CMS Issues Proposed Rule to Coordinate Medicaid-CHIP Eligibility on Exchanges

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The Centers for Medicare & Medicaid Services Jan. 14 issued a proposed rule describing how states should handle eligibility determinations for Medicaid and other income assistance programs on new state-based health insurance exchanges, beginning in January 2014.

The proposed rule (CMS-2334-P) provides details about how state Medicaid programs will coordinate with the exchanges on implementing new eligibility guidelines under the Affordable Care Act for Medicaid and the Children's Health Insurance Program (CHIP).

It also explains how states will determine eligibility for federal subsidies--called “premium tax credits”--on the exchanges, as well as cost-sharing reductions for people who are enrolled in employer-sponsored health plans (see related article).

The proposed rule is set for publication in the Jan. 22 Federal Register. Comments are due Feb. 13.

In general, the proposed rule provides guidance for states on implementing a major expansion of Medicaid contained in the ACA that will allow states--beginning in January 2014--to cover low-income individuals, including single adults younger than 65, with income up to 133 percent of the federal poverty level (technically, 138 percent because of a 5 percent income disregard allowed by ACA).

Cindy Mann, director of the Center for Medicaid and CHIP Services at CMS, told reporters in a conference call that the new rules will take effect in 2014, “regardless of whether the states are participating in the Medicaid expansion.” The U.S. Supreme Court made the expansion optional for states in its landmark health care decision in June 2012 (125 HCDR, 6/29/12).

Outside experts said the policies proposed by CMS in the proposed rule were impressive in their scope and complexity. “It's just breathtaking how complicated all this is,” Timothy Jost, a health law expert at Washington and Lee University School of Law, told BNA. “And it's impressive how CMS is struggling to allow states flexibility in reconciling the new premium support programs with Medicaid and CHIP.”

Eligibility and Enrollment

With respect to eligibility and enrollment procedures, the proposed rule would eliminate certain Medicaid eligibility categories that will be replaced in 2014, when a new income-based formula mandated by ACA takes effect.

The proposed rule also revises a final rule issued by CMS in March 2012 on how income eligibility will be determined for Medicaid and CHIP under the new income formula, which will be based on an enrollee's modified adjusted gross income (MAGI) as defined in the Internal Revenue Code (52 HCDR, 3/19/12).

Among other things, the proposed rule explains how states should apply the new MAGI standards so as not to eliminate eligibility for people who would otherwise be eligible under the state's previous categorical standards, such as pregnant women or recipients of Supplemental Security Income.

The proposed rule also would codify newly created eligibility for certain people under ACA, such as coverage for former foster care children up to age 26.

The proposed rule explains how states will align citizenship and income determinations across Medicaid, CHIP, and the insurance exchanges, using a new federal data services hub. The electronic hub will provide states with access to records from the Social Security Administration, Internal Revenue Service, and Department of Homeland Security.

The proposed rule provides additional details about how states are to handle an open enrollment period for the exchange beginning in October 2013 as part of a “streamlined, one-stop shop” for Medicaid and CHIP applicants on the exchanges.

In particular, the proposed rule explains how states are to apply the new 2014 income eligibility standards during the three-month open enrollment period in 2013. The coverage applicants sign up for during the open enrollment will take effect in January 2014.

Once eligibility is determined, the proposed rule directs states to develop, by Jan. 1, 2015, a “combined, comprehensive notice” that would provide the applicant information about the availability of financial assistance through premium tax credits and cost-sharing subsidies, as well as eligibility for Medicaid or CHIP.

Medicaid Benefits

The proposed rule would revise existing Medicaid regulations to conform to new requirements under ACA with respect to the “essential health benefits” states may offer Medicaid enrollees beginning in 2014. The rule updates the benefit options states may offer enrollees under so-called benchmark plans.

Benchmark plans generally reflect the benefits offered in such plans as the Federal Employees Health Insurance Benefits Program (Blue Cross/Blue Shield Preferred Provider Option), state employees' health coverage, and health insurance plans offered through a health maintenance organization with the largest insured commercial non-Medicaid enrollment in the state.

Cost Sharing

The proposed rule would allow state Medicaid programs to increase cost-sharing requirements for Medicaid enrollees. In particular, the rule would allow states to impose higher copayments for nonpreferred drugs and nonemergency use of emergency departments.

In her conference call with reporters, Mann said the change is not required by ACA, but she explained that the proposal is “prompted by the context of states expanding Medicaid.”

Finally, the proposed rule sets out appeals procedures that states must allow applicants in challenging denials of income assistance programs on the exchanges, including Medicaid, CHIP, cost-sharing reductions, and premium tax credits.

State Medicaid programs can retain authority to conduct the appeals process or they may delegate authority for handling appeals to the exchange, provided certain standards are followed, according to the proposed rule.

Individuals applying for Medicaid and CHIP can opt to have their appeals heard by the state Medicaid agency.

The proposed rule requires coordination of actions between agencies involved in the appeals process, including coordination of notices to the applicant.

Regulatory Impact.

CMS determined that the rule is “economically significant,” meaning it could have an impact of $100 million or more on the U.S. economy during any single year under Office of Management and Budget guidelines.

CMS said a more complete regulatory analysis was included with the March 2013 final rule on Medicaid expansion.

With respect to the provisions in the proposed rule issued Jan. 14, CMS said its Office of Actuary estimates they will add 74,000 more enrollees to Medicaid as a result of expanding eligibility to former foster care children.

State Medicaid expenditures could increase by $72 million in 2014, as a result of the foster children expansion and increase by $399 million from 2013 through 2017, CMS said. The federal budget could increase by $528 million over the same period, CMS said.

The estimates do not include offsetting savings from reducing uncompensated care costs and efficiencies resulting from the delivery of more preventive care under an expanded Medicaid program, CMS said.

By Ralph Lindeman  


The proposed rule is at A fact sheet is available at  




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