker should also determine if primary care is available within the lesser of 30 minutes or 30 miles of the child's residence. If primary care services are not available within these constraints, the coverage should be deemed inaccessible. In lieu of the 30 miles/30 minutes standard, States may adopt an alternative standard for time and distance, such as the standard that the State uses to administer programs such as Medicaid managed care services or to regulate managed care provider networks.

In determining accessibility, the decision maker should also assess whether one can reasonably expect the coverage to remain effective for at least one year, based on the employment history of the parent who is to provide the coverage.

Reasonable cost should be assessed based on Recommendation 9 through Recommendation 11.

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Decision makers must also address whether coverage is affordable. The definition of affordability must be considered in terms of reasonable cost. IV-D agencies are required to pursue private family health coverage whenever it is available at reasonable cost. Federal regulations state that "health insurance is considered reasonable in cost if it is employment-related or other group health insurance."²² The definition deeming employment-related coverage to be per se reasonable in cost was first promulgated in 1985. It was justified by a 1983 study by the National Center for Health Services Research, which found that employers paid 72 percent of the premium cost for low-wage employees. OCSE thus concluded that "most employment-related or other group health insurance is inexpensive to the employee/absent parent."²³

States have questioned the validity of this premise, however, since at least 1988.²⁴ And now, years later, there is even more reason to question the factual premise upon which this definition was based. The number of employers who offer completely subsidized dependent's coverage to their employees has significantly decreased.

The GAO estimates that in 1980, 51 percent of employers who offered family coverage fully subsidized the cost, but by 1993, only 21 percent of employers fully subsidized the cost.²⁵ Recent research shows that low-wage workers, who are the primary constituency of the IV-D program, are concentrated in certain "low-wage" firms where employee contributions to the cost of the premium are higher than in other firms.²⁶ Furthermore, the required employee contribution for health care coverage represents a much larger share of family income for low-income workers.²⁷

The size of the typical premium is not small.²⁸ The average percentage of the premium paid by the employee for family coverage ranges from 32 to 36 percent based on the plan type.²⁹ Employees at larger companies pay a considerably lesser percentage of their family health coverage premium costs than employees in smaller companies.³⁰

The estimates shown in the "Annual Premiums & Employee Contributions for Active Employees for Family Coverage, 1996" table suggest that on average, employee contributions to family health care coverage premiums are equal to 45 to 52 percent of the typical cash child support payment.³¹ Since the cost of health insurance coverage can be such a large part of the child support order, requiring such coverage has implications for the amount of cash payments the child receives and the size of the noncustodial parent's obligation, depending on how a State takes the cost of health care coverage into account. A State may reduce the cash obligation by the amount of health insurance cost, adjust the calculation of the noncustodial parent's income based on health insurance costs, or simply add a health insurance requirement with no adjustment to cash award.

Clearly, employee contributions to insurance premiums impose a significant financial burden on the parent who is providing the dependent coverage. States have long recognized this in their State child support guidelines. Every State provides a mechanism to adjust the amount of the child support obligation when a parent provides health care coverage for his children.³² If the custodial parent provides the coverage, the cash support award will probably increase, to reflect some contribution from the noncustodial parent toward the cost. If the noncustodial parent provides the coverage, the cash support award will probably decrease, to reflect the fact that that parent is subsidizing the cost of coverage through a separate deduction from wages toward the premium.

For more than a decade, States have worried about the effect of these adjustments in cash support, especially when the noncustodial parent is ordered to provide health care coverage.³³ If the premium associated with the coverage is too high, cash support will be substantially reduced, leaving the custodial parent without enough money to supply the child's basic needs. If cash support is not adjusted downward, however, poorer noncustodial parents will pay an unreasonably high portion of their income as support. If these parents cannot meet their own basic needs, they have little incentive to work and support their children, which may actually reduce the amount of child support they pay.³⁴

