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 # 10-001 
                            CHIPRA # 12 
 
 
January 22, 2010 
 
            Re: CHIPRA Premium Grace Period 
 
Dear State Health Official: 
 
The Childrens Health Insurance Program Reauthorization Act of 2009 (CHIPRA), Public Law 
111-3, provides additional funding to enable States to provide health coverage for low-income 
children through the Childrens Health Insurance Program (CHIP) and Medicaid.  This letter 
provides general information on section 504 of CHIPRA, which institutes a statutory grace 
period during which CHIP enrollees may pay their monthly premiums before being disenrolled 
and includes new requirements for States to notify families of their rights and responsibilities 
with respect to payment of premiums.  Section 504 of CHIPRA amends the cost-sharing 
provisions at section 2103(e)(3) of the Social Security Act (the Act), and is applicable only to 
separate child health programs that impose premiums.  Section 504 is effective as of the first day 
of a new coverage period on or after February 4, 2009, the date of CHIPRA enactment. 
 
General Overview 
 
This new provision requires States to grant individuals enrolled in separate child health programs 
a 30-day grace period, from the beginning of a new coverage period, to pay any required 
premium before enrollment may be terminated.  The new coverage period will begin the month 
following the last period for which a premium was paid.  States are required to inform CHIP 
enrollees that failure to pay any required premium within at least 30 days after the beginning of a 
new coverage period will result in termination of coverage.  This notice must be sent to the 
family no later than seven days after the first day of the grace period.  The State must provide 
this same grace period and notice for each coverage period for which a premium has not been 
received.  Regulations in effect prior to CHIPRA also require that States provide families with an 
opportunity to show that their income has changed and as a result, may qualify for a different  
premium amount. The notice will provide States with the opportunity to assure that families have 
this information as soon after enrolling as possible. 
 
Section 504 also requires States to inform enrollees of their right to challenge a proposed 
termination of coverage for failure to pay the premium, consistent with regulatory requirements 
for disenrollment protections at 42 CFR 457.570.  Regulations in effect prior to CHIPRA further 
require timely notice before termination of coverage and an opportunity for individuals to seek a  Page 2  State Health Official 
review of their termination; for example, if the individual believes the premium was, in fact, paid 
in a timely manner. 
 
 
Example of Premium Grace Period Notice 
In this instance, a familys premium is due by September 30 for the new coverage period 
beginning October 1.  If the premium is not received by September 30, the State must send a 
notice to the family no later than eight days into the new coverage period (that is, seven days 
after the first day of the coverage period), or by October 8, that payment must be received by 
October 30 (the end of the grace period) or the individual(s) enrolled in coverage will be 
terminated.  If the premium payment for October is received by October 30, coverage continues; 
if payment is not received by October 30, the enrollee(s) can be terminated from coverage, 
provided all Federal regulations regarding notice and appeal rights have been met.   
 
Section 504 does not specify the earliest date by which States must provide notice to enrollees 
about the premium grace period.  While the Centers for Medicare & Medicaid Services (CMS) 
could give States some flexibility on this point, it is consistent with the establishment of the 
premium grace period that notice be given nearer to the beginning of the new coverage period (in 
the example above, within a short time before or after October 1).  
 
Existing Regulations on Title XXI Cost Sharing Notice and Review Rights 
 
While section 504 of CHIPRA pertains only to the premium grace period, the following 
discussion outlines the existing regulations that relate to this provision: 
 
Changes in Income 
Regulations at 42 CFR 457.570(b) require States to provide families an opportunity to show that 
their income has declined before coverage is terminated for non-payment of the premium.  States 
should evaluate the familys income and family size, in the event that a change might qualify the 
CHIP enrollee(s) for Medicaid eligibility.  This requirement remains in effect and is unchanged 
by CHIPRA. 
 
Timely Notice 
Existing regulations at 42 CFR 457.1180 require States to provide timely written notice of 
determinations subject to review, including termination for failure to pay a premium, and the 
individuals right to review of termination.  Section 504 of CHIPRA explicit establishes a notice 
requirement of not more than seven days; that is, the notice must be provided within seven days 
after the first day of the grace period, and reiterates the current requirement, described below, to 
provide notice of the right to challenge the termination. 
 
 
Review of State Agency Decisions 
Current regulations at 42 CFR 457.1130 and 42 CFR 457.570(c) require States to give CHIP 
enrollees an opportunity for State review of a decision to terminate enrollment based on a failure 
to pay cost sharing, including premiums.  Enrollment continues during the review process, as 
specified in 42 CFR 457.1170.   Page 3  State Health Official 
 
The review process to address disenrollment from coverage for failure to pay a premium is 
described in regulation at 42 CFR 457.1120 and must be described in Section 8.7 of the State 
child health plan, related to cost sharing and payment.  These regulations require States to 
implement one of two review processes - either a program specific review process that complies 
with CHIP regulations; or a Statewide Standard Review process that complies with the 
requirements for all health insurance issuers in the State.    
 
