DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
SHO # 10-002 
CHIPRA # 13 
 
February 2, 2010 
 
          RE: CHIPRA Premium Assistance Option 
 
Dear State Health Official:  
 
The Childrens Health Insurance Program Reauthorization Act of 2009 (CHIPRA), 
Public Law 111-3, offers new opportunities for States to provide premium assistance to 
children under age 19, who are eligible for the Childrens Health Insurance Program 
(CHIP) or Medicaid , and who have access to qualified employer-sponsored coverage.  In 
some circumstances, family members who are not otherwise eligible for CHIP or 
Medicaid may also receive premium assistance when enrolled in qualified employer-
sponsored coverage.    
 
Premium assistance programs use federal and State CHIP and Medicaid funds to help 
subsidize the purchase of group health coverage for children (and in some circumstances, 
family members) who have access to employer-sponsored coverage, but may need 
assistance in paying for their premiums.  Premium assistance is designed to make health 
care coverage more affordable for families.  The CHIPRA premium assistance provisions 
build on lessons learned from State experiences with premium assistance programs, and 
are designed to reduce implementation barriers, such as providing a guaranteed right for 
CHIP and Medicaid individuals to enroll in a group health plan without having to wait for 
an open enrollment period if certain conditions are met. 
 
States now have four state plan options for implementing premium assistance either 
under title XXI (CHIP) or title XIX (Medicaid) of the Social Security Act (the Act): 
 
  The CHIP premium assistance option that was available prior to CHIPRA 
continues to be an option for States.  Section 301(a)(2) of CHIPRA changes the 
cost-effectiveness test under this option, established in Section 2105(c)(3) of the 
Act.  This option is referred to as Purchase of Family Coverage.     
  Section 301(a)(1) of CHIPRA provides States with an additional premium 
assistance option under CHIP by adding paragraph 2105(c)(10) to the Act;   
  Section 1906 of the Act is a Medicaid premium assistance option that was 
available to States for children and adults prior to CHIPRA and continues to be an 
option for States; and  Page 2  State Health Official 
  Section 301(b) of CHIPRA provides States with an additional premium assistance 
option for children under age 19 in Medicaid by adding section 1906A to the Act. 
 
This letter provides general information on these four premium assistance options and 
discusses the differences among these options.  This letter also describes related 
provisions of CHIPRA, such as section 302, Outreach, Education, and Enrollment 
Assistance, and section 311, Special Enrollment Period under Group Health Plans. 
 
CHIP Premium Assistance Options 
 
1)  Purchase of Family Coverage 
  
Section 2105(c)(3) of the Act and implementing Federal regulations at 42 CFR 457.1010 
allow States to provide title XXI premium assistance to children and their families 
through the CHIP State plan Purchase of Family Coverage option.  Under this option, 
States can provide coverage to children and families eligible for CHIP by subsidizing 
group health plan premiums under the following conditions: 
 
  Eligibility:  States may offer premium assistance to targeted low-income children 
and to families that include at least one targeted low-income child (as defined in 
section 2110(b).   
  Insurance Status:  Children must have access to, but not be enrolled in, group 
health coverage.  
  Coverage for Non-Eligible CHIP Family Members:  States can provide 
premium assistance to non-eligible CHIP family members.  Coverage, however, 
must be cost effective as described below.   
  Mandatory/Voluntary Enrollment: Enrollment can be voluntary or mandatory 
at the States option. 
  Benefits:  Benefits provided to eligible children in premium assistance must meet 
the same requirements as for children in CHIP direct coverage.  To satisfy the 
requirements of 2103(a) of the Act, benefits must meet benchmark coverage, 
benchmark-equivalent coverage, or Secretary-approved coverage.  These benefits 
can either be provided fully through the employer-based plan or through the 
private plan, with the State providing wraparound benefits.  Non-eligible family 
members do not receive wraparound benefits.   
  Cost Sharing:  Cost sharing for eligible children in premium assistance must 
meet the same requirements as those for children receiving benefits directly, 
consistent with the requirements at section 2103(e).  Cost sharing for families at 
or below 150 percent of the Federal poverty level (FPL), must be nominal in 
accordance with 42 CFR 457.540 - 457.555, and total charges may not exceed 5 
percent of the familys income for children of all income levels, in accordance 
with 42 CFR 457.560. 
  Substitution Strategy:  States must have a 6-month waiting period in place for 
premium assistance to prevent CHIP from substituting for private coverage, as 
required at 42 CFR 457.810(a)(1).  Exceptions are permitted and the Centers for  Page 3  State Health Official 
Medicare & Medicaid Services (CMS) will work with States on devising 
acceptable strategies to prevent substitution. 
  Employer Contribution:  States must identify a minimum contribution level; 
there is no Federal minimum contribution requirement.  
  Cost-Effectiveness:  Prior to CHIPRA, States were required to demonstrate cost 
effectiveness on an individual/family, or on an aggregate basis, compared to the 
cost of providing direct CHIP coverage to a targeted low-income child.  Section 
301(a)(2) of CHIPRA amends the cost-effectiveness test under section 2105(c)(3) 
of the Act to permit States to compare the costs of covering the entire family 
relative to direct CHIP coverage of the entire family, rather than just the targeted 
low-income child.  States can continue to calculate these costs on the individual or 
aggregate basis, and must now also include administrative costs in the cost-
effectiveness test.   
 
2) Additional Premium Assistance Option in CHIPRA 
 
Section 301(a)(1) of CHIPRA adds a new section 2105(c)(10) of the Act to provide 
States with an additional premium assistance option under title XXI.  States electing this 
premium assistance option must adhere to the following conditions:  
 
  Eligibility: The State may offer premium assistance to targeted low-income 
children who have access to qualified employer-sponsored coverage. Under 
certain circumstances, States may also offer premium assistance to families as 
described below under Coverage for Non-Eligible CHIP Family Members. 
  Insurance Status:  Individuals must have access to, but not be enrolled in, 
qualified employer-sponsored coverage as defined in section 2105(c)(10)(B).  
  Coverage for Non-Eligible CHIP Family Members: All States can cover 
parents through incidental coverage, which occurs when the per-child subsidy for 
covering children under a premium subsidy results in coverage for the parents at 
no additional cost to the State or the federal government when compared to direct 
CHIP coverage for the child or children only.  States with section 1115 
demonstration authority to cover families prior to the passage of CHIPRA can 
directly cover families, including parents, under this new State plan option 
(subject to the limitations of section 2111 of the Act). 
  Voluntary Enrollment Only: Section 2105(c)(10)(A) prohibits States from  
requiring children and/or families to mandatorily enroll in this premium assistance 
option.  In addition, States must establish a process for permitting parents to 
disenroll a child from employer-sponsored coverage, and to enroll the child in 
direct coverage effective on the first day of any month for which the child is 
eligible for such assistance and in a manner that ensures continuity of coverage 
for the child. 
  Benefits:  Coverage provided to eligible children in premium assistance must 
meet the same requirements as those for children in CHIP direct coverage.  If the 
group health plan or health insurance coverage offered through an employer is 
certified by an actuary as health benefits coverage that is a benchmark benefit 
package described in section 2103(b) or benchmark-equivalent coverage that  Page 4  State Health Official 
meets the requirements of section 2103(a)(2), then enrollment in the employer 
plan meets the CHIP benefit standards.  For qualified employer-sponsored 
coverage that does not meet benchmark or benchmark-equivalent standards, 
benefits must be provided through a combination of the employer-based plan and 
the State through wraparound benefits.   
  Cost Sharing:  Cost sharing for eligible children receiving premium assistance 
must meet the same requirements as those for children receiving CHIP benefits 
directly under the State plan, consistent with section 2103(e), as described above. 
If the group health plan or health insurance coverage offered through an employer 
is certified by an actuary as health benefits coverage that is a benchmark benefit 
package or benchmark-equivalent coverage, then enrollment in the employer plan 
meets the cost sharing CHIP standard.  For qualified employer-sponsored 
coverage that does not meet benchmark or benchmark-equivalent standards, 
States must ensure all cost sharing protections apply under section 2103(e). 
  Substitution Strategy:  States are not required to have a waiting period, except, 
if they have a waiting period for direct coverage under their CHIP State plan, they 
must apply the same waiting period to premium assistance, as specified by section 
2105(c)(10)(F). 
  Employer Contribution:  Section 2105(c)(10)(B) requires that an employer must 
contribute at least 40 percent toward the cost of the premium. 
  Cost-Effectiveness:  The employer contribution requirement serves as the proxy 
for cost effectiveness; this option does not require a cost-effectiveness test. 
  Notice of Availability:  If States provide premium subsidies, section 2105(c)(10) 
requires that they must include information about premium assistance on the 
CHIP application and establish other procedures to ensure that parents are fully 
informed of the choices for child health assistance or through the receipt of 
premium assistance subsidies. 
 