Some States have addressed this problem by developing policies that look at the actual cost of providing insurance relative to the obligated parent's income. If cost exceeds a certain percentage of that parent's income, coverage is not ordered. For example, Washington State does not require the decision maker to order the noncustodial parent to pay coverage if the premiums are more than 25 percent of the noncustodial parent's basic child support obligation.³⁵ In other States, the decision maker exercises discretion when the cost is too high, even if the coverage is employment-related. For example, Colorado does not require the decision maker to order coverage if the premium exceeds 20 percent of the noncustodial parent's gross income.³⁶

Other States compare the cost of family health coverage to the amount of the cash support award. For example, Maine does not require the decision maker to order coverage if the cost exceeds 15 percent of the parent's cash support obligation³⁷ and Montana has a similar rule if the cost exceeds 25 percent of the cash support obligation.³⁸ The Working Group also noted that the SCHIP program directs that contribution by the parent toward the cost of this health care coverage should not exceed five percent of a family's gross income.

The Working Group looked at these State policies in developing a new definition of reasonable cost. The Working Group began with the Maine/Montana approach, which calculates reasonable cost relative to the cash support award. The Working Group rejected this as a national guideline, however, because a significant number of States (12) use a child support guideline that calculates a cash support obligation only for the noncustodial parent. These States have no ability to calculate a support obligation for the custodial parent. If the custodial parent were to be the one ordered to provide coverage, there would be no way to adjust that parent's obligation in those States.

The Working Group also considered the amount of cash support owed under various State guidelines and concluded that using the Percentage of Support Obligation model would exacerbate existing inequities. There is enormous variation in different States' treatment of similarly-situated families. For a low-income family with a combined income of $14,400 per year, for example, the noncustodial parent's typical child support payment ranges from nothing in Connecticut to $327 in Indiana.³⁹ If the Federal government adopted a 25 percent of cash support standard, the Connecticut father would have no obligation, while the Indiana father would owe an additional $82, for a total obligation of $409. It is clear that this approach would compound existing inequities.

For this reason, the Working Group concluded that affordability should be determined with reference to the gross income of the parent providing the coverage. Even in States that use the Percentage of Income model, the gross income of both parents can be determined. Moreover, this approach does not exacerbate the inequalities that would be created if affordability were determined based on the Percentage of Support Obligation model.

The Working Group also debated the relative merits of the higher standard used by Washington and a percentage similar to that embodied in the SCHIP formula. The Working Group was concerned about the effects of reducing the amount of cash support when the noncustodial parent provides coverage, given the importance of maintaining sufficient cash support, especially at lower income ranges where large numbers of families are affected by welfare reform. Time limits and work requirements combine to move many families from public assistance to low-wage jobs and encourage others to avoid using the public assistance system. These families need cash support to meet their children's other essential needs.

In addition, the Working Group was concerned that a combination of cash support and a health care premium equal to 25 percent of the child support obligation could be high enough to send the obligation over Federal wage withholding limits. When this happens, employers are left trying to figure out what to do, IV-D agencies have to go back and modify orders, and children lose coverage. The Working Group selected a nonvariable percentage of income that applied throughout the country and, in most cases, that would keep the largest number of orders within withholding limits.⁴⁰

Consequently, the Working Group concluded that the best approach was to use the five percent of gross income standard, which is based on the standard used in the SCHIP program. The Working Group was persuaded that the SCHIP standard struck a reasonable balance between cash and premium costs, was consistent with existing public policy, would minimize the number of cases where cash and medical support obligations exceed withholding limits, and would enable consistency in recommendations for cases where public, rather than private, coverage is used. For these reasons, the Working Group recommends that 45 CFR §303.31(a)(1) be amended to reflect this standard.

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Recommendation 9 (Federal Regulation)
The Federal regulation that deems all employment-related or group-based coverage to be reasonable in cost should be replaced with a standard based on the cost of coverage relative to the income of the parent who provides the coverage. Except as noted in Recommendation 10 and Recommendation 11, if the cost of providing private coverage does not exceed five percent of the gross income of the parent who provides coverage, then the cost should be deemed reasonable.