A program-specific review must be timely and impartial.  Enrollees have a right to 
representation, review their files, participate in the review, and receive a written decision.  If the 
State follows a program specific review process, then current CHIP regulations at 42 CFR 
457.1170 require coverage to continue, pending the completion of the review or challenge of a 
decision to disenroll for failure to pay a premium.   
 
Next Steps 
 
As noted above, the premium grace period provision was effective upon enactment of CHIPRA 
and States with separate child health programs that impose premiums are expected to be in 
compliance with this new provision immediately, unless State legislative authority is needed to 
come into compliance.  States that still need to make changes in their procedures should contact 
CMS for technical assistance as needed.  We will continue to work with States to implement 
these provisions in a manner that is consistent with the statute.   
 
Questions and answers that provide further clarification and guidance are enclosed with this 
letter.  If you have questions regarding this guidance, please send an e-mail to 
CMSOCHIPRAQuestions@cms.hhs.gov or contact Ms. Victoria Wachino, Director, Family and 
Childrens Health Programs Group, at (410) 786-5647. 
 
            Sincerely, 
 
            /s/ 
 
Cindy Mann  
Director  
Center for Medicaid and State Operations  
 
Enclosure  
 
cc:  
 
CMS Regional Administrators  
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
  Page 4  State Health Official 
Ann C. Kohler  
NASMD Executive Director  
American Public Human Services Association  
 
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures  
 
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 5  State Health Official 
Enclosure 
 
Questions and Answers Regarding the Premium Grace Period 
 
Question 1:  Will States have to do this every month?  For people who get behind on their 
payments, there could be an endless cycle of grace periods and late notifications. 
 
Answer:   Yes, States must comply with this provision for each new coverage period for which a 
premium has not been received.  States must provide the family with a notice giving a certain 
date by which the payment must be received or coverage will be terminated, pursuant to 
disenrollment protections at 42 CFR 457.570.  States must continue to provide coverage until the 
period has expired, at which point coverage may be terminated if a payment has not been 
received, unless coverage must continue while the termination decision is under formal review in 
accordance with the enrollees review rights. We welcome hearing from States on promising 
practices and will commit to providing technical assistance as States work to implement this 
provision.   
 
Question 2:  Are individuals required to appeal termination within a specified timeframe? 
 
Answer:  Neither CHIPRA nor the current CHIP regulations specify a timeframe within which 
an individual must request review of a decision or challenge a termination based on failure to pay 
a premium, so States can decide this timeframe within the parameters of existing regulations at 
42 CFR 457.570.    
 
Question 3:  Section 504 of CHIPRA requires a 30-day grace period and a notice to be sent 
to enrollees who failed to make timely premium payments.  The notice is to inform the 
enrollee that if payment is not received by the end of the grace period that the coverage will 
terminate.  There is no indication of what date the coverage should be terminated.  At what 
point are States permitted to terminate coverage? 
 
Answer:  The law allows flexibility in this regard  States are permitted to terminate coverage at 
the end of the grace period if the premium is not paid, or they may grant beneficiaries time 
beyond the required period.   The intent is to allow the enrollee time within the new coverage 
period to pay the overdue premium before coverage is terminated.  States must explain in their 
State plans the consequences for an enrollees failure to make a premium payment, including 
how the grace period functions. 
  Page 6  State Health Official 
Question 4:  Is it acceptable to retroactively terminate the coverage effective with the first 
day of the grace period if we inform the enrollee in the notice that if payment is not 
received, any medical claims during the grace period will be the responsibility of the 
enrollee to pay?   Or is it expected that the State and Federal Government will pay the full 
amount for that month of coverage?  
 
Answer:  No, it is not acceptable to retroactively terminate coverage.  The purpose of the grace 
period is for enrollment and coverage to continue, so a State may not hold the enrollee 
accountable for any medical claims during the grace period.  The State may submit any claims 
during the grace period and will receive the enhanced CHIP match. 
 
Question 5:  Can an individual re-enroll after termination?  Is there a specific period of 
time before re-enrollment can occur? 
 
Answer:  Current CHIP regulations at 42 CFR 457.570(a) require States to give enrollees an 
opportunity to pay past due premiums, copayments, coinsurance deductibles or similar fees prior 
to disenrollment.  There is no statutory or regulatory authority on re-enrollment after termination.  
States will decide on the timing of re-enrollment and any required payment for prior periods of 
enrollment. 
 
Question 6:  Does CMS have a model or some examples of grace period notices that it could 
share with the States?  
 
Answer:  Yes.  CMS is in the process of gathering examples from States and will share them as 
soon as possible.  Simple, easy-to-understand notices that meet the regulatory requirements will 
help assure that families are properly informed of their rights and responsibilities with respect to 
premiums and other cost sharing.