33810 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 431, 433, 435, 436, and

457

[HCFA–2006–IFC]

RIN 0938–AL00

State Child Health; Revisions to the

Regulations Implementing the State

Children’s Health Insurance Program

AGENCY: Health Care Financing

Administration (HCFA), HHS.

ACTION: Interim final rule with comment

period; revisions, delay of effective date,

and technical amendments to final rule.

SUMMARY: Title XXI authorizes the State

Children’s Health Insurance Program

(SCHIP) to assist State efforts to initiate

and expand the provision of child

health assistance to uninsured, lowincome children. On January 11, 2001

we published a final rule in the Federal

Register to implement SCHIP that has

not gone into effect. This interim final

rule further delays the effective date,

revises certain provisions and solicits

public comment, and makes technical

corrections and clarifications to the

January 2001 final rule based on further

review of the comments received and

applicable law. Only the provisions set

forth in this document have changed.

All other provisions set forth in the

January 2001 final rule will be

implemented without change.

DATES: Effective Date: The effective date

of the January 2001 rule (66 FR 2490),

delayed on February 26, 2001 (66 FR

11547) and on June 11, 2001 (66 FR

31178) until June 25, 2001, is delayed

for an additional 60 days, and will be

effective, as amended by this rule, on

August 24, 2001.

Comment date: Comments will be

considered if we receive them at the

appropriate address, as provided below,

no later than 5 p.m. on July 25, 2001.

Compliance dates: To the extent

contract changes are necessary, States

will not be found out of compliance

until the next contract cycle. By

‘‘contract cycles’’, we mean the earlier

of the date of the original period of the

existing contract, or the date of any

extension or modification that would

change the term of the contract. To the

extent legislative changes are necessary,

States will not be found out of

compliance until the conclusion of the

next legislative cycle following the

effective date of the rule.

ADDRESSES: In commenting, please refer

to file code HCFA–2006–IFC. Because of

staff and resource limitations, we cannot

accept comments by facsimile (FAX)

transmission.

Mail written comments (one original

and three copies) to the following

address only: Health Care Financing

Administration, Department of Health

and Human Services, Attention: HCFA–

2006–IFC, P.O. Box 8016, Baltimore,

MD 21244–1850.

Please allow sufficient time for mailed

comments to be timely received in the

event of delivery delays.

If you prefer, you may deliver (by

hand or courier) your written comments

(one original and three copies) to one of

the following addresses:

Room 443–G, Hubert H. Humphrey

Building, 200 Independence Avenue,

SW., Washington, DC 20201, or

Room C5–16–03, 7500 Security

Boulevard, Baltimore, MD 21244–

1850.

Comments mailed to the addresses

indicated as appropriate for hand or

courier delivery may be delayed and

could be considered late.

For information on viewing public

comments, see the beginning of the

SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Regina Fletcher, (410) 786–3293;

Diona Kristian for subpart A, State plan,

(410) 786–3283;

Maurice Gagnon for subpart C,

Eligibility, (410) 786–0619;

Regina Fletcher for subpart D, Benefits,

(410) 786–3293;

Dana Pryor for subpart E, Cost sharing,

(410) 786–1304;

Kathleen Farrell for subpart G, Strategic

planning,(410) 786–1236;

Maurice Gagnon for subpart I, Program

integrity (410) 786–0619;

Terese Klitenic for subpart J, Allowable

waivers, (410) 786–5942; and

Christina Moylan for subpart K,

Applicant and enrollee protections

(410) 786–6102.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

Comments received timely will be

available for public inspection as they

are received, generally beginning

approximately 3 weeks after publication

of a document, at the headquarters of

the Health Care Financing

Administration, 7500 Security

Boulevard, Baltimore, Maryland 21244,

Monday through Friday of each week

from 8:30 a.m. to 4 p.m. To schedule an

appointment to view public comments,

call telephone number: (410) 786–7195.

To order copies of the Federal

Register containing this document, send

your request to: New Orders,

Superintendent of Documents, P.O. Box

371954, Pittsburgh, PA 15250–7954.

Specify the date of the issue requested

and enclose a check or money order

payable to the Superintendent of

Documents, or enclose your Visa or

Master Card number and expiration

date. Credit card orders can also be

placed by calling the order desk at (202)

512–1800 or by faxing to (202) 512–

2250. The cost for each copy is $9. As

an alternative, you can view and

photocopy the Federal Register

document at most libraries designated

as Federal Depository Libraries and at

many other public and academic

libraries throughout the country that

receive the Federal Register. This

Federal Register document is also

available from the Federal Register

online database through GPO access, a

service of the U.S. Government Printing

Office. The Website address is http://

www.access.gpo.gov/nara/index.html.

I. Background

Section 490l of the BBA, Public Law

105–33, as amended by Public Law 105–

100, added title XXI to the Act. Title

XXI authorizes the State Children’s

Health Insurance Program (SCHIP) to

assist State efforts to initiate and expand

the provision of child health assistance

to uninsured, low-income children.

Under title XXI, States may provide

child health assistance primarily for

obtaining health benefits coverage

through (1) a separate child health

program that meets the requirements

specified under section 2103 of the Act;

(2) expanding eligibility for benefits

under the State’s Medicaid plan under

title XIX of the Act; or (3) a combination

of the two approaches. To be eligible for

funds under this program, States must

submit a State child health plan (State

plan), which must be approved by the

Secretary.