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The five percent standard will be appropriate in most cases. At the lowest income levels, however, the additional cost of health care coverage may make the financial burden on the noncustodial parent too high. If that burden is adjusted downward, cash support may not significantly contribute toward the cost of providing basic necessities for the children. For this reason, States should not order noncustodial parents with incomes below 133 percent of the poverty level to provide private health care coverage to their dependents unless such coverage is available at no cost.

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Recommendation 10 (Best Practice)
No parent whose net income is at or below 133 percent of the Federal poverty level should be ordered to provide private coverage, unless that parent has access to private coverage that does not require an employee contribution to obtain coverage.

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The Working Group also recommends that OCSE identify this as a best practice and disseminate information regarding the rationale for it to the States. The preamble to the Federal regulations defining reasonable cost should also include this information, so that it will be clear to States that they have the flexibility to adopt this approach.
Similarly, if a custodial parent's income is so low that her resident child qualifies for or is receiving Medicaid, that parent should not be required to provide private coverage unless such coverage is available at no cost. The Working Group also recommends that OCSE identify this as a best practice and disseminate supporting information to States. The preamble to the Federal regulations should also state that deviation is allowable in extremely low-income cases.

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Recommendation 11 (Best Practice)
No parent whose resident child is covered by Medicaid, based on that parent's income, should be ordered to provide private coverage, unless the parent has access to private coverage that does not require an employee contribution to obtain coverage.

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In sum, the Working Group recommends that there should be some minimum national standard for determining the appropriateness of coverage based on comprehensibility, accessibility, and affordability. HHS should include definitions/standards for these terms in a revised 45 CFR §303.31. Standard definitions will promote greater equity between similarly-situated families in both intra-state and interstate cases. The current lack of uniformity leads to situations where inappropriate coverage is ordered for one child but not for another, where some parents are paying for useless coverage while others are not, where some children receive less cash support because their parent is paying for inaccessible coverage but other children do not lose cash support for this reason, and/or where some children are denied SCHIP coverage because inaccessible coverage is theoretically available to them while other children enter the SCHIP program because the decision maker has recognized the futility of ordering inaccessible coverage. Overall, establishing standard definitions for affordable, comprehensive, and accessible coverage will maximize the number of children who are enrolled in stable, comprehensive, accessible, and affordable family health coverage.

Children with Special Needs

In determining the appropriate type of health care coverage for children with special health needs (CSHNs), it is of paramount importance to consider the medical, mental, and social service needs of these children and their guardians. CSHNs are at great risk of chronic illnesses and disabilities. Therefore, attention must be given to their routine preventive and acute care. Many of the services necessary to address these conditions may not be covered in certain health care plans, and it is essential that CSHNs have continuity of care.⁴¹ In determining appropriate health care coverage for CSHNs, it is important for the decision maker to consider which plans are adequate to meet those needs. A common definition of CSHNs would help facilitate the decision maker's determination of the appropriate plan enrollment and system(s) of care, whether private, Medicaid, or SCHIP coverage. For some families, for example, health care coverage would outweigh cash support as the primary need. Flexibility must be available to the decision maker to accommodate such individual situations.

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Recommendation 12 (Federal Guidance)
The decision maker must consider a child's special medical needs when deciding which form of private or public coverage is appropriate under Recommendation 8 through Recommendation 11. HHS should identify governmental agencies that are currently studying issues involving children with special needs and should coordinate with these agencies in the development of a common definition of "special needs" children. HHS should provide guidance to State IV-D agencies on how best to use the decisionmaking matrix set out in Recommendation 13 when a special needs child is involved.

HCFA should require Medicaid agencies to identify whether there is a special needs child in any case they refer to the IV-D program pursuant to the child support cooperation requirement of the Medicaid program.

