CHAPTER 6 Moving Towards Seamless Coverage: Improving Coordination and Communication Among Private and Public Health Care Coverage

CHAPTER 6
Moving Towards Seamless Coverage: Improving Coordination and Communication Among Private and Public Health Care Coverage

CHAPTER 6 AT A GLANCE
Not all features are available in this version- See PDF version or hard copy report
OUTREACH FOR MEDICAID AND THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM, 6-3
SCHIP BARRIERS, 6-4
    Crowd-Out Policies, 6-4
    Access to Health Care Coverage, 6-6
SCHIP/MEDICAID/IV-D INFORMATION EXCHANGE, 6-8
INCREASED EFFICIENCY IN THE COORDINATION OF PUBLIC AND PRIVATE
COVERAGE, 6-12
    Automated Data Matches with Private Insurers, 6-13
    Repeal Mandatory Pay and Chase, 6-14
ERISA ISSUES RELATED TO CHILDREN COVERED UNDER QMCSOS, 6-17
    HIPAA and COBRA, 6-17
    Circumstances Under Which Group Health Plans May Impose Preexisting Condition Exclusions, 6-21
    Coordination of ERISA Medical Child Support Provisions with Social Security Act Medical Child Support Provisions, 6-22

Theme
Under the current system it is very easy for children to have periods in which no health care coverage is available. The extent to which this happens could be decreased by building feedback loops into the information flow between IV-D agencies and the public health care providers, Medicaid and SCHIP. Additionally, IV-D, Medicaid, and SCHIP agencies need to be working from a common understanding when obtaining private or public health care coverage or both are in the best interest of the child. IV-D should work with Medicaid and SCHIP, as well as with private insurers, to assure that the child is enrolled in appropriate health care coverage.

Private employment-related group plans provide health care coverage for a majority of America's children, yet rarely is such coverage continuous. Frequent job changes make insurance coverage uncertain. Many parents are part-time or seasonal workers, who may have erratic coverage or difficulty in meeting eligibility requirements for employer-based coverage. Even when employment is stable, employers may change insurance plans.

Where the noncustodial parent is obligated to provide private coverage, such changes often create more uncertainty. Often, neither the custodial parent nor the child support agency responsible for enforcing the order learn of the change in employment and the need to apply for new public or private coverage until after the child's insurance has lapsed. And, if a child's private health care coverage lapses, they are likely to be uninsured for several months, as they may be subject to waiting periods before they are eligible for new coverage through the employer or through an SCHIP. Furthermore, replacement coverage may not pay to treat pre-existing conditions.

Similarly, as the child's private insurance status or family income changes, their eligibility for SCHIP or Medicaid may change. Children who do not successfully transition to private or public insurance when the changes occur will be uninsured or underinsured.

Recognizing that children need seamless health care coverage, Congress charged the Working Group to report on "appropriate procedures for coordinating the provision, enforcement, and transition of health care coverage under the State programs operated pursuant to part D of Title IV of the Social Security Act and titles XIX and XXI of such Act."¹ Early on, the Working Group realized that Medicaid and SCHIP need to be included in the medical child support decision matrix, along with private insurance, in order to maximize a child's access to quality health care coverage. Coordination among these programs and with private insurers is essential.

“[W]e were all somewhat taken aback by and very concerned … that there does not seem, at the current time, to be a good interface between Medicaid, CHIP, and IV-D and that many of the problems that we've identified really go to that lack of interface.”
~Sallie H. Hunt, Commissioner, Bureau of Child Support Enforcement, HHR, West Virginia

A significant number of children who receive IV-D child support services qualify for Medicaid and SCHIP coverage. State officials are working with Federal agencies to reach as many potentially eligible, uninsured children as possible through amendments to State Plans. IV-D agencies can and should play a major role in these efforts. Adequate planning, coordination, and collaboration between IV-D, Medicaid, SCHIP and other appropriate public and private agencies are essential to ensure that every child who is eligible for child support services has comprehensive health care coverage.

Public agencies, such as IV-D, Medicaid and SCHIP and private employers and insurers must coordinate their efforts in order to secure the best possible coverage for children and to minimize disruptions in coverage when children move between private coverage and public coverage.

Outreach for Medicaid and the State Children's Health Insurance Program

In order to ensure that the maximum possible number of children has continuous health care coverage, it is important to enroll children in appropriate coverage as quickly as possible. Children who do not have reasonable access to appropriate private coverage should be enrolled in public coverage if eligible.

The Working Group believes that linking child support programs with Medicaid and SCHIP could make it possible to reach more eligible families. Indeed, a letter from OCSE's Deputy Commissioner to State IV-D Directors makes this very point. IV-D agencies "have immediate access to necessary information regarding the children's health coverage and the parents' income, employment, and other financial information. The agencies could provide an invaluable service by identifying potentially eligible recipients and making SCHIP information and applications available to them." Some State IV-D programs are already trying to inform working parents about the Medicaid and SCHIP programs.

Child support agencies can identify eligible uninsured children and streamline enrollment in the SCHIP and Medicaid programs.² The Working Group believes that IV-D agencies should be added to the list of qualified agencies permitted to make presumptive Medicaid eligibility determinations for children, and recommends that the Medicaid statute be amended accordingly.³ This could expedite enrollment of eligible children in the Medicaid and SCHIP programs. Once the child support agency determines that private coverage is not an option, the IV-D agency could use the income information it has gathered to calculate the amount of cash support under the guidelines and make a preliminary determination that the child is Medicaid or SCHIP eligible, if the State has chosen to provide presumptive coverage for children under Medicaid or SCHIP. The child could then be enrolled as presumptively eligible and coverage could begin immediately. While Congress should not require States to use their IV-D programs to determine a child's presumptive eligibility for Medicaid or SCHIP, they should be strongly encouraged to do so. If they choose not to, states should adopt other methods to facilitate enrollment in the Medicaid and SCHIP programs. See Recommendation 17 and Recommendation 18, CHAPTER 3.

One of the barriers to enrollment in Medicaid and SCHIP is the burdensome application and enrollment process. Some States have applications over 20 pages long, posing an often insurmountable challenge for families.

