United States: Proposed Managed Care Rules Leave State Obligations For CHIP Largely Unchanged

The Centers for Medicare & Medicaid Services' (CMS) proposed rule ("Rule") that updates Medicaid managed care regulations to reflect changes in the usage of managed care delivery systems, leaves state obligations largely unchanged for the Children's Health Insurance Program ("CHIP").1 Published on June 1, 2015, the proposed rule would codify statute and guidance that has applied to CHIP since 2009, as implemented by State Health Official ("SHO") letters released in 2009.

The SHO letters, 09-008 and 09-013, issued on August 31, 2009 and October 21, 2009, respectively, implemented section 403 of the Children's Health Insurance Program Reauthorization Act of 2009 ("CHIPRA"). CHIPRA and the Affordable Care Act had applied several Medicaid managed care provisions in section 1932 of the Social Security Act to CHIP. Specifically, Medicaid statutory provisions regarding the process for enrollment and termination and change of enrollment, provisions of information, beneficiary protections, quality assurance standards, protections against fraud and abuse, sanctions for noncompliance, and parts relating to provider and supplier screening, oversight and reporting would officially apply to CHIP.2

Historically, CHIP has had few regulations related to managed care. In its proposed rule, CMS noted that the goal for these CHIP-specific regulations is to "align CHIP managed care standards with those of the Marketplace and Medicaid where practical...[to] ensure consistency across programs."3 Although the CHIP-specific proposed regulations were published with the proposed revisions to existing Medicaid managed care regulations, they are narrower in scope. As CMS noted, most of the proposed CHIP regulatory changes are limited in scope to those included in the existing section 403 of CHIPRA.

Some key differences from the Medicaid managed care regulations are:

  • CMS is not adopting Medicaid managed care regulation related to withholding Federal financial participation for non-compliance with Federal regulations since CHIP has an existing regulation that serves the same purpose;4
  • CMS is retaining the existing provision that managed care entity contracts include an attestation to the accuracy, completeness, and truthfulness of claims and payment data;5
  • CMS is retaining existing language that contracts include a guarantee that managed care entities will not avoid costs for services covered in its contract by referring enrollees to publicly supported health care resources;6 and
  • the proposed standards for Medicaid enrollment processes are not adopted for CHIP since CMS noted that it was not well suited to the historic flexibility granted to states in administering CHIP.

For the last point, CMS explained that CHIP enrollment is often prospective, so children are not enrolled in the program until they have selected a managed care plan and, if applicable, paid a premium. To illustrate the importance of maintaining this flexibility in administering CHIP, CMS gave the example of a state that uses prospective enrollment. If CMS were to require a 14-day choice period in enrollment for instance, this would delay coverage for a child in such a state that uses prospective enrollment.

In addition to the differences from the proposed rule as it applies to Medicaid managed care, here are some non-exhaustive highlights of new CHIP-specific requirements proposed:

  • Under the proposed rule, states would now be required to submit CHIP managed care contracts in accordance with standards specified by the Health and Human Services Secretary;
  • Moreover, CHIP contracts submitted to CMS must include the rate that will be paid to the managed care entity to help CMS evaluate the cost, efficiency, and effectiveness of managed care contracts;
  • A minimum medical loss ration (MLR) would be adopted in CHIP to allow regulators to conduct a retrospective analysis of rates paid compared to overall expenditures and as a useful means to ensure that capitation rates are actuarially sound;
  • More structured state and managed care plan standards would be adopted for beneficiary information while making beneficiary information available in electronic form;
  • As in Medicaid, states must ensure that managed care entities do not hold CHIP enrollees liable for services or debts of the managed care entity;
  • States must ensure that CHIP managed care entities have an ongoing comprehensive quality assessment and performance improvement program;
  • There must be an external independent review of managed care activities which cannot exceed the ten percent administrative expenditures allotted for non-primary services; and
  • Nearly all of the several Medicaid program integrity standards would be applied to CHIP.

CMS is seeking comment on the above CHIP-specific requirements in the Rule by July 27, 2015.7


[1] CHIP provides low-cost health coverage to children in low-income families that earn too much to qualify for Medicaid.
[See Social Security Act §§ 1932(a)(4), (a)(5), (b), (c), (d), (e) and §§ 1902(a)(77), (kk).

[2] https://www.federalregister.gov/articles/2015/06/01/2015-12965/medicaid-and-childrens-health-insurance-program-chip-programs-medicaid-managed-care-chip-delivered at 266.

[3] See 42 CFR § 457.204.

[4] See 42 CFR § 457.950(a)(2).

[5] See 42 CFR § 457.950(a)(4).

[6] See 42 CFR § 457.1201(a).

[7] Comments may be submitted through www.regulations.gov.

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