Related Provisions 
Section 301 of CHIPRA also provides an option for States to establish an employer-
family premium assistance purchasing pool.  Employers who are eligible to participate 
must:  1) have less than 250 employees; 2) have at least one employee who is a pregnant 
woman eligible for CHIP, or a member of a family that has at least one child eligible 
under the States CHIP plan.  The State may provide a premium assistance subsidy for 
enrollment in coverage made available through this pool.  (See new section 
2105(c)(10)(I) for additional conditions and limitations applicable to States and 
employers regarding health benefits coverage for purchasing pools.) 
 
Section 302 of CHIPRA amends section 2102(c) of the Act and, effective April 1, 2009, 
requires States to include a description of outreach, education, and enrollment efforts 
related to premium assistance subsidies in their CHIP State plan.  This provision also 
clarifies that outreach expenditures related to premium assistance programs under either 
the CHIP State plan option, or under a demonstration, are exempt from the 10 percent 
title XXI administrative cap.  However, the total outreach expenditures claimed for 
premium assistance cannot exceed 1.25 percent of the administrative costs. 
  Page 5  State Health Official 
Medicaid Options 
 
3) Section 1906 Medicaid Premium Assistance. 
 
(This option applies to Medicaid and Title XXI-funded Medicaid Expansions.) 
 
CHIPRA does not amend existing section 1906 of the Act relating to Medicaid premium 
assistance programs; and States may continue to use section 1906 authority to enroll 
Medicaid-eligible individuals (children and adults) in group health plans as long as the 
conditions outlined below are met:   
 
  Eligibility:  This provision is available to all Medicaid-eligible individuals, 
assuming the State has elected this option in its Medicaid State plan. 
  Insurance Status:  The individual must be eligible to be enrolled in a group 
health plan.  Individuals may already be enrolled in the group plan or be eligible 
and enrolled only once the premium assistance is provided. 
  Coverage for Non-Medicaid-Eligible Family Members:  States may enroll 
family members who are not eligible for Medicaid in employer coverage when 
that enrollment is necessary to achieve coverage of Medicaid-eligible family 
members.  For example, Medicaid can pay premiums for a non-Medicaid-eligible 
parent to enroll in an employer health plan so that a Medicaid-eligible child can 
be enrolled in that plan.  However, non-Medicaid-eligible family members do not 
receive any wraparound benefits.   
  Mandatory Enrollment:  Enrollment in the group health plan can be mandatory, 
at the States option, but a childs eligibility for benefits under title XIX is not 
affected by a parents decision to not enroll the child in a group health plan.   
  Benefits and Cost Sharing:  Medicaid-eligible individuals enrolled in a group 
health plan under section 1906 of the Act:  1) must receive the same benefits 
(whether or not provided by the group health plan) and the same cost-sharing 
protections as any other Medicaid beneficiary; and, 2) must have all premiums, 
deductibles, coinsurance, and other cost-sharing for items and services otherwise 
covered under the State plan, paid on their behalf.  Non-Medicaid-eligible family 
members are eligible only to have group health plan premiums paid on their 
behalf if necessary to obtain access for the Medicaid enrollee.  The non-Medicaid-
eligible enrollees are liable for any additional cost sharing on their behalf. 
  Third Party Liability:  The group health plan is treated as a third party resource 
to pay all or part of the cost of care for the individual with respect to items or 
services covered under the State plan. 
  Substitution Strategy:  Not required. 
  Employer Contribution:  No minimum employer contribution. 
  Cost-Effectiveness:  Enrollment in a group health plan must be cost-effective 
(i.e., the expenditures for an individual enrolled in a group health plan, including 
wraparound benefits and cost sharing, are likely to be less than if the individual 
participated in Medicaid fee-for-service).  Costs for premiums for non-Medicaid-
eligible family members are included when testing for cost-effectiveness.     
  Page 6  State Health Official 
4) New Medicaid Premium Assistance Option for Children. 
 
(This option applies to Medicaid and Title XXI-funded Medicaid Expansions.) 
 
Section 301(b) of CHIPRA provides States with an additional Medicaid State plan 
premium assistance option for children by adding a new section 1906A of the Act. This 
option is intended to give States the opportunity to build on existing 1906 programs to 
augment coverage options for children.  The federal requirements under this option are as 
follows: 
  Eligibility: Premium assistance under section 1906A is available at State option 
to individuals under age 19 who are eligible for medical assistance under title 
XIX of the Act (and, when appropriate, the parent of such individuals).  As noted 
above, this option also applies to title XXI-funded Medicaid expansions.   
  Insurance Status:  The individual must have access to qualified employer-
sponsored coverage, as defined in section 1906A(b) of the Act.   
  Coverage for Non-Medicaid-Eligible Family Members:  States may enroll 
parents who are not eligible for Medicaid in qualified employer-sponsored 
coverage when that enrollment is necessary to achieve coverage of Medicaid-
eligible family members. 
  Voluntary Enrollment:  States may not make application for enrollment in 
qualified employer-sponsored coverage a condition of becoming or remaining 
eligible for Medicaid, for either the individual under age 19, or for the parent who 
is Medicaid-eligible.  In addition, States must establish a process for permitting 
parents to disenroll their child from employer-sponsored coverage in any month.  
  Benefits and Cost Sharing:  Children who are Medicaid-eligible (and their 
parent(s), if applicable) will be covered for all items and services covered under 
the Medicaid State plan, and the State must pay all premiums, deductibles, 
coinsurance, and other cost-sharing obligations for items and services otherwise 
covered under the State plan either through the employer-sponsored coverage or 
in combination with State-provided wrap around benefits (exceeding the amount 
otherwise allowed under section 1916 or 1916(A) of the Act).  States must pay for 
all cost sharing required by the qualified employer-sponsored insurance, even if 
this cost sharing is greater than what individuals would pay under the Medicaid 
State plan. 
  Third Party Resource:  The qualified employer-sponsored coverage is treated as 
a third party resource to pay all or part of the cost of care for the individual (and 
the Medicaid-eligible parent(s)). 
  Substitution Strategy:  Not required. 
  Employer Contribution:  Employer must contribute at least 40 percent toward 
the cost of the premium. 
  Cost-Effectiveness:  The employer contribution is a proxy for cost-effectiveness; 
this provision is not subject to a cost-effectiveness test. 
    Page 7  State Health Official 
Special Enrollment Periods under Group Health Plans 
CHIPRA also includes new rules designed to ease transitions between public and private 
coverage, and to allow States to enroll individuals into premium assistance regardless of 
open enrollment periods.  Effective April 1, 2009, section 311 of CHIPRA provides a 
guaranteed right to enroll in a group health plan without having to wait for an open 
enrollment period if either of the following conditions is met: 
 
1)  The employee/dependents coverage is terminated as a result of losing eligibility 
under CHIP or Medicaid for individuals who otherwise meet the eligibility requirements 
of a group health plan, or  
2) The employee/child becomes eligible for premium assistance from the State under its 
CHIP or Medicaid program, if he or she is otherwise eligible for a group health plan.  
Enrollment must be requested within 60 days after the loss of eligibility or after the date 
the employee or dependent is determined to be eligible for Medicaid or CHIP premium 
assistance. 
 