A key to successfully reaching and enrolling uninsured children in SCHIP and Medicaid is a simple application and enrollment process. Federal requirements for application and enrollment in Medicaid and SCHIP provide broad flexibility to States in designing their applications and developing their enrollment process. Many States have simplified the complicated application forms and enrollment processes, as well as allocated more resources to outreach activities. Currently, States are trying to encourage enrollment through such methods as creating joint SCHIP/Medicaid applications, reducing and simplifying the application forms, providing mail-in applications, and developing a follow-up process for families who do not complete the application.

HCFA has developed a model joint application for SCHIP/Medicaid for children (see APPENDIX H: Model Joint Medicaid/SCHIP Application Form, page A-59).⁴ States can allow individuals to use this form to apply for both programs and the information can be sufficient for determining which program a child is eligible for. The simplified form asks only for necessary information and allows for application by mail. The Working Group supports HCFA's efforts to streamline and simplify the application process, and encourages all States to adopt a joint Medicaid/SCHIP application.

Recommendation 50 (Federal Guidance)
HCFA should continue to encourage joint Medicaid/SCHIP applications to streamline the application process.

SCHIP Barriers

SCHIP does not always offer an adequate safety net for all child support-eligible children. There are specific eligibility criteria in Title XXI that create barriers to obtaining continuous coverage for children. These barriers include SCHIP crowd-out policies and denial of SCHIP eligibility based on access to private coverage.

Crowd-Out Policies

While most children⁵ who have private health care coverage also can be eligible for Medicaid, children with other coverage are generally not eligible for SCHIP. Whenever a State implements Title XXI through a Medicaid expansion, the Medicaid program rules apply and children may be enrolled in private health care coverage as well as in the Medicaid expansion program. On the other hand, when a State implements Title XXI through a separate SCHIP, different rules apply, which are sometimes problematic.

One of the fundamental principles of Title XXI is that SCHIP coverage should not supplant existing public or private coverage (commonly referred to as "crowd-out"). Title XXI contains provisions specifically designed to ensure that States use SCHIP funds to provide coverage only to uninsured children. Specifically, Title XXI requires States to ensure that coverage provided under SCHIP does not substitute for coverage under either private group health plans or Medicaid.

According to HCFA, the potential for crowd-out exists because SCHIP coverage costs less and provides better coverage than coverage purchased by some individuals and employers. Specifically, employers who make contributions to coverage for dependents of lower-wage employees could potentially save money if they reduce or eliminate their contributions for such coverage and encourage their employees to enroll their children in SCHIP. At the same time, families that make significant contributions towards dependent group health coverage could have an incentive to drop that coverage and enroll their children in SCHIP if the benefits would be comparable or better and their out-of-pocket costs would be reduced.
In cases where insurance coverage is provided directly through SCHIP or Medicaid, States are required to establish reasonable procedures to ensure that coverage provided under the SCHIP plan does not substitute for coverage under group health plans. In cases where SCHIP funds are used to subsidize coverage provided through employer-sponsored group health plans, States are required to implement specific precautions, including imposing a waiting period. Many States impose a waiting period that ranges from 3 to 12 months, with certain exceptions. An otherwise SCHIP-eligible child who has just lost private coverage must wait until the end of this waiting period before he may enroll in SCHIP coverage.

The waiting period can be particularly troublesome when the child's health insurance is to be provided or paid for by a noncustodial parent who often may live far away from the child, may not have good patterns of communication with the custodial parent, may have limited income, and may have a history of frequent and sudden job change. While many of these problems affect both intact and non-intact families, in families with a noncustodial parent they are exacerbated by potential lack of communication between the custodial and noncustodial parent. The custodial parent may not even know of the noncustodial parent's oft-changing employment status, and therefore be unaware of when the children have coverage and when they do not.

Children may also lose private coverage when the custodial parent is providing coverage and the noncustodial parent is ordered to contribute toward the cost of the coverage, but fails to do so. The custodial parent may have no control over the loss of private coverage and in these cases there is no deliberate effort to move the child from private coverage to the SCHIP program. The Working Group believes that the waiting period does not serve a valid public policy purpose here and therefore ought not to be imposed in such cases.

HCFA has already issued proposed SCHIP regulations that would explicitly allow exceptions to the minimum waiting period if the prior coverage was involuntarily terminated by the employer in a State that has a policy of subsidizing employer-sponsored group health plans.⁶ Many States already provide exceptions to the requirement that the child be uninsured for a certain period of time. For example, Connecticut, Iowa, Kentucky, New Hampshire, and North Carolina have developed a broad range of exceptions to their waiting period in order to accommodate involuntary termination of private coverage.

Because of the unique situation of child support-eligible children, the Working Group recommends that every State exempt children who lose health care coverage pursuant to a medical support order from the requirement that children be uninsured for a certain period of time before becoming eligible for SCHIP. The Working Group anticipates that HCFA will address the issue of crowd-out in the SCHIP final rule.

Recommendation 51 (Federal Guidance)
HCFA should provide guidance to States to make children who lose health care coverage pursuant to a medical support order an exception to the SCHIP "crowd out" provision by eliminating the waiting period for these children. In particular, guidance would include eliminating the waiting period when the custodial parent loses court- or agency-ordered dependent health coverage due to the noncustodial parent's failure to comply with an obligation to reimburse the custodial parent for the premiums.

Access to Health Care Coverage

The Working Group was particularly concerned about the problems created when the decision maker orders a child to be placed in health care coverage that is not geographically accessible to the child. Recognizing the futility of enrolling a child in such coverage, some parents ignore this aspect of the order. In other cases, the obligated parent follows the order and enrolls the child, making the child ineligible to participate in SCHIP, although, for all practical purposes the child is uninsured.⁷

Implementing the Working Group's recommendation on the definition of "accessible" should prevent this from happening in the future (see Recommendation 8, page 3-10). However, a substantial number of existing orders will continue to create problems for children who need SCHIP coverage. The Working Group believes HCFA should address this problem by making it clear to states that a child who is enrolled in inaccessible coverage should be categorized as "uninsured" for SCHIP purposes. We note that a discussion of this issue, consistent with this recommendation, is included in the preamble to the proposed SCHIP regulations.⁸

Recommendation 52 (Federal Regulation)
HCFA should issue SCHIP regulations that allow a child to be eligible for SCHIP if the child is enrolled in a group health plan but does not have reasonable access to care under that plan.