SCHIP is jointly financed by the

Federal and State governments and is

administered by the States. Within

broad Federal guidelines, each State

determines the design of its program,

eligibility groups, benefit packages,

payment levels for coverage, and

administrative and operating

procedures. SCHIP provides a capped

amount of funds to States on a matching

basis for Federal fiscal years (FY) 1998

through 2007. Federal payments under

title XXI to States are based on State

expenditures under approved plans

effective on or after October 1, 1997.

On January 11, 2001, we published a

final rule to implement SCHIP, which

has not gone into effect (66 FR 2490).

That final rule contained provisions

regarding State plan requirements and

plan administration, coverage and

benefits, eligibility and enrollment,

enrollee financial responsibility,

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33811

strategic planning, substitution of

coverage, program integrity, waivers,

and applicant and enrollee protections.

The January 2001 final rule also

included provisions to expand State

options for coverage of children under

the Medicaid program. On February 26,

2001, we delayed the effective date of

the January 11, 2001 final rule for 60

days (66 FR 11547). On June 11, 2001,

we delayed the effective date an

additional 14 days, until June 25, 2001.

We are further delaying the effective

date of the January 11, 2001 final rule

so that those provisions which were not

revised by this interim final rule, as well

as those which have been revised by

this interim final rule (which are

discussed in detail below), will all

become effective on August 24, 2001.

After further Departmental review of

the January 2001 final rule, and

additional consideration of the public

comments received on the November 8,

1999 proposed rule (64 FR 60882), we

have decided to make revisions to

certain provisions set forth in the

January 2001 final rule. We note that

only the provisions specified in this

document have changed. All other

provisions set forth in the January 2001

final rule will be implemented without

change.

We note that we previously obtained

public comments on the issues set forth

in this document. We welcome parties

to submit further comments on the

issues presented in this interim final

rule with comment period. To the extent

that it is necessary to address any new

concerns that are raised, we will do so.

II. Summary of Changes to the January

11, 2001 Final Rule

We received 109 timely comments on

the November 8, 1999 proposed rule,

which we responded to in the January

2001 final rule. As stated above, after

further review of the public comments

we are revising our responses to some

of the comments set forth in the January

2001 final rule and revising the

corresponding regulatory text. In

addition, in this interim final rule, we

are making certain technical changes to

correct errors in the January 2001 final

rule. In the following discussion we

summarize the relevant public

comments and present our revised

responses.

A. State Plan Requirements: Eligibility,

Screening, and Enrollment

1. Eligibility Standards (§ 457.320)

In the January 2001 final rule,

§ 457.320(b)(4) provided that a State

may not require that any individual

provide a social security number (SSN),

including the SSN of the applicant child

or that of a family member whose

income or resources might be used in

making the child’s eligibility

determination.

Comment: We received a large

number of comments related to

obtaining social security numbers

(SSNs) during the application process.

Many commenters specifically

supported the prohibition against

requiring the SSN in separate child

health programs, while others

recommended that SSNs be required for

applicants as long as there is a Medicaid

screen and enroll requirement. Some

commenters indicated that the

prohibition against requiring SSNs for a

separate child health program while

requiring it for Medicaid will cause

referral, tracking and coordination

problems; handicap enrollment in States

using a joint application; make it

difficult to implement the screen and

enroll provision; reinforce stereotypes;

and prevent automatic income

verification in States that have reduced

the documentation requirements.

Another added that this prohibition

would impede efforts to identify

children with access to State health

benefits. (66 FR 2541)

Response: We previously responded

that the requirements and prohibitions

related to the use of a social security

number were statutory, based upon our

interpretation of language in the Privacy

Act. The Privacy Act makes it unlawful

for States to deny benefits to an

individual based upon that individual’s

failure to disclose his or her social

security number, unless such disclosure

is required by Federal law or was part

of a Federal, State or local system of

records in operation before January 1,

1975. Additionally, we responded that

section 1137(a)(1) of the Act requires

States to condition eligibility for

specific benefit programs, including

Medicaid, upon an applicant (and only

the applicant) furnishing his or her SSN.

Because SCHIP was not one of the

programs identified in section 1137 of

the Act, and title XXI does not require

applicants to disclose their SSNs, we

concluded that States were prohibited

under the Privacy Act from requiring

applicants to do so.

In our previous response, however,

we did not discuss subsequent revisions

to the Privacy Act that provided

exceptions for ‘‘general public

assistance programs’’ because we had

interpreted that language to refer to only

State-only welfare programs. Further

investigation of the conference reports

discussing the modifications made by

Congress to the Privacy Act, namely the

exceptions for ‘‘general public

assistance programs,’’ revealed that

Congress had a broader intent than

referring to State-only welfare programs.

We now interpret that term in a broader

sense, and we believe SCHIP is a

program that qualifies as an exception

under the Privacy Act. We have been

aware through our dialogue with the

States that this provision inhibited the

screen and enroll process, verification of

private insurance, payment of premium

assistance to an employee, and the

evaluation capabilities for many States.

The requirement also created significant

administrative difficulties for those

States that use joint applications with

Medicaid.

Therefore, we are revising the final

regulation to provide States with the

option to require a SSN of applicants for

SCHIP. However, similar to the

requirements for Medicaid, only the

SSN of the individual who is applying

for benefits can be required as a

condition of eligibility. States may not

require other individuals not applying

for coverage, including parents or other

family members, to provide SSNs as a

condition of the child’s eligibility for

either a Medicaid expansion program or

a separate child health program. Section

457.320(b)(4) has been revised

accordingly. We specifically solicit

comments on the impact that this

provision may have on immigrant

populations.