Continuation of Coverage for Children and Families Currently Covered under Title 
XXI or Title XIX Section 1115 Premium Assistance Related Demonstrations. 
CHIPRA does not prevent States with section 1115 demonstrations in effect prior to the 
date of CHIPRA enactment, February 4, 2009, from continuing to provide premium 
assistance to the title XIX and title XXI populations served under section 1115 authority.  
CMS will also consider new premium assistance demonstration proposals on a State-by-
State basis in the future, but encourages States interested in creating new premium 
assistance programs to consider the new CHIPRA title XIX and title XXI State plan 
options.  However, new section 2111 of the Act prohibits CMS from approving any new 
demonstrations to cover parents with title XXI funds, regardless of whether or not these 
demonstrations involve premium assistance.  Under section 2111(b)(2) of the Act, States 
have the option in fiscal years 2012 and 2013 to continue covering parents with title XXI 
funds, if they achieve outreach and benchmarks related to performance in providing 
coverage to children. 
 
States wishing to adopt either the CHIP or Medicaid State plan options described above 
must submit a State plan amendment, which must be approved by the Secretary.  States 
electing this option will be able to amend their CHIP or Medicaid State plan by 
submitting the enclosed addendum to the CHIP or Medicaid State plan. 
 
Enclosures 
 
Enclosed you will find questions and answers related to both title XXI and title XIX 
premium assistance programs, a draft CHIP State Plan template, a draft Medicaid State 
plan preprint, and a summary chart of all four of the premium assistance options available 
to States. 
 
CMS looks forward to its continued work with States on considering these new options 
for providing premium assistance to families with access to cost-effective employer-
sponsored coverage.  Draft State plan amendment (SPA) template pages to implement the  Page 8  State Health Official 
new CHIPRA options for both CHIP and Medicaid are enclosed.  These pages would be 
an Addendum to the CHIP State child health plan, describing premium assistance 
coverage under the plan.  CMS is in the process of obtaining the required Office of 
Management and Budget (OMB) clearance for the SPA templates.  Given that States may 
need considerable time to complete these templates, CMS is sharing, in draft, the SPA 
template under the guidelines of the Paperwork Reduction Act (PRA) currently under 
OMB review.  Until the PRA process is completed, States are not obligated to use the 
recommended template.  After CMS obtains the necessary PRA clearance number from 
OMB, States will be required to complete the SPA template. 
 
Contact Information 
If you have additional questions, you may send an email to 
CMSOCHIPRAquestions@cms.hhs.gov or contact Ms. Victoria Wachino, Director, 
Family and Childrens Health Programs Group, Center for Medicaid and State 
Operations, at (410) 786-5647. 
 
Sincerely,  
 
/s/ 
 
Cindy Mann  
Director  
Center for Medicaid and State Operations  
 
 
Enclosures 
 
Enclosure 1  Questions and Answers  
Enclosure 2  Side-by-Side Analysis of Title XXI and XIX Premium Assistance Options 
Enclosure 3  Draft CHIP State Plan Preprint 
Enclosure 4  Draft Medicaid State Plan Preprint 
 
cc:  
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
Division of Medicaid and Childrens Health 
 
Ann C. Kohler 
NASMD Executive Director 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures  Page 9  State Health Official 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Debra Miller 
Director for Health Policy 
Council of State Governments 
 
Christine Evans, M.P.H. 
Director, Government Relations 
Association of State and Territorial Health Officials 
 
Alan R. Weil, J.D., M.P.P. 
Executive Director 
National Academy for State Health Policy 
    Page 10  State Health Official 
Enclosure 1 
 
Questions and Answers Related to title XXI CHIPRA  
Premium Assistance Provisions 
 
The questions and responses below only pertain to premium assistance under 
2105(c)(10) of the Act as added by section 301(a)(1) of CHIPRA.  This is referenced as 
the Additional State Option for Providing Premium Assistance, in CHIPRA.   
 
  PREMIUM ASSISTANCE SUBSIDIES 
 
Question 1: What is the definition of premium assistance subsidy for a child and 
how does the State calculate the costs of the subsidy? 
 
Answer:  As specified in Section 2105(c)(10)(C), a premium assistance subsidy is the 
amount equal to the difference between the employee contribution required for 
enrollment only of the employee under qualified employer-sponsored coverage and the 
employee contribution required for enrollment of the employee and the child in such 
coverage, less any cost sharing applied under the State child health plan.  The formula 
can be illustrated as follows: 
 
Example:  Contribution for Employee + Child       $200 
Contribution for Employee Only       -100 
Premium Cost Sharing under CHIP for Child      -50 
  Premium Assistance Subsidy       $50 
 
Using this example, the States premium assistance subsidy is $50 (i.e., ($200  $100) - 
$50 = $50). 
 
Question 2: Does the State have the option to reimburse the premium assistance 
payment to either the employee or the employer? 
 
Answer: Yes.  The State may provide a premium assistance subsidy either as 
reimbursement to an employee for out-of-pocket expenditures or directly to the 
employer. 
 
ELIGIBILITY 
 
Question 3: Can any State elect this new option to cover targeted low-income 
children under premium assistance? 
 
Answer: Yes. Any State can elect to cover targeted low-income children under this new 
option. 
 
    Page 11  State Health Official 
Question 4: Can any State provide coverage to the families of a CHIP child under 
this new option?   
 
Answer:  All States can cover parents through incidental coverage, which occurs when 
the per-child subsidy for covering children under a premium subsidy results in coverage 
for the parents at no additional cost to the State or the federal government when 
compared to direct CHIP coverage for the child or children only.  States with section 
1115 demonstration authority to cover families prior to the passage of CHIPRA can 
directly cover families, including parents, under this new State plan option (subject to the 
limitations of section 2111 of the Act). 
 
Question 5:  Are CHIP-eligible children or eligible family members required to 
participate in premium assistance if the State opts for premium assistance and the 
child has access to such coverage? 
 
Answer:  No, participation by families is voluntary and CHIP-eligible children are not 
required to participate in premium assistance.  In fact, a State must establish a process for 
permitting the parent of a targeted low-income child receiving a premium assistance 
subsidy to disenroll the child from the qualified employer-sponsored coverage and enroll 
the child in the CHIP State plan, effective on the first day of any month for which the 
child is eligible. 
 
Question 6:  Can a State provide premium assistance coverage to pregnant women? 
 
Answer: States can provide premium assistance to pregnant women only if the pregnant 
woman meets the definition of a targeted low-income child, including being 19 years old 
or younger.   
 
Question 7: Can a State require beneficiaries to practice continuous enrollment in a 
premium assistance program? 
 
Answer:  No.  A State cannot require continuous enrollment in a premium assistance 
program because States must permit children to opt out of premium assistance effective 
on the first day of any month for which the child is eligible. 
 
EMPLOYER PARTICIPATION 
 
Question 8: What is the definition of qualified employer-sponsored coverage? 
 