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The Decision "Matrix"

Once the decision maker has obtained all of the pertinent information concerning the child's needs, health care plans available to both parents, and the parents' ability to pay, they must determine which of the parents is best able to provide comprehensive, stable, affordable, and accessible coverage that serves the best interests of the child. The table on the following page, "Decision Matrix for Tribunal Use," illustrates the decision logic for the tribunal to use in determining whether to order private or public group health care coverage.

Steps 1-3 reflect the basic principle articulated in Recommendation 3-that is, that the decision maker should first determine if either parent has accessible, affordable, comprehensive coverage. When it is clear that only one of the parents has access to comprehensive coverage, this coverage should be ordered.

Step 4 tells the decision maker what to do if only one parent has accessible, affordable, comprehensive coverage. If only the custodial parent has such coverage, then that coverage should be ordered. Likewise, if only the noncustodial parent has such coverage, then that coverage should be ordered. What the Working Group's decision matrix makes clear is that even if the custodial parent is the one with access to such coverage, that parent should be ordered to provide it.

Step 5 tells the decision maker what to do when both parents have access to comprehensive, accessible, and affordable coverage. In these situations, the Working Group recommends that the custodial parent's coverage should be ordered. We recommend this for a number of reasons.

• First, children will benefit. The custodial parent's coverage is more likely to be easily accessible to the child. As discussed earlier, if coverage is not accessible, it is not used.
• Second, using the custodial parent's coverage will most likely decrease the IV-D agencies' enforcement burden. Custodial parents have a strong incentive to enroll the child in available insurance: if they do not do so, they will be responsible for all of the bills. Accordingly, the custodial parent is likely to act more quickly and require less prodding by the IV-D agency. The custodial parent will know when a job change is imminent and when the children need to be moved to the new policy or, if the new job does not provide dependent benefits, when the medical support order needs to be modified. This will reduce the amount of time that elapses before the IV-D agency learns that the order needs modification.
• Third, using the custodial parent's own coverage is procedurally easier for parents, employers, insurers, and plan administrators. Employers and plan administrators routinely distribute information about coverage, provide claim forms to their employees, and acknowledge the employee's signature on claims. It is far more difficult for employers, insurers, and plan administrators to deal with the custodial parent when the noncustodial parent provides coverage. Thus, communication regarding the child's health insurance is eased considerably when the custodial parent is the policy holder. Moreover, the COBRA and HIPAA rules are very clear for dependents covered by the custodial parent, but less clear for dependents covered by the noncustodial parent.⁴²

  While there are many reasons for using the custodial parent's coverage when both parents have access to comprehensive, accessible, and affordable coverage, the Working Group recognizes that either parent may prefer the noncustodial parent's coverage in some instances. For example, if a child needs mental health services and the noncustodial parent's policy provides for such services while the custodial parent's policy does not, the former is obviously preferable. Or if the noncustodial parent is already providing dependent benefits to others in his household, and can add the child in question at little or no cost, it makes sense to use the noncustodial parent's policy.

The decision maker should have authority to assess what is in the child's best interest and order coverage accordingly. Consistent with Recommendation 1, this recommendation requires the decision maker to consider all sources of private coverage that may be available. This policy is also consistent with the direction States are now taking in this area. Of the 27 States whose child support guidelines require the decision maker to examine coverage available to both parents, six States require the decision maker to order the best and most affordable coverage.⁴³ One State, Arizona, actually provides a similar preference for custodial parent coverage⁴⁴ and Massachusetts expresses a preference for custodial parent coverage if it is already in place.⁴⁵

Moreover, several IV-D program administrators expressed a desire to move in this direction but felt they did not have the authority to do so. This change should be embodied in a new Federal statute, so that IV-D agencies have clear authority to assess coverage available to both parents and order custodial parent coverage in appropriate situations.

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Recommendation 13 (Federal Legislation)
After determining that a child is not enrolled in private health care coverage, and that at least one parent could enroll the child in private coverage, the decision maker should determine which plan is most appropriate for the child (as defined in Recommendation 8) by evaluating the plan(s) in the following manner:

Step 1. Determine whether the child has access to the services provided under the coverage.