Because we are now permitting States

to require a social security number for

each individual who is requesting

services, we have also added a new

provision at § 457.340(b) to assure

necessary protections for use of a social

security number consistent with the

requirements currently set forth in the

Medicaid regulations at § 435.910. This

provision requires States to disclose the

purpose for obtaining the social security

number and to assist the applicant in

obtaining or verifying an existing social

security number. Section 435.910 also

prohibits the State from denying or

delaying services to an otherwise

eligible individual pending issuance or

verification of the individual’s social

security number. This provision makes

the procedures and protections for a

separate child health program consistent

with procedures and protections under

Medicaid. Consistency between the

programs will facilitate the application

process, particularly in States that use a

joint application. We also note that in

accordance with § 457.1110(b) of the

January 2001 final rule, States are

required to comply with regulations set

forth at subpart F of part 431. These

requirements specify that the State must

provide safeguards that restrict the use

or disclosure of information concerning

33812 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

applicants and recipients to purposes

directly connected with administration

of the plan.

2. Eligibility Screening and Facilitation

of Medicaid Enrollment (§ 457.350)

Paragraphs (e) and (g) of § 457.350 of

the January 2001 final rule required

States to provide SCHIP applicants with

written information on the Medicaid

program, but did not indicate the degree

of flexibility as to the format and timing

of that information.

Comment: Several commenters

expressed their concern about the

requirements that certain information

about Medicaid should be provided to

families if a State uses a screening

procedure other than a full

determination of Medicaid eligibility

(66 FR 2547). Commenters indicated

that they were concerned that this

information could be confusing to

families whose children were found

eligible for a separate child health

program. Commenters were also

concerned that providing this

information would slow down the

eligibility determination process.

Response: We previously responded

by providing clarifying language in

§ 457.350(e) and (g) regarding a State’s

responsibility to facilitate enrollment in

Medicaid and to assist families in

making informed application decisions.

In these sections, we clarified that States

must inform the family, in writing, that

based on a limited review, the child

does not appear to be eligible for

Medicaid. We also required that a State

provide certain information about the

State’s Medicaid program to enable a

family to make an informed decision

about applying for Medicaid or

completing the Medicaid application

process. These materials are to be

provided in a simple and

straightforward manner that can be

understood by the average applicant and

that meets all applicable civil rights

requirements.

Upon further consideration of these

public comments, we have decided to

provide additional clarification and

flexibility for States in meeting this

requirement. We have added

§§ 457.350(e)(4) and 457.350(g)(3) to

reflect that the written format and

timing of information regarding

Medicaid eligibility, benefits, and the

application process will be determined

by the State. However, States will still

be required to provide families with

information about Medicaid eligibility,

benefits, and the application process.

The State must provide the information

when the child is found potentially

ineligible for Medicaid through a

limited eligibility screening and when

the child is found potentially eligible for

Medicaid as described in § 457.350(e)

and (g). These new revisions clarify that

the required information may be in the

form of handouts, brochures, or other

written material provided during the

application process. This approach may

help to avoid lengthy, complex

eligibility notices that are often

confusing to families. As previously

noted in the preamble, we are working

to identify appropriate notice language

and best practices and will disseminate

this material to States (66 FR 2548). We

note that, as discussed in detail below

in section II.A.3. of this document, we

have removed § 457.350(f)(5)(iii).

3. Presumptive Eligibility § 457.355

In the January 2001 final rule, we

included § 457.355 regarding

presumptive eligibility under a separate

child health program as authorized

under section 803 of BIPA. The BIPA

had been enacted less than a month

before the publication of the January

2001 final rule. The revisions to this

section are technical changes to

accurately reflect BIPA as we now

understand it. These changes assure that

the BIPA provision authorizing

presumptive eligibility under a separate

child health program is effectively and

efficiently implemented.

Comment: We received one comment

urging HCFA to include information

about presumptive eligibility under a

separate child health program in the

preamble to the regulation that

implemented the SCHIP financial

provisions (65 FR 33616). Another

urged HCFA to encourage States to

provide presumptive eligibility for

children as this is particularly important

to children experiencing a mental health

crisis (66 FR 2533).

Response: In our previous response,

we stated that States were given explicit

authority to implement a presumptive

eligibility procedure under its separate

child health program with the

enactment of the Benefits Improvement

and Protection Act of 2000 (BIPA) (Pub.

L. 106–554). Under section 803 of BIPA,

States were given the option to establish

a presumptive eligibility procedure and

to determine which entities must

determine presumptive eligibility,

subject to the approval of the Secretary.

Under the presumptive eligibility

established under Medicaid and carried

over to SCHIP under the BIPA

legislation, a family has until the end of

the month following the month in

which the presumptive eligibility

determination is made to submit an

application for the separate child health

program (or the presumptive eligibility

application may serve as the application

for the separate child health program, at

State option). If an application is filed,

the presumptive eligibility period

continues until the State makes a

determination of eligibility under the

separate child health program (subject

to the Medicaid screening

requirements). In accordance with

§ 457.355, if a child enrolled in a

separate child health program on a

presumptive basis is later determined to

have been eligible for the separate child

health program, the costs for that child

during the presumptive eligibility

period will be considered expenditures

for child health assistance for targeted

low-income children and subject to the

enhanced FMAP. If the child is found to

have been Medicaid-eligible during the

period of presumptive eligibility, the

costs for the child during the

presumptive eligibility period can be

considered Medicaid program

expenditures, subject to the appropriate

Medicaid FMAP (the enhanced match

rate or the regular match rate,

depending on whether the child is an

optional targeted low-income child).