Answer: Qualified employer-sponsored coverage is defined as a group health plan or 
health insurance coverage offered through an employer that qualifies as creditable 
coverage as a group health plan under section 2701(c)(1) of the Public Health Service 
Act, for which the employer contribution toward any premium for such coverage is at 
least 40 percent, and that is offered to a classification of employees that is considered to 
be a nondiscriminatory eligibility classification under section 105(h)(3)(A)(ii) of the  Page 12  State Health Official 
Internal Revenue Code of 1986 (without regard to clause (i) of subparagraph (B) of such 
paragraph). 
 
Question 9: Are health flexible spending arrangements or high deductible health 
plans considered qualified employer-sponsored coverage? 
 
Answer:  No.  Benefits provided under a health flexible spending arrangement, or any 
high deductible health plan, as defined in section 223(c)(2) of the Internal Revenue Code, 
are not considered qualified employer-sponsored coverage. 
 
Question 10: Can an employer opt out of being directly paid a premium assistance 
subsidy by the State on behalf of an employee? 
 
Answer: Yes. The employer participation in a premium assistance subsidy shall be 
voluntary and the employer can elect to opt out of receiving the subsidy. 
 
Question 11:  If qualified employer-sponsored coverage does not meet the 40 percent 
premium contribution requirement, but the State could demonstrate that the 
coverage was cost effective, could the coverage be deemed to be qualified?  
 
Answer: No.  The qualified employer-sponsored coverage must meet the 40 percent 
requirement under title XXI as specified under 2105(c)(10)(B).    
 
Question 12: Can States claim for outreach expenditures related to a premium 
assistance program? 
 
Answer: Yes.  States may claim Federal financial participation for outreach activities 
related to premium assistance programs operated under 2105(c)(10) of the Act, under the 
Purchase of Family Coverage option, 2105(c)(3), of the Act, or under section 1115 
demonstration program authority.  The outreach expenditures are exempt from having to 
be claimed under the 10 percent administration cap in CHIP.  However, CMS will only 
provide federal financial participation for expenditures up to 1.25 percent of the maximum 
amount permitted to be expended under the 10 percent administration cap.  For example, 
if a State has a 10 percent limit on administrative costs of $5,000,000 in CHIP, the State 
can claim Federal financial participation for $62,500 ($5,000,000*1.25%) in premium 
assistance outreach costs. 
 
Section 311:  Special Enrollment Period under Group Health Plans in Case of 
Termination of Medicaid or CHIP Coverage or Eligibility for Assistance in Purchase 
of Employment Based Coverage; Coordination of Coverage. 
 
Question 13:  Are there new requirements under CHIPRA for employers to provide 
notices to employees regarding premium assistance? 
 
Answer:  Yes. Employers who maintain group health plans in States that provide CHIP 
(or Medicaid) premium assistance subsidies are required to provide written notices to  Page 13  State Health Official 
their employees informing them of the potential opportunities for premium assistance in 
their State.  In addition, the Department of Health and Human Services (HHS) and the 
Department of Labor (DOL) are required to develop national and State-specific model 
notices by February 4, 2010, to enable employers to comply with the notice requirement.  
The national and State-specific model notices are required under Section 
701(f)(3)(B)(i)(II) of ERISA, as added by section 3111(b)(1) of CHIPRA.  
 
Question 14: Can States request information from group health plans regarding 
benefit information? 
 
Answer: Yes. CHIPRA requires group health plan administrators to disclose information 
about plan benefits to States upon request when a familys child is covered under 
Medicaid or CHIP, to allow States to determine the cost-effectiveness of providing 
premium assistance for the purchase of coverage for that child under the plan and to 
provide supplemental benefits.  In addition, HHS and DOL are directed to establish a 
working group to develop a model coverage coordination disclosure form for plan 
administrators to complete that would require certain information for this purpose.   
 
Question 15: What is the purpose of the CHIP, Medicaid, and Employer-Sponsored 
Coverage Working Group to be established under CHIPRA? 
 
Answer:  Section 311 of CHIPRA directs the Secretary of Health and Human Services 
and the Secretary of Labor to jointly establish a CHIP, Medicaid, and Employer-
Sponsored Coverage Coordination Working Group.  The purpose of the CHIP Working 
Group is to:  (1) develop a model coverage coordination disclosure form for plan 
administrators of group health plans to permit a State to determine the availability and 
cost-effectiveness of coverage available under group health plans to employees who have 
family members who are eligible for premium assistance offered under a title XIX or title 
XXI State plan and to allow for coordination of coverage for enrollees of such plans, and 
(2) identify the impediments to the effective coordination of coverage available to 
families that include employees of employers who maintain group health plans and 
members who are eligible for medical assistance under title XIX or title XXI.  For more 
information on the CHIP Working Group, please go to the Federal Register notice 
published on May 1, 2009, at 74 Fed. Reg. 20323 and/or 
http://edocket.access.gpo.gov/2009/pdf/E9-10083.pdf 
    Page 14  State Health Official 
Questions and Answers Related to title XIX CHIPRA  
Premium Assistance Provisions 
 
The questions and responses below only pertain to premium assistance under 
section 1906A of the Act as added by section 301(b) of CHIPRA.  This is referenced 
as the Premium Assistance Option for Children in CHIPRA.   
 
GENERAL 
 
Question 16:  What is the effective date of the provision? 
 
Answer:  The effective date is April 1, 2009. 
 
Question 17:  Which States can provide premium assistance under section 1906A? 
 
Answer:  All States and the District of Columbia may elect to provide premium 
assistance under section 1906A to children under age 19 who are entitled to medical 
assistance under title XIX of the Act, and to the childs parent(s) who have access to 
qualified employer-sponsored coverage. 
 
Question 18:  How does section 1906A differ from section 1906? 
 
Answer:  Section 1906A differs from section 1906 as follows: 
  Eligible population: 1906 is available to any Medicaid-eligible individual; 1906A 
covers children under age 19 and their parent(s) only. 
  Definition of health coverage: Section 1906 defines a group health plan in which 
a Medicaid participant may be enrolled by cross-reference to section 5000(b)(1) 
of the Internal Revenue Code of 1986.  By contrast, section 1906A permits 
premium assistance for employer-sponsored group health plan or health insurance  
-- 1) that qualifies as creditable coverage under section 2701(c)(1) of the Public 
Health Service Act; 2)for which the employer contribution is at least 40 percent; 
and 3) is nondiscriminatory, pursuant to section 105(h)(3)(A)(ii) of the Internal 
Revenue Code. 
  Benefits for adults:  Section 1906 covers all items and services covered under the 
Medicaid State plan for Medicaid-eligible individuals regardless of age, and 
covers group health plan premiums for such individuals; 1906A only covers items 
and services covered under the Medicaid State plan for Medicaid-eligible 
individuals under age 19 (and the parents of such individuals), and covers 
premiums, deductibles, co-insurance, and other cost sharing, as specified by the 
group health plan, for Medicaid State plan-covered services for such individuals 
and their parents. 
  Cost-effectiveness requirements:  1906 requires that enrollment in group health 
insurance be cost-effective; 1906A does not require a cost-effectiveness test. 
  Employer premium contribution requirements:  1906 does not specify a minimum 
level of employer contribution; 1906A requires the employer to contribute an  Page 15  State Health Official 
amount equal to at least 40 percent of the total amount of the premium for the 
type of coverage being purchased. 
  Enrollment limitations:  1906 allows the State to make application for enrollment 
in a group health plan a condition of becoming or remaining eligible for Medicaid 
for eligible individuals; 1906A does not allow the State to make application for 
enrollment in employer-sponsored coverage a condition of becoming or 
remaining eligible for Medicaid. 
 