Step 2. Determine whether the cost of the coverage is reasonable.

Step 3. Determine whether the coverage is comprehensive.

Step 4. If, after following steps 1-3, the decision maker finds that only the custodial parent has accessible, affordable, and comprehensive coverage, that coverage should be ordered, with appropriate allocation of cost, as determined by the State child support guidelines. (See Recommendation 2)

If, after following steps 1-3, the decision maker finds that only the noncustodial parent has accessible, affordable, and comprehensive coverage, that coverage should be ordered, with appropriate allocation of cost, as determined by the State child support guidelines. (See Recommendation 2)

Step 5. If, after following steps 1-3, it is determined that accessible, affordable, comprehensive coverage is available to both parents, then coverage available to the custodial parent should be ordered unless (1) either parent expresses a preference for coverage available through the noncustodial parent; or (2) the noncustodial parent is already carrying dependent's coverage for other children, either under a child support order for those children or because the children reside in his current household, and the cost of contributing toward the premiums associated with the custodial parent's coverage is significant. If either of the exceptions applies, the decision maker should make an assessment of what is in the best interests of the child and order coverage accordingly.

If neither parent has family health coverage, see Recommendation 14 and Recommendation 15.

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Step-parents are another possible source of coverage. Census Bureau data indicates that approximately 17 percent of child support-eligible children live in step families.⁴⁶ Remarried custodial parents who do not have access to dependents health care coverage through their own employment may have access to such coverage through their new spouses. Decision makers should also be directed to explore coverage available through step-parents when it is appropriate to do so. Although it is not ideal to order a parent to secure health care coverage through a step-parent's plan, such plans should be taken into account when a medical support order is established or modified, when such coverage is available.

Step-parents traditionally have had no enforceable legal obligations to their step-children.⁴⁷ In States that continue this tradition, the step-parent's provision of health care coverage has always been purely voluntary because the IV-D agency or private attorney handling the case could not enforce the obligation. However, approximately 20 States have now created a statutory duty for step-parents to support their step-children, at least while they are married to the children's biological or adoptive parent.⁴⁸ In these States, step-parents may be compelled to provide private health care coverage to their step-children. If the new marriage does not last, however, the children will lose access to coverage. In such instances, the custodial parent will need to quickly seek a new order or learn about and exercise any COBRA rights that may exist.

“If you've gone through this process and you determine that both parents have accessible, affordable comprehensive coverage, then our preference at this point is to have the custodial parent provide the coverage for all the reasons that we've talked about in the past, in terms of that's the parent who most easily can enroll the child, who's got the forms, whose signature will be honored, who really takes away all the difficult enforcement issues from a IV8209D perspective of having the noncustodial parent provide the coverage.”

~Paula Roberts, Senior Attorney, Center for Law and Social Policy

In addition, not all employer-sponsored plans extend benefits to step-children. Employers who do not currently provide such coverage should not be forced to do so. Nevertheless, since some large employers, including the Federal government, do provide health care coverage to their employees' step-children, this option may be available and desirable. Every State should have some policy in this area. The policy should reflect the realities of the situation and consider step-parent coverage only when the parties themselves believe it is appropriate and employers ordinarily make such coverage available. Even then, the custodial parent should be warned to seek COBRA coverage or modification of the order if the marriage terminates.

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Recommendation 14 (Best Practice)
When neither parent has access to private health care coverage at reasonable cost but a step-parent does, enrolling the children in the step-parent's coverage should be considered under certain conditions. These conditions are: (a) the coverage is accessible to the children; (b) the step-parent is willing to provide such coverage; and (c) there are no employer/insurer constraints for enrollment of the child.