We further stated that BIPA

authorizes presumptive eligibility under

separate child health programs in

accordance with section 1920A of the

Act, and the statute allows health

coverage expenditures for children

during the presumptive eligibility

period to be treated as health coverage

for targeted low-income children when

the child is ultimately found not to be

eligible for either the separate child

health program or Medicaid, as long as

the State implements presumptive

eligibility in accordance with section

1920A and § 435.1101. This policy

preserves State flexibility to design

presumptive eligibility procedures and

allows States that adopt the

presumptive eligibility option in

accordance with § 435.1101 to no longer

be constrained by the 10 percent cap.

Upon further consideration and

analysis of BIPA, we are correcting our

previous analysis with respect to

expenditures for a child who is found to

have been Medicaid-eligible during a

period of presumptive eligibility. Our

analysis now concludes that the title

XXI enhanced FMAP rate is available

for services provided to a child during

a period of presumptive eligibility

implemented in accordance with

section 1920A and § 435.1102. Since

Medicaid presumptive eligibility is paid

at the FMAP rate generally available in

Medicaid, we believe SCHIP

presumptive eligibility should be paid

at the rate generally available under

Title XXI, the enhanced FMAP rate. The

expenditures for this period of

presumptive eligibility will be

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33813

considered child health assistance that

is not subject to the 10 percent limit on

outreach and health services initiatives,

regardless of whether the child is

ultimately determined eligible for the

separate child health program, eligible

for Medicaid, or ineligible for both

programs. SCHIP presumptive eligibility

is not one of the listed categories of

expenditures limited by section

2105(c)(2)(A), as amended by BIPA.

Accordingly, we have revised § 457.355,

‘‘Expenditures for coverage during a

period of presumptive eligibility’’ to

indicate that these expenditures will be

considered as child health assistance

when implemented in accordance with

§ 435.1102. States that adopt

presumptive eligibility in both their

separate child health program and

Medicaid expansion program should

presumptively enroll children into the

appropriate program based on their

family income under the highest

applicable income standard for

Medicaid or the separate child health

program in order to avoid the need to

move children between programs when

a final eligibility determination is made.

Comment: Two commenters

recommended that HCFA encourage

States that have separate child health

programs to provide newborn infants

the same eligibility protections granted

under Medicaid. Another recommended

that HCFA allow pre-enrollment of

newborns or automatic enrollment of

newborns of pregnant teens enrolled in

a separate child health program (66 FR

2541).

Response: We previously responded

that the statute does not provide for

automatic and continuous eligibility for

infants under a separate child health

program but suggested using

‘‘presumptive eligibility’’ to enroll

children in a separate child health

program pending completion of the

application process as a means to

address this issue. We stated that, if the

infant is ultimately found not to be

eligible for Medicaid, costs of services

provided during the period of

presumptive eligibility may be treated

as health coverage for targeted lowincome children that is not subject to

the 10 percent cap. This would apply

whether or not the child is ultimately

found eligible for the separate child

health program, as long as the State

implements presumptive eligibility in

accordance with section 1920A of the

Act and § 435.1101.

As a result of our review of the

previous response and section 803 of

BIPA, we clarify here that when a

newborn is enrolled in a separate child

health program pending a formal

determination of eligibility for Medicaid

or SCHIP, the costs for the presumptive

eligibility period are considered child

health assistance. These costs are not

subject to the 10 percent cap on

administration and health services

initiatives, as long as presumptive

eligibility is implemented in accordance

with § 435.1102.

Comment: A few commenters

indicated that the regulations should

clarify that a child can be enrolled in a

separate child health program while

undertaking the full Medicaid

application process. Other commenters

recommended enrolling a child in a

separate child health program for 45

days to allow processing of the

Medicaid application (66 FR 2548).

Response: In our previous response to

these comments, we stated that a State

has the option to provisionally enroll or

retain current enrollment of a child who

has been found potentially eligible for

Medicaid in a separate child health

program, for a limited period of time, as

specified by the State, pending a final

eligibility decision. We stated, however,

that a child cannot be ‘‘eligible’’ for the

separate program unless a Medicaid

application is completed and a

determination made that the child is not

eligible for Medicaid.

In that previous response, we

indicated that BIPA permits health

coverage expenditures for children

during the presumptive eligibility

period to be treated as health coverage

for targeted low-income children

whether or not the child is ultimately

found eligible for the separate child

health program, as long as the State

implements presumptive eligibility in

accordance with section 1920A and

§ 435.1101. We stated that, in that

circumstance, the State would no longer

be constrained by the 10 percent cap.

As a result of our review of the

previous response and section 803 of

BIPA, we clarify here that a child may

be provisionally enrolled or retain

current eligibility in a separate program,

for a limited period of time, pending a

final eligibility determination for

Medicaid or SCHIP. When

implementing presumptive eligibility

consistent with § 435.1102, the

presumptive eligibility period would

begin on the date that a qualified entity

determines that the child has family

income below the applicable income

level and end on the day a Medicaid or

separate child health program eligibility

determination is made, or, if an

application is not filed, the last day of

the month following the date

presumptive eligibility began. The costs

are considered child health assistance

and are not subject to the 10 percent cap

on administration and health services

initiatives, as long as presumptive

eligibility is implemented in accordance

with § 435.1102.