“[T]he CHIP program in our State [Alabama] also has a comprehensive package for these kids, and I guess my concern is that children who have other coverage, from a noncustodial parent or whomever, are excluded from CHIP, yet the plan that's causing them to be excluded doesn't provide a lot of the care that they need.”

~Kay Keeshan, Director, Third Party Liability Division, Alabama Medicaid Agency

In addition, Title XXI allows States the option to preclude enrollment in SCHIP to an otherwise SCHIP-eligible child whenever that child has access to other creditable health insurance but is not enrolled in that coverage. A few States have elected this option. For example, in Michigan children that have employer-sponsored coverage available will not be enrolled in the State's CHIP. This restriction creates another barrier to obtaining stable, continuous coverage for children, particularly if parents themselves are cycling on and off employer-sponsored insurance due to employment patterns, making it difficult to determine if and when private coverage is available to the child, and preventing the possibility of continuous private or public coverage for the child. To facilitate the enrollment of children in the most appropriate coverage (that is, accessible, comprehensive, and affordable coverage, as defined in Recommendation 8), the Working Group recommends that HCFA encourage States to allow IV-D eligible children to enroll in SCHIP when private coverage is available yet not appropriate and they are otherwise eligible for SCHIP.

Recommendation 53 (Federal Guidance)
HCFA should provide guidance to States that IV-D-eligible children are also eligible to participate in SCHIP if private health care coverage is available to them but they are not enrolled in such coverage because the services available through that coverage are not appropriate-that is, they are not accessible, comprehensive, or affordable as those terms are defined in Recommendation 8.

SCHIP/Medicaid/IV-D Information Exchange

In order to remove significant barriers to medical support enforcement, States must develop efficient and effective mechanisms for communication and coordination among the IV-D, Medicaid, SCHIP and other programs that provide health care coverage for low income children. This will improve the child's chance of being promptly enrolled in appropriate health care coverage with minimal or no delays or disruptions.

Clearly, the enrollment of IV-D children in public rather than private health care coverage raises many complex organizational and procedural concerns. That is why the Working Group recommends that HHS convene an interdisciplinary task force that represents all of the State and Federal agencies involved in medical support, as well as other appropriate stakeholders. This task force would identify issues that need to be addressed in order to effectively implement the Working Group's recommendations concerning the enrollment of IV-D children in public insurance, and propose solutions to the identified problems.

While the Working Group was not in a position to identify all of the potential issues that might need to be addressed, it did identify three areas that the HHS task force should address.

1- Notification Systems

First, the task force should explore ways in which the public programs would benefit from the development of a notification system or a standardized notice to transmit information between the courts, the IV-D program, and the Medicaid and SCHIP agencies. Its possible purposes include:

Enabling the decision maker to notify the child support enforcement agency that public coverage has been ordered and whether the noncustodial parent has been ordered to contribute to the cost of such coverage.
Making it possible for the child support enforcement agency to inform the Medicaid or SCHIP agency that a decision maker has ordered that the children be enrolled in publicly financed health care programs and, if applicable, order the parent(s) to contribute to the cost of such coverage.
Making it possible for the Medicaid or SCHIP agency to inform the child support enforcement agency that a child has not been enrolled as ordered, or that a custodial parent has removed the child from the program or has failed to pay any applicable premiums.
Enabling the courts and agencies to notify one another when a change has occurred. Such changes might include moving the child from Medicaid to SCHIP or vice versa, enrolling the child in private coverage, cessation of the child's eligibility for Medicaid/SCHIP coverage, and termination of the State child support enforcement agency's responsibility to enforce the order.

2- Standardized System

Second, the Working Group suggests that the task force should consider whether each State should create a child support/Medicaid/SCHIP database to facilitate a standardized system for exchanging information.

SCHIP and Medicaid programs should be able to determine whether applicants or beneficiaries are enrolled in private health coverage that is enforced through the child support enforcement program. Child support enforcement agencies should, similarly, be able to determine immediately whether children who are receiving IV-D services are receiving or have applied for Medicaid or SCHIP.

Several members of the Working Group met with an Automation Focus Group, comprised of experts from the systems staffs of several States and OCSE. The Automation Focus Group thought that the modifications necessary to enable automated data exchanges between IV-D, SCHIP, and Medicaid would be complicated, costly, and time consuming. Therefore, this idea requires the careful study and consideration of the proposed HHS task force.

3- Administrative Simplification

The task force should recommend further ways to improve the ease with which the child support enforcement system, Medicaid, and SCHIP interact and share information as needed.

Recommendation 54 (Administrative Action)
The Secretary of HHS should convene a Working Group to develop protocols for implementing the recommendations concerning the enrollment of IV-D children in public rather than private health care coverage, particularly in interstate cases. This group should be comprised of staff from OCSE, HCFA, the Office of the Secretary, State Child Support, Medicaid, and SCHIP agencies as well representatives of other appropriate agencies and the courts.

Among the tasks of this Working Group should be: (1) determining the feasibility and advisability of developing and mandating the use of a standard notification system to transmit information between the State courts, child support enforcement agencies, and Medicaid and SCHIP agencies; (2) assessing the feasibility of each State creating a IV-D/Medicaid/SCHIP database to facilitate a standardized system for information exchange; and (3) exploring the possibility of administrative simplification between the IV-D, Medicaid, and SCHIP programs.

This task force should also work with the Courts regarding enrollment of child support-eligible children in Medicaid and SCHIP (see Recommendation 26, page 3-34).

While coordination between Medicaid and IV-D agencies can and must be deepened, these two agencies do have an evolving history of communication, especially around the issues of cooperation and third party liability. The cooperation requirement placed on Medicaid applicants requires them to cooperate with efforts to establish paternity and pursue medical support in order to secure Medicaid coverage for themselves.⁹ In previous recommendations, the Working Group has sought to refocus and enhance this partnership in the interest of those children who benefit, or could benefit, from both programs.

However, SCHIP and IV-D agencies do not have the same linkages. Because SCHIP programs not financed through Medicaid expansion funds are not available to insured children, there is no cause for any third party liability action. There is no federally- mandated cooperation requirement for SCHIP applicants.