SUBSIDY 
 
Question 19:  Is payment of a premium assistance subsidy considered a payment for 
medical assistance for purposes of section 1903(d)? 
 
Answer:  Yes.  Section 1903 of the Act authorizes payment of the Federal share of 
medical assistance expenditures to the States.  Sections 1903(a)  (c) specify the Federal 
medical assistance percentage (FMAP) to be used in calculating payments to the States 
for various types of expenditures and the limitations on allowable expenditures.  Section 
1903(d) authorizes the Secretary to estimate the amount to which a State will be entitled 
under sections 1903(a) and (b) for a calendar quarter, prior to the beginning of the 
quarter, and to pay the estimated amount to the State.  Payment of a premium assistance 
subsidy is considered payment for medical assistance for purposes of section 1903(a) of 
the Act, and State expenditures for the subsidy are included in the calculation of the 
Federal estimated payment to the State.   
 
Question 20:  What is the definition of premium assistance subsidy? 
 
Answer:  For section 1906A, premium assistance subsidy means the amount of the 
employee contribution for enrollment in the qualified employer-sponsored coverage by 
the individual under age 19 or by the individuals family.  The premium assistance 
subsidy is (1) the amount the employee, who is an individual under age 19, pays to enroll 
himself in qualified employer-sponsored coverage, when he has access to qualified 
employer-sponsored coverage through his own employment, or (2) the amount the 
employee pays to enroll himself and his child under age 19 in qualified employer-
sponsored coverage for either the employee plus dependent coverage option or the family 
coverage option, as the employee chooses.   
 
Question 21:  May the State subsidize family coverage even if the employer offers 
employee + dependent/child as a less expensive enrollment option than full family 
coverage?   
 
Answer:  Yes.  The selection of employee + dependent coverage or family coverage is the 
choice of the parent(s).  Section 1906A requires that the coverage selected by the 
individual under age 19, and, if applicable, the parent(s) who have access to such 
coverage, meets the definition of qualified employer-sponsored coverage. 
  Page 16  State Health Official 
Question 22:  If a parent is already enrolled in his employers insurance plan, is his 
premium subsidized when he elects premium subsidy and enrolls his child? 
 
Answer:  Yes. 
 
ELIGIBILITY  
 
Question 23:  Are Medicaid-eligible children or their parent(s) required to 
participate in premium assistance if the State opts for premium assistance and the 
child has access to such coverage? 
 
Answer:  No.  Under section 1906A, an individual under age 19, or the individuals 
parent(s), must voluntarily elect to participate.  A State cannot require application for 
enrollment in qualified employer-sponsored coverage or election to receive the premium 
assistance subsidy as a condition of becoming or remaining eligible for medical 
assistance under title XIX. 
 
This differs from section 1906, under which a State may require application for 
enrollment in a group health plan, and enrollment when it is likely to be cost-effective, as 
a condition of becoming or remaining eligible for medical assistance under title XIX, but 
only if the individual can enroll on his own behalf.    
 
Question 24:  May a Medicaid-eligible child be enrolled in fee-for-service coverage 
or a Medicaid managed care organization while waiting for enrollment in qualified 
employer-sponsored coverage? 
 
Answer:  Yes.  The child who is eligible to participate in the premium assistance subsidy 
under section 1906A has already been determined eligible for Medicaid and is entitled to 
receive all necessary Medicaid State plan-covered services from any participating 
Medicaid provider, through whatever delivery system the State uses. 
 
Question 25:  Section 1906A(a) says that the State may elect to offer a premium 
assistance subsidy to individuals under age 19 and the parent (singular) of such 
individual.  Is parent inclusive of the parents spouse when (1) both parents are 
living with the child, or (2) the child lives with a parent and step-parent? 
 
Answer:  Yes, to both situations. 
 
Question 26:  Can a pregnant woman receive premium assistance under section 
1906A? 
 
Answer:  A pregnant woman may receive premium assistance subsidy if she (1) is under 
age 19, otherwise eligible for Medicaid, and voluntarily elects to receive a premium 
assistance subsidy for qualified employer-sponsored coverage, or (2) has a Medicaid-
eligible child under age 19 living with her and the child voluntarily elects (or the  Page 17  State Health Official 
pregnant woman elects on behalf of the child) to receive a premium assistance subsidy 
for qualified employer-sponsored coverage. 
 
Question 27:  Can a State require continuous enrollment in a qualified employer-
sponsored coverage? 
 
Answer:  No.  The parent of an individual under age 19 who is receiving a premium 
assistance subsidy may disenroll the individual from the qualified employer-sponsored 
coverage at any time. 
 
Question 28:  May a child opt out of qualified employer-sponsored coverage?  Is 
there a minimum or maximum interval between last participation in the employer-
sponsored coverage and subsequent re-enrollment? 
 
Answer:  The State must establish a process that allows the parent(s) of an individual 
under age 19 receiving a premium assistance subsidy to disenroll the individual from 
qualified employer-sponsored coverage (opt-out).  The individual remains eligible for 
full Medicaid coverage until Medicaid eligibility is redetermined.  After the 
disenrollment is effective, the parent may reenroll the individual under age 19 in qualified 
employer-sponsored coverage (1) at the next open enrollment period offered by the 
employer, (2) when Medicaid eligibility is terminated, or (3) after Medicaid eligibility 
termination, when the individual becomes eligible for Medicaid again.  For enrollment 
after Medicaid eligibility termination or determination of Medicaid eligibility, the request 
for enrollment in the qualified employer-sponsored coverage must be made not later than 
60 days after the date of Medicaid termination or the date of Medicaid eligibility 
determination. 
 
Question 29:  Who notifies the State of opt-out, so that subsidy payments can be 
stopped? 
 
Answer:  States may accept notification from the individual under age 19, or the 
individuals parent(s), or the employer who was receiving the premium assistance 
subsidy payment, at their discretion. 
 
BENEFITS 
 
Question 30:  What services would the State be responsible for providing to children 
enrolled in qualified employer-sponsored coverage? 
 
Answer:  The State is responsible for all items and services provided to Medicaid 
recipients under the State plan for the individual under age 19 who is entitled to medical 
assistance under title XIX.  The qualified employer-sponsored coverage in which the 
individual is enrolled is treated as a third-party resource.   
 
In accordance with Medicaid third-party liability requirements, providers must include in 
their claims for reimbursement the amount of payment received, or a denial of liability,  Page 18  State Health Official 
from the employer-sponsored coverage, unless the claim is for preventive pediatric 
services covered under the State plan or the service was provided to a child on whose 
behalf child support enforcement is being carried out by the State title IV-D agency.  For 
those exceptions, Medicaid will pay the provider and seek reimbursement directly from 
the employer-sponsored coverage. 
 
Question 31:  Section 1906A(e) requires State subsidy of the parent(s) premiums, 
deductibles, coinsurance, and other cost-sharing obligations for items and services 
otherwise covered under the State plan.  If the parent is not eligible for medical 
assistance under the State plan, is he entitled to payment of deductibles, 
coinsurance, and other cost-sharing obligations?  
 
Answer:  Yes.  The eligibility of an individual under age 19 for medical assistance makes 
the parent(s) eligible for premium assistance, including payment of premiums, 
deductibles, coinsurance, and other cost-sharing obligations, as specified in section 
1906A(e).  Payments for cost-sharing (deductibles, coinsurance, and other cost-sharing 
obligations) are limited to Medicaid State plan-covered services. 
 
Question 32:  Is employer-sponsored coverage through section 1906A considered a 
third-party liability under section 1902(a)(25)? 
 
Answer:  Yes, qualified employer-sponsored coverage for which the State pays a 
premium assistance subsidy through section 1906A is considered a third-party resource 
under section 1902(a)(25).  Providers claims presented to the State Medicaid agency on 
behalf of an individual under age 19 who is entitled to medical assistance under title XIX 
must be processed in accordance with Medicaid third-party liability requirements. 
 