Comment: Many commenters were

concerned generally about families

‘‘falling through the cracks’’ because of

the back and forth between separate

child health programs and Medicaid or

going without any health care for a

period of time because of the process

requirements. A significant number

suggested that the regulation provide

that a State cannot require a child to

reapply for a separate child health

program if the child is screened

potentially eligible for Medicaid, but

later determined ineligible for Medicaid.

Most suggested that the separate child

health program application should be

suspended or provisionally denied

when a child is found to be potentially

eligible for Medicaid, pending a final

Medicaid eligibility determination (66

FR 2549).

Response: We previously responded,

in part, by clarifying § 457.350(f)(1) to

indicate that a State may suspend, deny

or provisionally deny the separate child

health application of a child screened

potentially eligible for Medicaid.

Putting the application into suspense or

provisionally denying an application

would preserve the child’s initial

application date so prompt follow-up

could occur when the State agency or

contractor learns that the child has been

determined ineligible for Medicaid. The

child’s initial application would then be

reactivated. We indicated that the

regulation at § 457.350(f)(5) requires

that, if a child screened potentially

eligible for Medicaid is ultimately

determined not to be eligible for

Medicaid, the child’s original

application for the separate child health

program must be reopened or

reactivated and his/her eligibility under

the separate child health program

determined without a new application.

We also noted that a State could

establish a presumptive eligibility

process for a separate child health

program to enroll an applicant in the

separate child health program pending

the formal determination of Medicaid

eligibility.

After reviewing our previous response

and section 803 of BIPA, we now

provide further clarification that

provisional denial or suspension of an

application for a separate program

would permit the child to be

presumptively enrolled pending the

outcome of a Medicaid eligibility

determination. This presumptive

eligibility period would be time limited.

As indicated previously, when

implementing presumptive eligibility

consistent with § 435.1102, the

33814 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

presumptive eligibility period would

begin on the date that a qualified entity

determines that the child has family

income below the applicable income

level and end on the day a Medicaid

eligibility determination is made, or, if

a Medicaid application is not filed, the

last day of the month following the date

presumptive eligibility began. However,

if the application for the separate child

health program is denied, then

presumptive eligibility in the separate

child health program would end.

In addition, we have decided to

withdraw § 457.350(f)(5)(iii). While it is

ordinarily advisable for States to reopen

or reactivate the child’s original

application for the separate child health

program following a denial of Medicaid

eligibility, there may be circumstances

in which a new application would be

warranted. For example, considerable

time may elapse following the initial

application, for reasons beyond the

State’s control, and information on the

initial application may no longer be

valid. Therefore, while we strongly

encourage States to reactivate the

original application, we have removed

§ 457.350(f)(5)(iii) in order to allow

State discretion in this matter.

B. Secretary-Approved Coverage

(§ 457.450)

Section 457.450 of the January 2001

final rule provided examples of

Secretary-approved coverage. After

further review of the public comments,

we are amending our prior responses

and revising the final rule. This revision

is intended to clarify that these

examples were not meant to be

exclusive. The revision also expands the

list of examples to ensure that the

regulation clearly reflects the breadth of

possible Secretary-approved coverage.

Comment: One commenter argued

that ‘‘Secretary-approved coverage’’

should provide HCFA with greater

flexibility to approve SCHIP State plans.

The commenter pointed out that

Secretary-approved coverage is not

simply another name for benchmark

coverage; title XXI provides for

Secretary-approved coverage as a

flexible way for HCFA to approve a

State plan. The statute requires no

actuarial analysis for this option but

rather requires only that the coverage be

deemed ‘‘appropriate’’ for the targeted

population.

The commenter recommended that

the regulation should simply indicate

that States must demonstrate, to the

Secretary’s satisfaction, that their

coverage meets the needs of their SCHIP

populations. The manner in which

States make this demonstration should

be left flexible in accordance with the

discretion accorded to the States by title

XXI (66 FR 2567).

Response: We previously responded

to this comment by stating that the

regulation text at § 457.450 was not

meant to be an exhaustive list of

examples of Secretary-approved

coverage and that we remained open to

reviewing other proposals for Secretaryapproved coverage.

Upon further consideration of this

comment; however, we are revising the

regulation text to make our intent clear.

We have added the phrase ‘‘but is not

limited to’’ to clarify our intent to

consider other benefit packages under

Secretary-approved coverage. In

addition, we have revised § 457.450(b)

to permit comprehensive coverage for

children under a Medicaid

demonstration project approved by the

Secretary under section 1115 of the Act

to be considered Secretary-approved

coverage. At § 457.450(c), we permit

coverage that includes the full benefit

for early and periodic screening,

diagnosis, and treatment or that the

State has extended to the entire

Medicaid population in the State to be

considered Secretary-approved

coverage. We have also added a new

§ 457.450(e) to clarify that States may

offer coverage that is the same as that

provided by Florida, New York and

Pennsylvania under their existing

comprehensive State-based coverage

programs. These benefit packages were

acknowledged in the original title XXI

statute as providing appropriate

coverage for children by permitting

those States to continue using the same

coverage under SCHIP. These

modifications will support our

consideration of a wider range of benefit

packages and provide additional

flexibility to States in proposing

coverage that is appropriate for the

target populations.