The Working Group discussed and rejected the option of adding a child support cooperation requirement to the SCHIP program. Members considered whether a cooperation requirement for separate SCHIP programs would help integrate IV-D and SCHIP. Health care program staff and children's advocates shared the concern that existing cooperation requirements discourage custodial parents from enrolling their children in Medicaid. They suggested that putting such a requirement in SCHIP would, similarly, counteract efforts to expand SCHIP coverage to vulnerable children. The Working Group also noted that, although HCFA permits States to impose a State-based child support cooperation requirement on families that participate in their separate SCHIP programs, at least one State (Virginia) has selected this option.¹⁰ For all of these reasons, the Working Group concluded that there were strong policy reasons for not creating a Federal child support cooperation requirement in the SCHIP program.

However, the Working Group did see much value, and need, in encouraging IV-D/SCHIP coordination. Enhanced communication will assist in ensuring that children have continuous coverage. Possible areas for information sharing include but are not limited to insurance and other SCHIP eligibility status issues (such as loss of private coverage, newly available employer-based coverage which the SCHIP program or the noncustodial parent may wish to pay the premium for, or loss of income).

In particular, if Recommendation 19 is enacted, noncustodial parents may be required to pay a portion of their child's SCHIP expenses, while the custodial parent pays the SCHIP premium (see page 3-28). If the custodial parent is unable to make the premium payment, the IV-D agency may be able to assist in notifying the noncustodial parent so that he or she has the option of picking up the premium and continuing the child's coverage. In addition, if the custodial parent moves the child off SCHIP, perhaps because of failure to pay the premium, the SCHIP agency must notify the IV-D agency so that the noncustodial parent is not obligated to continue to contribute to the cost of coverage that the child no longer has.

The Working Group encourages SCHIP and IV-D agencies to develop strong relationships and clear avenues of communication in order to ensure that children have every chance at getting and maintaining suitable coverage, with the support of both parents as appropriate.

Recommendation 55 (Best Practice)
State child support enforcement and SCHIP agencies should establish effective ways of communicating with each other.

Although many uninsured children in the IV-D caseload are eligible for SCHIP or Medicaid, many are not. Even if all of these barriers to SCHIP enrollment are eliminated, SCHIP and Medicaid will not be able to provide coverage for all of the uninsured children who are eligible for child support services. This is because IV-D services are available to every child who is eligible for child support, without regard to the amount of the family's income or the value of the custodial parent's assets, while Medicaid and SCHIP are available only to families of limited means.¹¹

Increased Efficiency in the Coordination of Public and Private Coverage

Members of the Working Group believe that children should be enrolled in private coverage, whenever this is appropriate, but realize that parents' situations are fluid. A parent who does not initially have access to private health care coverage through his job may later change jobs, and become eligible for such coverage. Likewise, a parent who has access to group health care coverage may become ineligible for family coverage.

The State child support enforcement agency may learn of this change from a parent or through New Hire Reporting. However, the child support agency may not act on this information until one of the parents requests a triennial review of the support order. Lengthy delays are not in the best interest of the child or the public. When the child support enforcement agency learns that the parent of a child enrolled in Medicaid or SCHIP is eligible for affordable, accessible and comprehensive private insurance, it should move that child to the private coverage as soon as possible, in order to conserve public funds.

“Massachusetts' law required that health insurance carriers doing business in the State provide us the information. We just amended our law last week to include employers, because our Medicaid program now is moving in a direction of working more with employers, and we wanted to obtain employer information and that recently passed.”

~Mary Fontaine, Director, Third Party Division, Benefit Coordination and Recoveries, Medicaid, Massachusetts

To make sure this happens as quickly as possible, State IV-D agencies should develop protocols for making inquiries when they receive information about potential private coverage. When the noncustodial parent is currently obligated to cover the child, the child support agency should issue the new NMSN to enroll the child right away. If the order does not include such an obligation, a modification should be sought and then enforced accordingly.

Recommendation 56 (Best Practice)
In IV-D cases, when coverage is provided through Medicaid or SCHIP and information provided by the parties or obtained through New Hire Reporting indicates that private dependent health care coverage may now be available, it should be determined whether that coverage is appropriate for the child (as defined in Recommendation 8). If private dependent health care coverage is available and appropriate, the order should be modified as needed and a National Medical Support Notice should be sent to the employer and the child should be enrolled.

Automated Data Matches with Private Insurers

State IV-D agencies must be able to make timely and accurate determinations regarding the sources of family health coverage actually and potentially available to parents. The recent development of the proposed NMSN will help make this possible. When implemented, States will use this Notice to identify health coverage available to children, through their noncustodial parent's employment-related health plans. The Notice will also serve as an order to enroll eligible children in the coverage. It will facilitate coordination and communication between State IV-D agencies, parents, employers, and group health plan administrators, and may make it possible to automate the process.

States should take additional steps to identify private health coverage that is actually or potentially available to children. Some State Medicaid agencies conduct automated data matches between their Medicaid eligibility files and lists of participants in private insurance plans. This permits states to identify Medicaid beneficiaries who have private coverage which should pay before Medicaid. Information on noncustodial parents is sometimes matched against the insurer's files, to identify sources of family health coverage for dependents.

For example, Massachusetts's law gives the Medicaid agency authority to conduct data matches with insurance companies doing business in the State.¹² The law grants Medicaid subrogation rights and allows Medicaid to identify family health coverage for Medicaid beneficiaries, including insurance available through noncustodial parents.

Massachusetts has data exchange agreements with every health maintenance organization (5) and at least 25 insurance carriers doing business in the State. At least once a month, Massachusetts matches Medicaid and noncustodial parent files against the insurance data base of policyholders and beneficiaries. No information on health claims or diagnosis is provided.

The match helps the Massachusetts Medicaid agency identify noncustodial parents who have already enrolled their dependents in family health coverage. The information also helps identify noncustodial parents who have family health coverage, but have not enrolled their children. In such cases, the Medicaid agency determines whether a medical support order has been established. If an appropriate order is in place, the Medicaid agency contacts the employer to obtain additional information. If there is no order, the Medicaid agency submits a survey to determine if the child has health care coverage. Once the child is enrolled in private health care coverage, Medicaid becomes the payer of last resort. The primary family health coverage pays first, while Medicaid picks up all co-payments, deductibles, and services not covered by the insurance.

Texas recently passed a law providing for similar computer data matches.¹³ It will be beneficial to track the implementation of these laws, in order to identify best practices.