When these conditions are met, the parent who is married to the step-parent should be ordered to provide health care coverage for the children. The order should specify that this obligation may be met by enrolling the children in the step-parent's health care coverage. Moreover, the order must make it clear that if the obligated parent and the step-parent later commence proceedings for a separation or divorce, the obligated parent has responsibility for obtaining information about the cost and availability of COBRA coverage for the children and enrolling the children in this coverage. The order should also specify that if COBRA (or other) coverage is not available or affordable, the obligated parent must immediately seek modification of the medical provisions of the child support order. As an alternative, the custodial parent should seek publicly-funded coverage in order to minimize any lapse in coverage for the children.

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Establishment of Orders for Publicly-Funded or Other Alternative Health Care Coverage

In many cases, private health care coverage is simply not available to either parent.⁴⁹ In such cases, public or other alternative coverage must be considered, as the children-especially those in the IVD caseload-may be eligible for Medicaid or SCHIP benefits. In addition, some IVD agencies have worked with insurers to establish alternative lower-cost child-only plans that parents can purchase to provide coverage for their children.⁵⁰ These plans can be especially useful for children who do not qualify for Medicaid or SCHIP.

In other cases, private coverage is available but the cost is prohibitive. Medicaid, SCHIP, and alternative programs can also be helpful in these instances.

A few States have already taken the lead in granting decision makers the power to consider both public and private coverage when drafting or modifying support orders. For example, Connecticut's child support guidelines require the decision maker to order the custodial parent to apply for HUSKY B (the State's non-Medicaid SCHIP program) or an available equivalent government-sponsored plan when private coverage is not available to either parent at reasonable cost.⁵¹ Similarly, Texas requires the decision maker to order custodial parents to enroll in a program offered by the Texas Healthy Kids Corporation if private coverage is not available or affordable.⁵²

All States should be encouraged to consider public or other alternative coverage when drafting or modifying support orders for children whose parents cannot provide private coverage. This approach could substantially increase the number of children with access to basic health care coverage.

Public Payment for Private Coverage

Children can also obtain private coverage with a public subsidy. State Medicaid agencies can use program funds to purchase group health coverage⁵³ if such coverage is available to a Medicaid-eligible individual. Alabama, for example, has been purchasing group health coverage for Medicaid beneficiaries since 1991. This is especially valuable to children living in areas with a limited number of Medicaid providers. Medicaid agencies also are permitted to pay for cost-effective group health premiums for certain individuals entitled to elect COBRA continuation coverage.⁵⁴

“But there are lots of cases on the margin where there is very limited noncustodial parent income, where the source of private insurance is less clear.  At that point … enroll[ing] the child in CHIP or Medicaid … maximizes benefits to everyone.”

~Nancy Ebb, Senior Attorney, Children’s Defense Fund

SCHIP programs can also use program funds to subsidize coverage under employer-sponsored group health plans. If the coverage would also include individuals not eligible for SCHIP, the State would need to obtain a "family coverage waiver" from the Health Care Financing Administration (HCFA) in order to purchase the coverage.⁵⁵ Massachusetts and Wisconsin have elected to purchase family coverage through their SCHIP programs.⁵⁶

Essentially, employers and plan administrators are concerned that this ability on States' parts to subsidize private insurance may result in "adverse selection"-that is, the selection of children with serious, and costly, medical problems as those for whom it is deemed more cost-effective to pay the employee contribution for private coverage rather than enroll them in Medicaid or SCHIP.

For many self-insured plans, employee contributions represent only a small percentage of the plan's expenses, including benefit claims. In these plans, the employer is responsible for the majority of the plan's expenses. In addition, the group premium for insured plans is generally based on the nature of the risk pool of insureds, and again, the employer may be paying most of the premium. If there is a significant shift of high-risk/high-cost Medicaid and SCHIP-eligible children from those programs to group health plans (in other words, adverse selection), the cost to employers of maintaining these plans, whether self-insured or insured, may rise substantially. Thus selection criteria must be neutral and uniformly applied. An additional concern is that many (if not most) group health plans that require employee contributions are only equipped to receive such contributions through payroll withholding by and transmittal from the employer. Preliminary inquiries indicate that such plans are not administratively equipped to receive contributions from other sources, whether it be the employee or the Medicaid or SCHIP agency. Further analysis is needed to determine if the cost of modifying systems to permit such receipt would be substantial. The pros and cons need to be weighed in developing future policy.