COST SHARING 
 
Question 33:  Do the cost-sharing limitations of sections 1916 and 1916A apply to 
employer-sponsored coverage under section 1906A? 
 
Answer:  No.  Section 1906A specifies that the State must pay all enrollee premiums for 
qualified employer-sponsored coverage, and all deductibles, coinsurance, and other cost-
sharing obligations for items and services otherwise covered under the State plan, even if 
these amounts exceed the amount otherwise permitted under section 1916 or 1916A of 
the Act. 
 
Question 34:  Who pays the premiums, deductibles, coinsurance, and other cost-
sharing obligations for items and services otherwise covered under the Medicaid 
State plan for participants in employer-sponsored coverage under section 1906A? 
 
Answer:  The State is responsible for payment of these costs, for the individual under age 
19 and the individuals parent(s).  The amount of the employee contribution for 
enrollment (the premium assistance subsidy) is considered payment for medical 
assistance for purposes of section 1903(a) of the Act.  Page 19  State Health Official 
 
Question 35:  How will States be expected to track cost-sharing expenditures 
associated with children enrolled in qualified employer-sponsored coverage? 
 
Answer:  Premium assistance subsidies (the amount of the employees contribution for 
enrollment in qualified employer-sponsored coverage) are considered payments for 
medical assistance.  States will need to identify recipients of premium assistance 
subsidies in their Medicaid Management Information Systems to track these payments. 
 
EMPLOYER PARTICIPATION 
 
Question 36:  Are employers required to participate in premium assistance subsidy? 
 
Answer:  No.  Employer participation is voluntary.  An employer who has agreed to 
participate may opt-out of participation at any time by notifying the State that it will no 
longer accept direct payment of the premium assistance subsidy.  In such a situation, the 
employee will be expected to pay the premium and the State will reimburse the 
employee. 
 
Question 37:  What is the definition of qualified employer-sponsored coverage? 
Answer:  Qualified employer-sponsored coverage is a group health plan or health 
insurance coverage offered through an employer that (1) qualifies as creditable coverage 
as a group health plan under section 2701(c)(1) of the Public Health Service Act, (2)  the 
employer contribution toward any premium for such coverage is at least 40 percent, and  
(3) is offered to all individuals in a manner that would be considered a nondiscriminatory 
eligibility classification for purposes of paragraph (3)(A)(ii) of section 105(h) of the 
Internal Revenue Code of 1986 (but determined without regard to clause (i) of 
subparagraph (B) of such paragraph). 
The employer can provide verification that health coverage offered to employees meets 
the technical requirements for creditable coverage and nondiscriminatory offering.  The 
State can determine if the employers contribution meets the minimum contribution 
requirement, based on employer verification of its cost to provide coverage and the 
employees cost for premiums. 
 
Question 38:  Is there a minimum employer contribution toward the cost of 
coverage for the child? 
 
Answer:  Yes.  The employer contribution for qualified employer-sponsored coverage 
must equal at least 40 percent of the total amount of the premium for the type of coverage 
being purchased. 
 
Question 39:  Does the employer contribution of 40 percent apply to a family 
premium or to the employees portion of a premium if the employer only subsidizes 
the employees portion and does not subsidize any other family members? 
  Page 20  State Health Official 
Answer:  The employers total contribution must equal at least 40 percent of the total 
amount of the premium for the type of coverage being purchased. 
 
Question 40:  Regarding non-discriminatory eligibility classification, does the 
Internal Revenue Code allow distinctions among employees based on (1) part-time 
vs. full-time employment, (2) mandatory waiting period before enrollment (new 
employees or open enrollment period for current employees), and (3) pre-existing 
condition exclusions or waiting periods? 
 
Answer:  The Internal Revenue Service has jurisdiction over these requirements.  States 
should ensure that all health plans for which they provide a premium assistance subsidy 
are compliant with the requirements set out in section 1906A(b)(1)(C).  Employers can 
provide verification of compliance with the Internal Revenue Code requirements to the 
State. 
 
Question 41:  How are plans certified as providing creditable coverage? 
 
Answer:  Creditable coverage is determined by a complex set of rules involving the 
Internal Revenue Service, the U.S. Department of Labor, and CMS.  Health plans will 
know if they are so certified.  States may require individuals who wish to receive a 
premium assistance subsidy to obtain verification of creditable coverage from the 
employer. 
 
COST EFFECTIVENESS 
Question 42:  If employer-sponsored coverage doesnt meet the required employer 
contribution level (40 percent of premium), can the State substitute a cost-
effectiveness test to qualify the coverage?  If so, what are the required components 
of the cost-effectiveness test? 
Answer:  No, the State may not substitute a cost-effectiveness test.  The 40 percent of 
premium contribution requirement is part of the definition of qualified employer-
sponsored coverage and may not be adjusted or have another test substituted for it. 
WAITING PERIOD 
 
Question 43: Is a State allowed to impose a waiting period on children selecting 
enrollment in premium assistance?  If so, what is the specified time period? 
 
Answer:  No, the State may not impose a waiting period. 
    Page 21  State Health Official 
 