Title IV-D agencies and OCSE should monitor, evaluate and report on current initiatives, where states have developed medical insurance data bases and carry out automated matches with other sources of information about private coverage. Medicaid agencies that maintain these databases should share the information with the IV-D agency. If some states have obtained successful results through these matches, OCSE should hold them up as a best practice.

Recommendation 57 (Technical Assistance)
State IV-D agencies, as well as the Federal OCSE, should monitor, evaluate, and report on current State initiatives related to the development of State databases and computer matches with other sources of information about private coverage. Where States have developed these matches, it is essential that the matched information be shared with the IV-D agency. If certain States have obtained successful results through these matches, Child Support Enforcement should hold them up as a best practice. (See Recommendation 5.)

Repeal Mandatory Pay and Chase

As stated earlier, children who are enrolled in private insurance may also be enrolled in Medicaid, if eligible. When this occurs, Medicaid is always the payer of last resort. Medicaid agencies generally do not pay medical claims when another third party is legally liable for payment. When a third party is liable, Medicaid returns the claim to the provider with instructions to bill the third party. This is referred to as "cost avoidance." There are some exceptions to this rule. For instance, Medicaid agencies are required to pay claims for covered services and seek reimbursement from liable third parties whenever health coverage is provided by a noncustodial parent.

Congress imposed this requirement primarily to protect mothers and their dependent children from having to pursue noncustodial parents, employers, or insurers for payment of medical care and services. Insurance carriers of noncustodial parents would often refuse to deal directly with the custodial parent. They would only accept claims that were filed by the policyholder (i.e., noncustodial parent) and would only send reimbursement checks to the policyholder, who often refused to reimburse the appropriate party.

This left Medicaid with the responsibility of trying to recover its cost from the policyholder. This was costly for Medicaid agencies, since it was expensive to pursue reimbursement and they were often unable to recover funds from liable third parties. A Medicaid agency which could save $50 million in cost avoidance might only net $27 million by paying claims and seeking reimbursement. When Medicaid is unable to recover its cost from a liable third party, it circumvents coordination efforts between Medicaid and IV-D by having noncustodial parents pay for health insurance that is not utilized.

Section 1908 of the Social Security Act (as amended by OBRA 93) provided the relief needed to ensure that payments are made directly to providers, custodial parents, or States. Specifically, §1908 requires insurers to accept claims from the custodial parent (or provider, with the custodial parent's approval) for covered services, without the approval of the policyholder (i.e., noncustodial parent) and to make payment accordingly. The Working Group recommended that Congress amend §1908 to explicitly state that the laws it requires States to pass apply to all children, not only those who are Medicaid-eligible (see Recommendation 63). Based on the §1908 requirements and this recommended legislative change, the Working Group discussed the merits of repealing the mandatory pay and chase requirements.

There was concern that allowing Medicaid to cost avoid claims could result in the provider billing the custodial parent for cost sharing amounts imposed by the noncustodial parent's health plan. The Working Group learned that §1902(a)(25)(C)¹⁴ of the Social Security Act prohibits providers from charging Medicaid beneficiaries (disregarding §1916).¹⁵ In addition, §1902(g) authorizes States to impose a sanction on any provider who seeks to collect payment from a Medicaid beneficiary of up to three times the amount of payment sought. Given these protections, the Working Group agreed that State Medicaid agencies should be allowed to cost avoid claims given the understanding that custodial parents of Medicaid eligible children are informed that providers are not allowed to charge them other than what is provided for in 1916. It is essential that this change be supported by technical assistance and education for health care providers so they do not erroneously bill the custodial parent, and to insurers so they do not incorrectly send the payment to the policyholder instead of the provider.

Some Working Group members expressed concern that eliminating the pay and chase requirement could result in a provider not being paid if a child receives services outside the private plan because those within the plan are not geographically accessible. It was noted that if Recommendation 8 is adopted (see page 3-10), the decision maker will determine whether available health coverage is geographically accessible before establishing an order. This would minimize the risk that children are enrolled in inaccessible coverage. In addition, the Medicaid representatives indicated that providers are generally assured that Medicaid will pay for covered services whenever a third party does not make payment. Individuals located in a region which is outside the service area so that they cannot reasonably avail themselves of services are not generally considered to have a third party resource available to them, therefore, Medicaid would pay.

For these reasons, the Working Group recommends repeal of the mandatory pay and chase requirement whenever health coverage is provided by a noncustodial parent. Of course, Medicaid would still be the payer of last resort.

Recommendation 58 (Federal Legislation)
Congress should repeal §1902(a)(25)(F) of the Social Security Act to allow State Medicaid agencies to cost-avoid claims where the third party coverage is derived through a noncustodial parent's obligation to provide medical coverage.

Another way of reaching this goal may be to look at amending the last clause of §1902(a)(2)(F) so that is reads "...if payment has not been made by such third party within 30 days after the provider of such services has sought to recover payment from such third party;" instead of "...if payment has not been made by such third party within 30 days after such services are furnished;". However, without full legal review by HHS to determine the statutory implications and the potential unintended consequences of such a change, it is difficult to determine what the best solution would be.

Building on the previous discussion, the Working Group considered another exception to cost avoidance. Section 1902(a)(25)(E) of the Social Security Act requires State Medicaid agencies to pay claims and seek reimbursement from liable third parties for services related to prenatal or preventive pediatric care, including early and periodic screening and diagnostic services provided under 1905(a)(4)(B).

This law was passed because Congress was concerned that the administrative burdens associated with third party liability collection efforts might discourage physicians and other providers of preventive pediatric and prenatal care from participating in the Medicaid program, since beneficiaries who need these services often have difficulty finding quality providers in many communities. Therefore, this law was intended to require States to pay providers and then pursue payment from liable third parties for prenatal and preventive pediatric services.

The Working Group decided not to recommend repeal of this provision since it applies very broadly to non-medical support children.

ERISA Issues Related to Children Covered Under QMCSOs

The Working Group learned of a number of technical barriers to seamless health care coverage for children in the area of ERISA. Those issues are discussed in the following sections.

HIPAA and COBRA

The Working Group considered two recommendations intended to clarify how COBRA applies to children enrolled in a group health plan pursuant to a QMCSO. The first related to the term "qualified beneficiary." Although this term is defined to include a beneficiary under a group health plan who is covered under the plan as a dependent of a covered employee, it is not explicit whether a child enrolled pursuant to a QMCSO would be considered a qualified beneficiary.