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Recommendation 15 (Best Practice)
When neither parent can provide comprehensive, accessible, affordable private health care coverage, the decision maker should explore the possibility of providing coverage to the child through Medicaid or the SCHIP. If the child is ineligible for Medicaid or SCHIP, the decision maker should explore whether there is any available lower-cost, child-only plan, such as Sacramento IV-D Kids.

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Role of the IV-D Agency

The five steps outlined earlier in Recommendation 13 for determining which plan is most appropriate for a child will not effectively ensure that children are enrolled in the best available coverage unless: (1) parents are aware of what public and private family health coverage programs are available, and (2) the child support agency helps them enroll their children.
Child support programs must conduct outreach activities to educate parents about government-sponsored family health coverage options. When SCHIP was enacted, OCSE's Deputy Director sent a letter to all State directors urging them to become involved in SCHIP implementation and outreach activities,⁵⁷ however only a few State child support programs have done so. This is partly because it was not clear whether such outreach activities were a IV-D function and therefore eligible for Federal Financial Participation (FFP). This funding issue needs to be addressed by including Medicaid/SCHIP outreach activities in Title IV-D. Unless this change in the program responsibility and funding can be resolved administratively, or by regulation, Congress should enact legislation that mandates this outreach role for State child support enforcement agencies.

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Recommendation 16 (Federal Legislation)
To facilitate enrollment of eligible children in public coverage, Federal law should require State IV-D agencies to: (1) provide parents with information about the Medicaid and SCHIP programs, as well as any other subsidized coverage that may be available to the child; and (2) refer the family to the appropriate program for possible enrollment.

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Enrollment Authority

Encouraging and enabling outreach activities, however, is just a first step for the IV-D agency. While the SCHIP statute does not expressly prohibit IVD agencies from enrolling eligible children in the program, IVD agencies are not permitted to enroll children in Medicaid. This must be changed. IVD agencies should be authorized to enroll children in Medicaid.

Section 1920A(b)(3)(A)(i)(I) of the Social Security Act, as added by §4912(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33) added a new §1920A to the Medicaid statute.⁵⁸ The new law allows a "qualified entity" to determine a child's eligibility for Medicaid for a "presumptive eligibility period" on the basis of preliminary information that the family income of the child does not exceed the State's Medicaid income eligibility level. The presumptive eligibility period is the month in which the presumptive eligibility determination is made plus the next month, a period of approximately 28 to 62 days; it terminates when the Medicaid agency determines "regular" eligibility. "Qualified entities" currently include Medicaid providers as well as agencies that determine eligibility for the Head Start, Child Care, Development Block Grant, and Women Infants and Children (WIC) programs.

The Working Group is therefore recommending that IVD agencies be added to the list of agencies authorized to determine presumptive eligibility and the Medicaid statute be amended accordingly. This would expedite enrollment of eligible children in the Medicaid program when private coverage is not an option.⁵⁹ The IV-D agency could use the income information obtained to calculate cash support under the guidelines to make a preliminary determination regarding a child's eligibility for Medicaid. The child could then be enrolled as presumptively eligible and coverage would begin immediately.

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Recommendation 17 (Federal Legislation)
Congress should amend §1920A of the Social Security Act to include IV-D agencies among the "qualified entities" that may enroll children in Medicaid for a presumptive eligibility period, based on preliminary information that indicates that the child is income-eligible for Medicaid.

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While States should not be required to use their IV-D programs to make presumptive Medicaid eligibility determinations, they should be strongly encouraged to do so. If they choose not to, States should adopt other methods for facilitating the enrollment of eligible children in the Medicaid and SCHIP programs.