Enclosure 2:  Side-by-Side Analysis of Title XXI and Title XIX Premium Assistance Options 
Conditions  Purchase of  Additional Premium  Medicaid Premium  Premium Assistance Option 
Family Coverage  Assistance Option  Assistance(Section 1906  for Children (Section 1906A 
(Section  (Section 2105(c)(10) of  of the Act and applies to  of the Act  and applies to 
2105(c)(3) of the  the Act)   Medicaid and Title XXI  Medicaid and Title XXI 
Act)  funded Medicaid  funded Medicaid 
Expansions)  Expansions) 
Eligibility  Targeted low  Targeted low-income  All Medicaid eligibles if  At State option, individuals 
income children,  children who have  State has elected this  under age 19, who are 
and families that  access to qualified  option in its Medicaid  eligible for title XIX (and the 
include at least one  employer sponsored  State plan.  parent of such individuals). 
targeted low  coverage. 
income child. 
Insurance Status  Children must  Children must have  The individual must be  The individual must have 
have access to, but  access to, but not be  eligible to be enrolled in  access to qualified employer 
not be enrolled in,  enrolled in, qualified  a group health plan.  sponsored coverage. 
group health  employer sponsored 
coverage.   coverage. 
Coverage for Non- May provide  Only States with  States may enroll family  States may enroll family 
Eligible Family  premium  section 1115  members who are not  members who are not 
Members  assistance to non- demonstration authority  eligible for Medicaid in  eligible for Medicaid when 
eligible CHIP  to cover families prior  employer coverage when  that enrollment is necessary 
family members.  to the passage of  that enrollment is  to achieve coverage of 
CHIPRA can continue  necessary to achieve  Medicaid-eligible family 
to cover families.  All  coverage of Medicaid- members. 
States, however, can  eligible family members.  
continue to cover  However, noneligible 
parents on an incidental  family members do not 
basis under the CHIP  receive any wrap-around 
State plan.  benefits. 
Mandatory/Volunt Voluntary or  Must be voluntary.   May be mandatory, at  Must be voluntary and States  Page 22  State Health Official 
Conditions  Purchase of  Additional Premium  Medicaid Premium  Premium Assistance Option 
Family Coverage  Assistance Option  Assistance(Section 1906  for Children (Section 1906A 
(Section  (Section 2105(c)(10) of  of the Act and applies to  of the Act  and applies to 
2105(c)(3) of the  the Act)   Medicaid and Title XXI  Medicaid and Title XXI 
Act)  funded Medicaid  funded Medicaid 
Expansions)  Expansions) 
ary Enrollment in  mandatory at State  State option, but a childs  may not make enrollment in 
Premium  option.  eligibility for title XIX is  qualified employer 
Assistance  not affected by a parents  sponsored coverage a 
decision not to enroll the  condition of becoming or 
child in a group health  remaining eligible for 
plan.    Medicaid. 
Benefits  Coverage must  Coverage must meet  Medicaid-eligible  Children who are Medicaid 
meet the same  the same requirements  individuals are covered  eligible (and their parents) 
requirements as  as those for CHIP  for all items and services  are covered for all items and 
those for CHIP  direct coverage.  If  covered under the  services covered under the 
direct coverage.   coverage offered  Medicaid State plan.  Medicaid State plan. 
These benefits can  through an employer is 
either be provided  certified by an actuary 
fully through the  as benchmark or 
employer-based  benchmark-equivalent 
plan or through the  then enrollment in the 
private plan plus  employer plan meets 
the State providing  the CHIP benefit 
wrap around  standards.  For 
benefits.    coverage that does not 
meet benchmark or 
benchmark-equivalent 
standards, benefits 
must be provided 
through a combination  Page 23  State Health Official 
Conditions  Purchase of  Additional Premium  Medicaid Premium  Premium Assistance Option 
Family Coverage  Assistance Option  Assistance(Section 1906  for Children (Section 1906A 
(Section  (Section 2105(c)(10) of  of the Act and applies to  of the Act  and applies to 
2105(c)(3) of the  the Act)   Medicaid and Title XXI  Medicaid and Title XXI 
Act)  funded Medicaid  funded Medicaid 
Expansions)  Expansions) 
of the employer-based 
plan and the State 
providing wrap around 
benefits. 
Cost Sharing  Cost sharing in  Cost sharing for  Cost-sharing protections  The State must pay all 
premium  premium assistance  as any other Medicaid  premiums, deductibles, 
assistance must  must meet the same  beneficiary  and must  coinsurance, and other cost 
meet the same  requirements as CHIP  have all premiums,  sharing for the individual 
requirements as  direct coverage.  If  deductibles, coinsurance,  under age 19 and the parent. 
CHIP direct  coverage offered  and other cost sharing for 
coverage.  through an employer is  items and services 
certified by an actuary  otherwise covered under 
as coverage that is  the State plan, as 
benchmark or  specified by the group 
benchmark-equivalent,  health plan, paid on their 
the plan shall be  behalf.  Non-Medicaid 
determined to meet  eligible family members 
CHIP cost sharing  are eligible only to have 
standard.  For coverage  group health plan 
that does not meet  premiums paid on their 
benchmark or  behalf (if necessary to 
benchmark-equivalent  obtain access for the 
standards, States must  Medicaid enrollee). 
ensure all CHIP cost 
sharing protections  Page 24  State Health Official 
Conditions  Purchase of  Additional Premium  Medicaid Premium  Premium Assistance Option 
Family Coverage  Assistance Option  Assistance(Section 1906  for Children (Section 1906A 
(Section  (Section 2105(c)(10) of  of the Act and applies to  of the Act  and applies to 
2105(c)(3) of the  the Act)   Medicaid and Title XXI  Medicaid and Title XXI 
Act)  funded Medicaid  funded Medicaid 
Expansions)  Expansions) 
apply. 
Third Party  N/A  N/A  Group health plan is  Qualified employer-
Liability/Resource   treated as a third party  sponsored coverage is treated 
resource to pay all or part  as a third party resource to 
of the cost of care for the  pay all or part of the cost of 
individual with respect to  care for the individual (and 
items or services covered  the Medicaid-eligible 
under the Medicaid State  parent). 
plan. 
Substitution  States must have a  States must apply same  No requirement.  No requirement. 
Strategy  six-month waiting  waiting period (if 
period.  applicable) to premium 
assistance as is applied 
to direct coverage. 
Employer  States must  Employer must  No minimum employer  Employer must contribute at 
Contribution  identify a  contribute at least 40  contribution.  least 40 percent toward the 
minimum  percent toward the cost  cost of the premium. 
contribution level;  of the premium. 
there is no Federal 
minimum. 
Cost Effectiveness  CHIPRA changes  This program does not  Expenditures for an  The provision is not subject 
the cost  require a cost- individual enrolled in a  to a cost effectiveness test. 
effectiveness test  effectiveness test.  group health plan, 
to permit States to  including wraparound 
compare the costs  benefits and cost-sharing,  Page 25  State Health Official 
Conditions  Purchase of  Additional Premium  Medicaid Premium  Premium Assistance Option 
Family Coverage  Assistance Option  Assistance(Section 1906  for Children (Section 1906A 
(Section  (Section 2105(c)(10) of  of the Act and applies to  of the Act  and applies to 
2105(c)(3) of the  the Act)   Medicaid and Title XXI  Medicaid and Title XXI 
Act)  funded Medicaid  funded Medicaid 
Expansions)  Expansions) 
of covering the  are likely to be less than 
entire family  expenditures required by 
relative to direct  the plan.  Costs for 
CHIP coverage of  premiums for non-title 
the entire family,  XIX eligible family 
rather than just the  members are included 
targeted low- when testing for cost-
income child.  effectiveness. 
Notice of  N/A  States must include  N/A  N/A 
Availability  information about 
premium assistance on 
CHIP application and 
establish other 
procedures to ensure 
parents are fully 
informed of choices.  
Purchasing Pool  N/A  States may establish a  N/A  N/A 
premium assistance 
purchasing pool. 
  Page 26  State Health Official 
Enclosure 3 
 
DRAFT                   DRAFT 
 
Additional State Plan Option for Providing Premium Assistance  
CHIP SPA Template 
 
Section 1:  General Description and Purpose of the State Child Health Plans and 
State Child Health Plan Requirements.  (section 2101) 
 

1.4.-APA   Please provide the effective (date costs begin to be incurred) and 
  implementation (date services begin to be provided) dates for this plan or 
  plan amendment (42 CFR 457.65): 
 
Effective date: 
Implementation date: 
 
Section 6:  Coverage Requirements for Childrens Health Insurance (section 
2103) 
 
Section 6.4.3: Additional State Options for Providing Premium Assistance  
A State may elect to offer a premium assistance subsidy for qualified 
employer-sponsored coverage, as defined in section 2105(c)(10)(B), to all 
targeted low-income children who are eligible for child health assistance 
under the plan and have access to such coverage.  No subsidy shall be 
provided to a targeted low-income child (or the childs parent) unless the 
child voluntarily elects to receive such a subsidy.  (section 
2105(c)(10)(A)).  Does the State provide this option to targeted low-
income children? 
 
  Yes 
  No 
 
 
6.4.3.1:  Qualified Employer-Sponsored Coverage and Premium Assistance 
Subsidy 
 
 
6.4.3.1.1.  Please provide an assurance that the qualified 
employer-sponsored insurance meets the definition of qualified 
employer-sponsored coverage as defined in section 
2105(c)(10)(B), and that the premium assistance subsidy meets the 
definition of premium assistance subsidy as defined in 
2105(c)(10)(C). 
 
Please note:  This form has not been approved by OMB pursuant to the PRA and States are not obligated 
to use it.  Page 27  State Health Official 
6.4.3.1.2.  Please describe whether the State is providing the premium 
assistance subsidy as reimbursement to an employee or for out-of-
pocket expenditures or directly to the employees employer.     
 
6.4.3.2:  Supplemental Coverage for Benefits and Cost Sharing Protections 
Provided under the State Child Health Plan. 
 