The proposed recommendation requests clarification that a child covered pursuant to a QMCSO would be considered a qualified beneficiary. Members of the Working Group expressed the view that many plan administrators already treat children enrolled pursuant to QMCSOs as qualified beneficiaries, but agreed that specific guidance would be helpful to plans, their sponsors and administrators, as well as participants and their beneficiaries, in determining their respective rights and obligations.

Recommendation 59 (Federal Guidance)
DOL and HHS should request the IRS to confirm that a child enrolled in a plan pursuant to a QMCSO would be considered a "dependent child" for purposes of the COBRA provisions, and therefore would be considered a "qualified beneficiary." In the event that such a child would not be considered a "qualified beneficiary," COBRA should be amended to provide that such children are qualified beneficiaries.

The second proposed COBRA-related recommendation relates to the term "qualifying event." If a child covered pursuant to a QMCSO is considered a qualified beneficiary, the child will have a right to elect to continue coverage following the occurrence of a qualifying event (such as termination of the covered employee's employment). Therefore, with respect to these qualifying events, a child who was enrolled pursuant to a QMCSO would be treated similarly to any dependent child of a covered employee.

However, such a child could lose coverage due to the occurrence of certain events that are not experienced by other dependent children. For example, limitations on involuntary withholding from an employee's wages can prevent the payment of the employee's share of any premiums necessary to maintain the child's coverage. Furthermore, the child will lose coverage, when the period covered by the QMCSO expires. It is not clear which, if any, of these would be considered an ERISA "qualifying event." The second proposed recommendation would have requested clarification that the loss of such coverage at any time during the period covered by a QMCSO, or at the expiration of the period covered by a QMCSO, would be considered a qualifying event.

ERISA¹⁶ background related to COBRA¹⁷ and HIPAA¹⁸
ERISA has been amended several times to expand the protections available to participants and beneficiaries of group health plans. The Consolidated Omnibus Budget and Reconciliation Act of 1985 (COBRA) contains provisions that permit certain individuals to continue group health coverage that otherwise would be lost under certain circumstances.¹⁹ COBRA's provisions amended ERISA, the Internal Revenue Code and the Public Health Service Act. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) added protections for individuals who have preexisting conditions or who might otherwise suffer discrimination in health coverage based on factors that relate to an individual's health. HIPAA's provisions also amended ERISA, the Internal Revenue Code, and the Public Health Service Act.
COBRA requires group health plans to provide certain covered individuals (called "qualified beneficiaries")²⁰ an opportunity to elect to continue group health coverage at their own expense for specified periods of time (up to 18 or 36 months).²¹ This opportunity arises when coverage would otherwise be lost due to the occurrence of an event (called a "qualifying event") specified in COBRA. The COBRA provisions specifically define the terms "qualified beneficiary"²² and "qualifying event."²³
HIPAA places a time limit, up to either 12 or 18 months, on the application of preexisting condition exclusions to newly-enrolled individuals.²⁴ A preexisting condition is a condition for which medical advice, diagnosis, care, or treatment was recommended or received within six months prior to enrollment. The 12 or 18 month time limit must be reduced by crediting certain periods of prior health coverage.²⁵ HIPAA also prohibits group health plans from applying any preexisting condition exclusions against certain newly-enrolled newborns²⁶ and adopted children.²⁷ HIPAA additionally requires that group health plans provide special enrollment opportunities for certain newborns and adopted children who become "new" dependents, and for individuals and their dependents who have lost other coverage due to certain events.²⁸ The provisions of HIPAA do not expressly apply to a child enrolled pursuant to a QMCSO.

The Working Group agreed that a loss of coverage due to the expiration of the term covered by a QMCSO might constitute a qualifying event, and found that guidance on this issue should be requested. Coverage could be lost at any time during the term covered by a QMCSO, if required employee contributions were not paid. An employee might refuse to contribute, or wage-withholding limitations might prevent the employer from withholding necessary amounts from an employee's wages. Making these a qualifying event for children covered under QMCSOs would provide those children with greater rights than similarly situated dependents living in a covered employee's household, since lapses due to non payment are not deemed ERISA "qualifying events."

However, the Working Group noted that nonpayment of premiums due to the application of withholding limitations would apply uniquely to QMCSO-related coverage. Nevertheless, the Working Group found that implementing such a definition would be burdensome for plan administrators, who would have to determine why premiums were not paid. Accordingly, the Working Group adopted the second recommendation only insofar as it would relate to the loss of coverage at the expiration of the period covered by a QMCSO.

Under HIPAA, group health plans and family health coverage issuers offering group family health coverage are required to offer "special enrollment periods" during which certain individuals may enroll in the plan regardless of any open season restrictions or waiting periods under certain circumstances. There are two types of special enrollment periods which plans must offer: (1) special enrollment periods for individuals losing other coverage, and (2) special enrollment periods for certain new dependents.²⁹

If an individual is eligible to enroll in a group health plan but declines enrollment because other coverage has been selected, the individual must be permitted to enroll in the plan if that individual becomes ineligible for the other coverage, under certain circumstances. In order to qualify for this special enrollment period, the individual or dependent losing other coverage must request coverage under the new plan within 30 days of losing the prior coverage.³⁰ For example, consider a husband and wife who are eligible for enrollment under the husband's employer's group health plan, but decline enrollment because they are enrolled in the wife's employer's plan. If the wife terminates her employment, becoming ineligible for coverage under her employer's plan, the family must be permitted to enroll in the husband's employer's group health plan, as long as the family timely requests enrollment and satisfies certain other conditions. The couple does not qualify for this special enrollment period, unless coverage was terminated because the family became ineligible, because of an event such as death, divorce, termination of employment or employer contributions, or reduction of hours.³¹ Loss of other coverage due to nonpayment of any required employee contribution does not give rise to a special enrollment right in a new plan.