C. State Assurance of Access to Care

and Procedures to Assure Quality and

Appropriateness of Care (§ 457.495(d))

Section 457.495(d) of the January

2001 final rule provided that decisions

related to the prior authorization of

health services must be completed in

accordance with the medical needs of

the patient, within 14 days after receipt

of a request for services. After further

review of the comments, we are

amending our prior responses and

revising the final rule.

Comment: Several commenters

recommended that HCFA identify time

frames for decisions related to prior

authorization of services to assure that

individuals have access to services

without unreasonable delay and that

services are provided as expeditiously

as an enrollee’s health condition

requires.

Response: In the January 2001 final

rule, we responded that we agreed with

the commenter’s recommendations and

provided time frames for decisions

related to prior authorization of

services. These time frame requirements

provided that the decision must be

completed in accordance with the

medical needs of the patient, within 14

days after receipt of a request for

services. We also allowed for a possible

extension of up to 14 days if the

enrollee requested the extension or the

physician or health plan determined

that additional information was needed.

Upon further consideration, we have

decided to amend § 457.495(d) to allow

States to use either the standards

established in § 457.495(d) or their

existing State law procedures regarding

prior authorization. Allowing States to

use their existing State laws will reduce

the administrative burden of these

regulations for States with premium

assistance programs, as States usually

do not have direct contractual

relationships with employers group

health plans. Given that most States

already have systems in place to

regulate private health plans, this

change in policy will allow them to use

those existing systems. Those States that

do not have such systems in place must

comply with the standards set forth in

§ 457.495(d).

D. Subpart E—State Plan Requirements:

Enrollee Financial Responsibilities

1. Computation of the Cumulative CostSharing Maximum (§ 457.560(a))

Section 457.560(a) of the January 2001

final rule required States to count costsharing amounts that the family has a

legal obligation to pay in computing

whether the family has met the

cumulative cost-sharing maximum.

‘‘Legal obligation to pay’’ is defined as

amounts a provider actually charges the

family for covered services, and any

other amounts for which payment is

required under applicable State law for

covered services to eligible children,

even if the family never pays those

amounts. After further review of public

comments and the applicable statutory

requirement, we are revising these

provisions to provide greater State

flexibility in meeting the statutory

requirements and in protecting

beneficiaries.

Comment: A number of commenters

disagreed with the proposed definition

of ‘‘legal obligation’’ for use in

connection with counting cost-sharing

amounts against the cumulative costsharing maximum. They noted that it is

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33815

very difficult and time-consuming to

track payments that have not occurred.

One commenter suggested changing the

definition of the term ‘‘legal obligation’’

to only those cost-sharing amounts,

which families have actually paid (66

FR 2588).

Response: We previously responded

that to track incurred costs, States could

rely on documentation based upon

provider bills that indicate the

enrollee’s share rather than relying only

on evidence of payments made by the

enrollee. We did not adopt the

commenters’ suggestion because it

could result in families being legally

obligated to pay cost-sharing amounts in

excess of the cumulative maximum.

Upon further consideration of these

comments, we are removing the

definition of ‘‘legal obligation to pay’’ at

§ 457.560(a) because we have concluded

that it does not ensure that enrollees’

expenses are limited to the cost-sharing

maximum in each year as intended.

Requiring States to count incurred but

not yet paid costs at the time that they

are incurred could disadvantage some

families, such as families that arrange

payment plans. For these families, the

payments made in a subsequent year

would be counted in the year that they

are incurred and not the year paid,

which could result in the family paying

an amount above the maximum in the

subsequent year. Accordingly, we have

eliminated § 457.560(a) in order to allow

each State to define how it counts costsharing amounts against the cumulative

cost-sharing maximum.

2. Children with Family Incomes at or

Below 150 Percent of the FPL

(§ 457.560(b))

Section 457.560(b) of the January

2001 final rule provided that for

targeted low-income children with

family income at or below 150 percent

of the Federal poverty level (FPL), the

State may not impose premiums,

deductibles, copayments, coinsurance,

enrollment fees, or similar cost-sharing

charges that, in the aggregate, exceed 2.5

percent of total family income for the

length of the child’s eligibility period in

the State.

Comment: We received several

comments requesting that we reconsider

the 2.5 percent cumulative cost-sharing

maximum. These commenters raised

specific concerns regarding the 2.5

percent cumulative cost-sharing

maximum, including the following: the

provision is not supported by the

statute; it is very difficult to administer

two caps (2.5 percent and 5 percent) and

track against two caps; limits on

copayments and deductibles are already

found in § 457.555 and section

2103(e)(3)(A) of the Act; States have

already implemented flat cumulative

cost-sharing maximums that are

administratively efficient and provide

families with fluctuating incomes

greater stability; HCFA’s commissioned

study by George Washington University

clearly demonstrates that it is rare that

enrollees will reach the 5 percent costsharing maximum; and, when a limit is

set using a percentage, there is no need

to make the percentage less.

One of the commenters also noted

that the Medicaid maximum charges for

premiums and other cost-sharing

charges, which apply to families at or

below 150 percent of the FPL, are

minimal in amount and are not based

upon income or family size. As a result,

the addition of another level of cost

sharing (2.5 percent) adds to an already

complex cost-sharing structure, in this

commenter’s view. The commenter

added that the requirements are

virtually impossible to implement in a

program that subsidizes employer

sponsored insurance (66 FR 2588).