   
6.4.3.2.1 If the State is providing premium assistance for qualified 
employer-sponsored coverage, as defined in section 
2105(c)(10)(E)(i), please provide an assurance that the State is 
providing for each targeted low-income child enrolled in such 
coverage, supplemental coverage consisting of all items or services 
that are not covered or are only partially covered, under the 
qualified employer-sponsored coverage consistent with 2103(a) 
and cost sharing protections consistent with section 2103(e).   
 
6.4.2.2.2.  Please describe whether these benefits are being provided through 
the employer or by the State providing wraparound benefits.   
 
   
6.4.3.2.3 If the State is providing premium assistance for benchmark 
or benchmark-equivalent coverage, check here to indicate that the 
State will ensure that such group health plans or health insurance 
coverage offered through an employer will be certified by an 
actuary as coverage that is equivalent to a benchmark benefit 
package described in section 2103(b) or benchmark equivalent 
coverage that meets the requirements of section 2103(a)(2).   
 
6.4.3.3:  Application of Waiting Period Imposed Under State Plan:  States are 
required to apply the same waiting period to premium assistance as is 
applied to direct coverage for children under their CHIP State plan, as 
specified in section 2105(c)(10)(F). 
 
   
6.4.3.3.1 Please provide an assurance that the waiting period for 
children in premium assistance is the same as for those children in 
direct coverage (if State has a waiting period in place for children 
in direct CHIP coverage). 
 
6.4.3.4:  Opt-Out and Outreach, Education, and Enrollment Assistance  
 
  6.4.3.4.1.  Please describe the States process for ensuring parents are 
  permitted to disenroll their child from qualified employer-sponsored 
  coverage and to enroll in CHIP effective on the first day of any month for 
  which the child is eligible for such assistance and in a manner that ensures 
  continuity of coverage for the child (section 2105(c)(10)(G)). 
 
Please note:  This form has not been approved by OMB pursuant to the PRA and States are not obligated 
to use it.  Page 28  State Health Official 
6.4.3.4.2.  Please describe the States outreach, education, and enrollment efforts 
  related to premium assistance programs, as required under section 
  2102(c)(3).  How does the State inform families of the availability of 
  premium assistance, and assist them in obtaining such subsidies?  What 
  are the specific significant resources the State intends to apply to 
  educate employers about the availability of premium assistance 
  subsidies under the State child health plan?  (section 2102(c))  
 
6.4.3.5:  Purchasing Pool:  A State may establish an employer-family premium 
assistance purchasing pool and may provide a premium assistance subsidy 
for enrollment in coverage made available through this pool (section 
2105(c)(10)(I)).  Does the State provide this option?  
 
  Yes 
  No 
 
6.4.3.5.1.   Please describe the plan to establish an employer-family premium 
assistance purchasing pool.   
 
  
6.4.3.5.2 Please provide an assurance that employers who are eligible to 
participate:  1) have less than 250 employees; 2) have at least one 
employee who is a pregnant woman eligible for CHIP or a member 
of a family that has at least one child eligible under the States 
CHIP plan.   
 
 
6.4.3.5.3 Please provide an assurance that the State will not claim for any 
administrative expenditures attributable to the establishment or 
operation of such a pool except to the extent such payment would 
otherwise be permitted under this title.   
 
6.4.3.6.:  Notice of Availability of Premium Assistance:  Please describe the 
procedures that assure that if a State provides premium assistance 
subsidies under this section, it must:  1) provide as part of the application 
and enrollment process, information describing the availability of 
premium assistance and how to elect to obtain a subsidy; and 2) establish 
other procedures to ensure that parents are fully informed of the choices 
for child health assistance or through the receipt of premium assistance 
subsidies (section 2105(c)(10)(K)).   
 
6.4.3.6.1.   Please provide an assurance that the State includes information 
about premium assistance on the CHIP application or enrollment 
form.   
 
 
Please note:  This form has not been approved by OMB pursuant to the PRA and States are not obligated 
to use it.  Page 29  State Health Official 
Section 9:  Strategic Objectives and Performance Goals and Plan Administration 
(section 2107) 
 
9.9.-APA  Describe the process used by the State to accomplish involvement of the 
public in the design and implementation of the plan and the method for 
ensuring ongoing public involvement.  (section 2107(c) and 42 CFR 
457.120(a) and (b))  
 
9.9.1  Describe the process used by the State to ensure interaction with 
Indian Tribes and organizations in the State on the development 
and implementation of the procedures required at 42 CFR section 
457.125.  (Section 2107(c) and 42 CFR 457.120(c)) 
 
  
9.10.  Provide a 1-year projected budget.  (section 2107(d) and 42 CFR 457.140)  
 
  The budget must describe:   
  Planned use of funds, including: 
  Projected amount to be spent on health services; 
  Projected amount to be spent on administrative costs, such as 
outreach, child health initiatives, and evaluation; and 
  Assumptions on which the budget is based, including cost per child 
and expected enrollment. 
  Projected sources of non-Federal plan expenditures, including any 
requirements for cost sharing by enrollees. 
 
States must include a separate budget line item to indicate the cost of providing coverage 
to premium assistance children. 
   
Please note:  This form has not been approved by OMB pursuant to the PRA and States are not obligated 
to use it.  Page 30  State Health Official 
Enclosure 4 
 
DRAFT                  DRAFT 
 
Additional State Plan Option for Providing Premium Assistance  
CHIP Medicaid Template 
 
29d 
 
STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT 
State: __________________         Medical Assistance Program 
________________________________________________________________________
_ 
Citation        Condition or Requirement 
________________________________________________________________________
_____ 
 
1906 of the Act    (c)  Premiums, Deductibles, Coinsurance and Other Cost Sharing 
Obligations  
 
      The Medicaid agency pays all premiums, deductibles, 
coinsurance and other cost sharing obligations for items and 
services covered under the State plan (subject to any nominal 
Medicaid copayment) for eligible individuals in employer-
based cost-effective group health plans. 
 
      When coverage for eligible family members is not possible 
unless ineligible family members enroll, the Medicaid agency 
pays premiums for enrollment of other family members when 
cost effective.  In addition, the eligible individual is entitled to 
services covered by the State plan which are not included in 
the group health plan.  Guidelines for determining cost 
effectiveness are described in section 4.22(h). 
 
1906A of the Act    (c)-1   Premiums, Deductibles, Coinsurance and Other Cost 
Sharing Obligations  
 
      The Medicaid agency pays all premiums, deductibles, 
coinsurance and other cost sharing obligations for items and 
services covered under the State plan, as specified in the 
qualified employer-sponsored coverage, without regard to 
limitations specified in section 1916 or section 1916A of the 
Act, for eligible individuals under age 19 who have access to 
and elect to enroll in such coverage. The eligible individual is 
entitled to services covered by the State plan which are not 
included in the employer-sponsored coverage. For qualified 
employer-sponsored coverage, the employer must contribute at 
least 40 percent of the premium cost.     
 
Please note:  This form has not been approved by OMB pursuant to the PRA and States are not obligated 
to use it.  Page 31  State Health Official 
      When coverage for eligible family members under age 19 is 
not possible unless an ineligible parent enrolls, the Medicaid 
agency pays premiums for enrollment of the ineligible parent, 
and, at the parents option, other ineligible family members.  
The agency also pays deductibles, coinsurance and other cost 
sharing obligations for items and services covered under the 
State plan for the ineligible parent.   
   
1902(a)(10)(F) of    (d)        The Medicaid agency pays premiums for individuals  
the Act      described in item 19 of Attachment 2.2-A. 
     
 
TN No.: ______    Approval Date __________    Effective Date
  ___________     
Supersedes TN No.______ 
Please note:  This form has not been approved by OMB pursuant to the PRA and States are not obligated 
to use it.