A child who is covered pursuant to a QMCSO can lose coverage under the obligated parent's plan under circumstances that would not apply to other dependents. If the effective period for the order expires, the plan is no longer obliged to provide coverage. The special enrollment provisions described above do not address the issue of whether a child who loses coverage because a medical support order has expired would be entitled to special enrollment right in any other plan. Accordingly, the Working Group recommends that HHS and DOL request guidance from the appropriate Federal agencies as to whether a child who loses coverage because a QMCSO expires would be entitled to a special enrollment right in another plan. If an individual who is enrolled in a group health plan acquires a new dependent through marriage, birth, adoption, or placement for adoption, under certain circumstances the new dependent (and the spouse in the case of birth or adoption) are entitled to a special enrollment period.³² During this period they must be permitted to enroll in the plan without regard to open season restrictions or waiting periods otherwise imposed by the plan. In order for this special enrollment right to apply, the plan must offer coverage to dependents, and a request for enrollment under the plan must be timely made. For example, consider a husband and wife who are eligible for enrollment in the group health plan maintained by the husband's employer, the wife voluntarily declines coverage. Later the wife gives birth to a child. The mother and child are entitled to a special enrollment period under the husband's employer's plan provided that the plan provides dependent coverage and a timely request for coverage is made.³³

Circumstances Under Which Group Health Plans May Impose Preexisting Condition Exclusions

Plans cannot apply these exclusions to newborns or adopted children. HIPAA provides that if a child is enrolled in creditable coverage (certain types of coverage are considered HIPAA "creditable" coverage) within 30 days of birth, adoption or placement for adoption, group health plans may not impose preexisting condition exclusions against the newborn or adopted child.³⁴ In the case of adopted children, §609(c) of ERISA provides additional protections from these exclusions. Under 609(c), if a child is adopted or placed for adoption while a participant is eligible for coverage under a plan, the plan may not impose a preexisting condition exclusion against the child once the child is enrolled. The plan is prohibited from imposing such an exclusion regardless of the timing of the enrollment.³⁵

The Working Group discussed the possibility of extending similar protections from preexisting condition exclusions to children covered pursuant to QMCSOs as well as children who lose coverage because a QMCSO expires. Ultimately the Working Group was unable to reach consensus on these issues. Some members felt that prohibiting such exclusions could leave plans vulnerable to adverse selection, because parents could wait until children were sick before seeking or enforcing a QMCSO. The Group also struggled with the fact that HIPAA's protections apply only where enrollment of the child is within a specific time frame. The QMCSO process makes it difficult to identify a corresponding enrollment period for QMCSO children. The Working Group agreed that it was important to note that current law permits plans to apply preexisting condition exclusions of up to 12 or 18 months against children covered pursuant to QMCSOs. These exclusions make it difficult for these children to obtain seamless coverage through their parents' group health plans.

Recommendation 60 (Federal Guidance/Federal Legislation)
DOL and HHS should request the IRS to provide interpretive guidance regarding whether the expiration of the period covered by the Qualified Medical Child Support Order is a COBRA qualifying event in ERISA §603(5) (a dependent child ceasing to be a dependent child under the generally applicable requirements of the plan). This interpretation would make it possible for the child support enforcement agency or custodial parent to elect COBRA continuation coverage to prevent a child from losing coverage for these reasons. If the current statute does not permit this interpretation, we recommend that Congress amend §603(5).

Recommendation 61 (Federal Regulation)
The DOL should issue regulation(s) that make it clear that ERISA §701(f)(1)(C)(ii) (special enrollment for individuals losing other coverage) permits a child to be specially enrolled in a new plan, after prior coverage obtained through a Qualified Medical Child Support Order (QMCSO) is terminated, if the coverage ends during the period covered by the order or at the end of the period covered by the order. This would permit a child to enroll in other available coverage provided by either parent, if coverage is terminated for some reason related to the medical support order.

Recommendation 62 (Federal Legislation)
Congress should amend ERISA §701(f)(2)(A)(iii) to include children enrolled pursuant to a QMCSO among the categories of dependents who, if certain other requirements are met, must be given special enrollment rights.

Coordination of ERISA Medical Child Support Provisions with Social Security Act Medical Child Support Provisions

Section 1908 of the Social Security Act³⁶ requires states to have specific laws that would make it easier for children to obtain family health coverage under their noncustodial parent's health plans. These laws primarily impact children, noncustodial parents, and insurers, such as group health care plans and employers. While some provisions of §1908 pertain to parents who are obligated by a court or administrative order to provide medical support to their children, other provisions do not contemplate the existence of an order.

Some provisions of §1908 are unclear, so states have adopted various interpretations. For instance, §1908 does not clearly define the scope of its applicability. Since §1908 was placed in Title XIX of the Social Security Act, which governs the Medicaid program, it can be construed as requiring that State laws enacted pursuant to §1908 need only apply to children who are receiving or eligible for Medicaid benefits. While most states apply the laws required by §1908 to all children, some states limit the applicability of those laws to Medicaid children.

It is reasonable to conclude that Congress intended the State laws required by §1908 to apply to all children. The introductory language in §1908, by its own terms, casts §1908 as "medical child support" law. The statute does not specify Medicaid children, but refers to the laws as they apply to "a child." The specific language speaks of laws that impose limitations or prohibitions on insurers and employers. In addition to the plain language of the statute, considerations of insurance and health plan administration support this interpretation. If the State laws applied only to Medicaid children, insurers and employers would be faced with the burden of determining whether a particular child, who may live in another State, is eligible for or receiving Medicaid.

Recommendation 63 (Federal Legislation)
Provided that Congress makes the following changes to §1908 of the Social Security Act (42 U.S.C. §1396g-1), Congress should also amend §1908 to state explicitly that the laws it requires States to pass as a condition of participation in the Medicaid program apply to all children (regardless of whether they are eligible for assistance under the State Medicaid plan), and should amend §609 of ERISA to incorporate the requirements of the amended §1908. The necessary changes are:

Clarify that a child who is in enrolled in a group health plan pursuant to a court or administrative order could be disenrolled under circumstances under which other dependent children would lose coverage (for example, elimination of family health coverage for all employees in the same business unit or job category).

Amend §1908(a)(1) to provide that, if there is no QMCSO, a child would be enrolled only if the participant enrolls or consents to the enrollment of the child.

Section 1908 requires states to enact laws that prohibit employers from terminating the coverage of a child who was enrolled in its group health plan pursuant to a court or administrative order unless, among other things, the employer eliminates family health coverage for all of its employees.³⁷ This could require the plan to maintain coverage of a child who was covered pursuant to a court order, although the employee's other children's coverage was terminated, because the parent did not pay required employee contributions. Similarly, if the employer terminates all group health plans for employees and dependents within a particular unit, such as a separate division or work site, §1908 seems to require the employer to continue to provide coverage to any child who was enrolled pursuant to an order, although the employee's other children and children of other similarly-situated employees would lose coverage. It is reasonable to conclude that Congress wanted plan administrators to treat children enrolled pursuant to orders in the same manner as other children of similarly situated parents, but did not intend to give those children greater rights to coverage than other similarly situated children.