Response: We previously responded

that a lower cost-sharing maximum for

children is necessary in order for States

to comply with section 2103(e)(2)(B) of

the Act, which requires that separate

child health plans may only vary cost

sharing based on the family income of

targeted low-income children in a

manner that does not favor children in

families with higher incomes over

children in families with lower

incomes. We further explained that a

State could ease administration by

implementing a cost-sharing structure

that places a 2.5 percent cap on families

at all income levels or imposing

premiums rather than copayments.

We have reconsidered our policy

related to the cumulative cost-sharing

maximum for families with incomes at

or below 150 percent of the FPL. We

acknowledge that lower income families

have less disposable income to spend on

health services than families with

higher incomes. However, cost sharing

for children at or below 150 percent of

the FPL is limited to nominal amounts

under the statute and final rule. Because

of this limit on cost-sharing amounts for

children in families at or below 150

percent of the FPL, it is unlikely any

family in this income range would

approach spending 5 percent of income

on health services. The application of a

5 percent maximum to all income

ranges is sufficient to ensure that

children in higher income families are

not favored over lower income families.

Therefore, we are revising the

regulatory requirements at § 457.560 to

limit cumulative cost sharing to 5

percent of family income for all children

enrolled in SCHIP, regardless of family

income. Section 457.560(b) has been

removed and § 457.560(c), (now

§ 457.560(a)), has been revised

accordingly. States may apply a lower

cumulative cost-sharing maximum to

children in lower income families or

may place the same limit on children in

families at all income levels, so long as

the cost sharing maximum for eligible

children does not exceed 5 percent of

family income.

For the same reasons, we are revising

our cost-sharing requirements that we

would apply in evaluating a request for

the purchase of family coverage, as

discussed in the preamble of the January

11, 2001 final rule (66 FR 2622). Our

previous policy required that cost

sharing for the entire family, both adults

and children, must remain within the

cumulative cost-sharing maximum.

Upon further consideration, we are

revising this policy to require that only

the cost sharing for the children in the

family must be counted toward the

cumulative cost-sharing maximum.

Section 2103(e)(3)(B) specifies that cost

sharing with respect to all targeted lowincome children in the family may not

exceed 5 percent of such family’s

income for the year. Therefore, States

need not count an adult family

member’s cost sharing toward the

cumulative cost-sharing maximum

when providing family coverage.

E. Annual Report (§ 457.750)

Section 457.750 of the January 2001

final rule required States to submit an

annual report to HCFA by January 1 of

each year and specified the contents of

that report. Specifically, § 457.750(b)(7)

of the January 2001 final rule required

that annual reports submitted by the

State to include data on the primary

language of SCHIP enrollees. Based

upon further review of public

comments, we are revising the final rule

to delete this requirement.

Comment: We received several

comments requesting that HCFA require

States to collect data pertaining to one

or more of the following categories of

information about enrollees and their

SCHIP coverage: gender, ethnicity, race,

primary language, English proficiency,

age, service delivery system, family

income, and geographic location.

Certain commenters suggested that these

data be collected and reported to HCFA

in the State evaluations, annual reports,

and/or quarterly statistical reports.

These commenters felt this information

would help target outreach, retention,

enrollment, and service efforts to underrepresented groups. These commenters

also indicated that such reporting

requirements are consistent with the

33816 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

goals of Healthy People 2010 and

recently enacted legislation directing

the Secretary of Commerce to produce

statistically reliable annual State data on

the number of uninsured, low-income

children categorized by race, ethnicity,

age, and income. One commenter

indicated that HCFA should require

States to document the appropriate

range of services and networks of

providers available, given the various

language groups represented by

enrollees. Additionally, some

commenters noted that HCFA should

require States to provide an assessment

of their compliance with civil rights

requirements.

Response: We previously agreed with

several of the comments summarized

above. Several commenters urged us to

require States to report data on gender,

race, ethnicity and primary language of

SCHIP enrollees to HCFA. We included

a provision in the January 11, 2001 rule

to require States to report on primary

language of enrollees in their annual

report. We also included a provision in

the January 11, 2001 rule to require

States to report data, on a quarterly

basis, on the race, ethnicity, and gender

of SCHIP enrollees using the format

prescribed by the OMB Statistical

Directive 15—Standards for

Maintaining, Collecting and Presenting

Data on Race and Ethnicity. We felt that

this policy was consistent with overall

program goals, as well as the civil rights

requirements.

Upon further consideration, we have

decided to withdraw § 457.750 (b)(7)

and will no longer require States to

report primary language in their annual

reports. States currently collect

information on primary language in

different ways (for example, on

applications, through statewide surveys,

etc.) In addition, States may find that

collecting information about the

primary language of the head of

household rather than the child

applicant/enrollee is more useful, for

example, for purposes of translating

written materials about the program.

Therefore, we find that providing States

with flexibility to decide what

information to collect about primary

language, and how to collect it, will best

serve the needs of the program and that

withdrawing this provision will not

inhibit the Federal government from

effectively evaluating the program. We

have retained the requirement for States

to report data on gender, race, and

ethnicity at § 457.740(a)(3)(ii) and

§ 457.740(c).

After reviewing this subpart, we find

that further revision is not necessary.

Therefore, we have retained the other

requirements for the contents of the

annual report as stated in the January

11, 2001 final rule, including the

requirement to provide information

related to a core set of national

performance measures as developed by

the Secretary. We want to reiterate our

statements from the January 11, 2001

final rule that we are mindful of the

complexities of developing these

measures and will work closely with

States to do so. We plan to convene a

workgroup with States to develop a

limited set of core performance goals

and measures. As we undertake this

effort, we will be guided by the

objectives, goals, and measurement

methods States have already developed.