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Recommendation 18 (Federal Guidance)
Provided that Congress amends the Social Security Act to allow State IV-D agencies to presumptively enroll children in Medicaid, OCSE and HCFA should strongly encourage all States to exercise this option or to take other steps to facilitate Medicaid enrollment, including placing Medicaid or SCHIP staff in IV-D offices, providing application forms to potentially eligible families, and arranging eligibility appointments.

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Contribution by the Noncustodial Parent

When they are financially able to do so, both parents should contribute to the cost of their children's health care coverage. While the definition of reasonable cost proposed earlier precludes parents with access to employer-based coverage from being ordered to provide coverage if the cost is not reasonable, this does not preclude the parent from contributing something toward the cost of the child's coverage. In other words, while it may be unreasonable to expect the parent to pay the full premium for available private coverage in some cases, it is not unreasonable to expect the parent to contribute something towards public coverage.

If private coverage is not ordered, children are likely to enter the Medicaid or SCHIP program at substantial public cost. While Medicaid is an open-ended program, the SCHIP program has a specific appropriation. If all of the SCHIP funds are used up, otherwise eligible children have to be turned away. While this has not yet happened, the potential exists, particularly if current SCHIP outreach efforts are successful. Parents of SCHIP-eligible children who could help contribute toward the SCHIP costs should be asked to do so in order to preserve funds for other eligible children in the future. In addition, when children do enter Medicaid or SCHIP, the custodial parent may have to pay premiums, co-payments, and/or deductibles. It is unfair not to ask noncustodial parents to contribute as well toward their children's health care costs in appropriate situations.

In order to achieve equity between custodial and noncustodial parents whose children are enrolled in Medicaid or SCHIP, the Working Group used the basic Medicaid and SCHIP cost-sharing policies as the starting point for its recommendation.

The Medicaid program is available to children in low-income families. Because these families are, by definition, low income, States are not allowed to charge custodial parents enrollment fees, premiums, deductibles, coinsurance, co-payments, or similar charges for most Medicaid services to children. However, the Working Group recommends that the same standard should also apply to low-income noncustodial parents. No cost-sharing should be imposed upon noncustodial parents with incomes below 133 percent of poverty, which is the cut-off for Medicaid eligibility.

“-- noncustodial parents vary by age, income, and marital status, and I would hope, as we proceed with our work, that we would consider the sets of issues that really challenge under-employed and unemployed noncustodial fathers and mothers.”

~Jeffery Johnson, President and CEO, National Center for Nonprofit Planning and Community Leadership (NPCL)

Using this approach has three advantages: (1) the amount of cash support available to the child will not be diminished by virtue of the noncustodial parent's contribution to medical support; (2) the noncustodial parent's contribution to the child's support will likely remain below Federal wage-withholding limits, reducing the number of situations in which employers and IV-D agencies have to wrestle with that difficult issue; and, (3) obligations imposed on low-income noncustodial parents will not leave them with too little income to meet their own basic needs.

The SCHIP program is generally available to children with family incomes above the Medicaid level but below roughly 200 percent of poverty.⁶⁰ (At least eight States provide eligibility for children whose family income is above this level.⁶¹ ) Whether or not there is any cost sharing for services to SCHIP children depends on how the State chooses to implement its SCHIP program.⁶² If a State implements SCHIP through Medicaid expansion, then the Medicaid rules apply and families cannot be charged for children's services. If a State creates a separate SCHIP program for some or all SCHIP-eligible individuals, then the State can require custodial parents to contribute toward the premium for those children covered by the separate program.⁶³ There are, however, limits on the amount that States can charge. For families with income below 150 percent of poverty, premiums can range from $1.00 per month to $19.00 per month, depending on family size and income.⁶⁴ For families with incomes above 150 percent of poverty, there are no specific restrictions on the amount that can be charged for premiums or deductibles/co-payments. The aggregate cost of all premiums, deductibles, co-payments, and co-insurance charges, however, cannot exceed five percent of the family's gross income. When charges exceed this amount, the State must suspend further charges.⁶⁵

In short, in a separate SCHIP program States can impose costs on custodi