Section 1908 also includes some provisions that require states to impose requirements on insurers, even absent a court order. Section 1908 defines "insurer" to include a group health plan, as defined in §607(1) of ERISA. At the time §1908 was enacted, Congress also amended §514 of ERISA to lift ERISA preemption of State laws required by §1908 to the extent they apply to a QMCSO. Currently, State laws may be preempted with respect to a group health plan's obligation in the absence of a QMCSO.

Inconsistency between ERISA and §1908 may cause health plans to treat a child of a noncustodial parent who is not under a court order but wishes to enroll his child in his group health plan, differently from a parent whose child is enrolled pursuant to a court order. If two noncustodial parents work for the same employer, both with a child living in the same area, and one is ordered to provide health care coverage, while the other not, the noncustodial parent who is subject to an order might be able to enroll her child, while the other could not. ERISA should be amended to eliminate this disparate treatment.

Section 1908 does not define "family health coverage." An employer can offer a plan that covers the employee's dependents, without covering the employee. If such plans are not considered "family health coverage," children may not gain access to available coverage.

Recommendation 64 (Federal Regulation)
The term "family health coverage" should be defined in regulations and guidelines to include health coverage that provides benefits to dependents, including a dependent-only policy.

Endnotes

[1] Pub. L. 105-200, §401(a)(5)(iii), 112 Stat. 660 (1998).

[2] Child support agencies must determine whether children whose families are receiving services have health care coverage and have access to the financial information needed to determine whether the family qualifies for Medicaid or SCHIP.

[3] See, 42 U.S.C. §1396r-1a(b)((3) (1999). The Balanced Budget Act includes a provision that permits a “qualified entity” to determine a child’s eligibility for Medicaid for a “presumptive eligibility period” based on preliminary information that the family income does not exceed the State’s Medicaid income eligibility level. The presumptive eligibility period is the remainder of the month in which presumptive eligibility is determined plus the next month, about 29 to 62 days, and ends when the Medicaid agency determines “regular” eligibility. Qualified entities now include Medicaid providers, as well as agencies which determine eligibility for the Head Start, Child Care and Development Block Grant, and WIC programs. SCHIP does not similarly limit the entities that could determine presumptive eligibility.

[4] This model application can also be found at http://www.hcfa.gov/init/chpelig.htm

[5] The Balanced Budget Act of 1997 added a new optional Medicaid eligibility group that consists of children who by definition do not have health insurance. If the State uses this group to expand Medicaid, the children cannot have other insurance. However, if the State expands Medicaid by expanding another eligibility group in some way (such as putting a higher income level on a poverty-level-related group), then the State is required to cover the children whether or not they have insurance.

[6] Federal Register, Volume 64, No. 215, November 8, 1999.

[7] 42 U.S.C. §1397aa (1999).

[8] Federal Register, Volume 64, No. 215 on November 8, 1999.

[9] The cooperation requirement only applies to coverage for the mother. If she does not cooperate, the children may not be denied Medicaid coverage as a result.

[10] Virginia’s SCHIP State Plan is located at: http://www.cns.state.va.us/dmas/images/PDF/statepln.pdf

[11] 42 U.S.C. §1397bb (1999).

[12] Mass. Ann. Laws ch. 118E, §9A (1999).

[13] Senate Bill 1248, 76^th Legislature, effective September 1, 1999.

[14] Section 1902(a)(25) requires that a State plan for medical assistance provide “that in the case of an individual who is entitled to medical assistance under the State plan with respect to a service for which a third party is liable for payment, the person furnishing the service may not seek to collect from the individual (or any financially responsible relative or representative of that individual) payment of an amount for that service (i) if the total of the amount of the liabilities of third parties for that service is a least equal to the amount payable for that service under the plan (disregarding section 1916), or (ii) in an amount which exceeds the lesser of (I) the amount which may be collected under section 1916, or (II) the amount by which the amount payable for that service under the plan (disregarding section 1912) exceeds the total of the amount of the liabilities of third parties for that service.”

[15] Section 1916 allows States to impose nominal cost-sharing amounts on Medicaid beneficiaries in specific situations. The statute does, however, prohibit the imposition of cost sharing for services for individuals under age 18 (with the State’s option of raising the age limit to 21).

[16] Employee Retirement Income Security Act, which appears generally as 29 U.S.C. §1001 et seq. (1999).

[17] The Consolidated Omnibus Budget and Reconciliation Act of 1985, Pub. L. 99-272, codified in various sections of the U.S. Code.

[18] The Health Insurance Portability and Accountability Act of 1996, Pub. L. 104-191, 110 Stat. 1936, codified in various sections of the U.S. Code.

[19] 29 U.S.C. §1167(3) et seq. (1999).

[20] 29 U.S.C. §1161.

[21] 29 U.S.C. §§1161-62.

[22] 29 U.S.C. §1167(3) (1999).

[23] 29 U.S.C. §1163 (1999).

[24] 29 U.S.C. §1181 (1999).

[25] 29 U.S.C. §1181(c) (1999).

[26] 29 U.S.C. §1181(d)(1) (1999).

[27] 29 U.S.C. §1181(d)(2) (1999).

[28] 29 U.S.C. §1181(f) (1999).

[29] 29 U.S.C. §1181(f) (1999).

[30] 29 U.S.C. §1181(f) (1999).

[31] 29 U.S.C. §1181(f)(1)(C) (1999).

[32] 29 U.S.C. §1181(f)(2) (1999).

[33] 29 U.S.C. §1181(f)(2)(A)(iii) (1999). “…in the case of the birth or adoption of the child, the spouse of the individual may be enrolled as a dependent of the individual, if the spouse is otherwise eligible for coverage.”

[34] 29 U.S.C. §1169(c) (1999).

[35] 29 U.S.C. §1181(d)(4) (1999).

[36] 42 U.S.C. §1396g-1(a)(3)(C) (1999).

[37] 42 U.S.C. §1396g-1(a)(3)(C) (1999).