F. Program Integrity

1. Procurement Standards (§ 457.940)

Section 457.940(d) of the January

2001 final rule requires that all contracts

under part 457 include provisions that

define a sound and complete

procurement contract, in accordance

with the procurement requirements of

45 CFR part 74. We are making a

technical change to accommodate a

possible change in Departmental policy.

Comment: Several commenters

recommended that procurement

standards in 45 CFR part 92 are more

appropriate for non-entitlement

programs, such as SCHIP, because they

allow States to use their own

procurement standards when

purchasing services with Federal grant

money. Commenters stated that

flexibility will enable States to make

cost-effective and quality health plan

selections. One commenter noted that

flexibility to establish higher rates to

ensure provider participation should be

coupled with stricter enforcement (66

FR 2615).

Response: We disagreed with the

commenter’s recommendation for

changing the procurement standards

applicable to SCHIP. We stated that the

procurement requirements of 45 CFR

74.43 are more appropriate for separate

child health programs because they

allow for accountability as well as State

flexibility in implementation.

Upon further consideration, we have

decided to revise our policy to allow

States to use the procurement

requirements of either 45 CFR 74.43 or

45 CFR 92.36, as applicable. Currently,

the Department has issued a Notice of

Proposed Rulemaking in the Federal

Register published on November 15,

2000, to amend 45 CFR 92. When this

regulation change is final, the applicable

procurement requirement for SCHIP

will be 45 CFR 92.36. Until this

regulation change is final, the

provisions of 45 CFR 74.43 are

applicable to SCHIP.

2. Verification of Enrollment and

Provider Services Received

Section 457.980(a) of the January 2001

final rule provided that the State must

establish methodologies to verify

whether beneficiaries have received

services for which providers have

billed. Based upon further review of

public comments, we are removing

§ 457.980(a) because we do not believe

that this provision is necessary to

comply with applicable statutory

requirements or effective and efficient

program operation.

Comment: Several commenters noted

that the provisions in § 457.980 could be

difficult to implement in managed care

plans and that verification may be

burdensome in a capitated system. The

commenters requested that we clarify

that it would be acceptable if there were

a provision in the contract with the

health plan to ensure provider services.

One commenter expressed concern

regarding external verification of

provider services received in the

managed care market, especially in

capitation-based plans. The commenter

felt that States should be able to handle

this through the normal provider

evaluation and review procedures used

by managed care entities (66 FR 2618).

Response: In our previous response to

these comments, we indicated that it is

necessary for the effective and efficient

administration of any State separate

child health insurance program to

monitor and verify enrollee receipt of

services for which providers have billed

or received payment, or that providers

have contracted to furnish regardless of

the method of payment. Therefore, the

provisions of § 457.980(a) apply to

States using managed care plans as well

as other systems of health insurance and

care delivery. Plans participating in

SCHIP are accountable to the State for

providing services and care to SCHIP

participants. States must ensure, when

contracting with providers, that

beneficiaries are receiving care they are

entitled to and for which States have

provided funds.

Upon further consideration, we have

decided to remove § 457.980(a). This

provision would be difficult to apply to

managed care settings in which

individual services are not billed to the

State. States also have interpreted this

provision as holding them responsible

for the internal workings of the managed

care plans. Although the fiscal integrity

of payments made under SCHIP is

important, when this provision is

removed, the provision at § 457.980(b) is

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33817

adequate to address the need for

program integrity.

G. Applicant and Enrollee Protections

We previously explained that subpart

K—Applicant and Enrollee

Protections—was developed to

consolidate and clarify certain

provisions involving applicant and

enrollee protections. More specifically,

the subpart defined the components of

a review process and established

minimum requirements. The subpart

applied only to separate child health

programs.

Our previous policy required States to

adopt all of the minimum requirements

in subpart K in designing their review

process for their separate child health

program. States contracting with

providers that were subject to applicable

State consumer protection law that met

or exceeded the requirements in the

regulation could rely upon State law to

satisfy the review requirements. In the

absence of State law, States were

required to adopt a review process that

met the requirements of this regulation.

While we will continue to strongly

support the need for consumer

protections for all SCHIP-eligible

children, we have revised our previous

policy to afford States greater flexibility

in designing their review processes. Our

new policy will require States to either

meet the requirements of §§ 457.1130–

457.1180 or to demonstrate that

participating providers comply with

State-specific grievance and appeal

requirements currently in effect for

health insurance issuers (as defined in

section 2791(b) of the Public Health

Service Act) in the State. For example,

if a State had a grievance and appeal

law that applied to HMOs and the State

provides coverage under SCHIP through

managed care plans, then States would

have the option of requiring the plans to

meet the HMO review requirements

under the State law. In absence of any

State law governing grievance and

appeals, a State is required to

demonstrate compliance with Subpart

K. We have revised § 457.1120

accordingly. Furthermore, we have

revised §§ 457.1130, 457.1140,

457.1150, 457.1160, 457.1170, and

457.1180 by adding ‘‘Program Specific

Review Process:’’ at the beginning of

each section heading to clarify that

these provisions apply to a program

specific review process as defined in

§ 457.1120(a)(1), and not to a Statewide

standard review as defined in

§ 457.1120(a)(2).

The basis for this decision is

explained in greater detail in the

following summary of public comments

received on the proposed regulation and

published in the January 11, 2001 final

rule.

Overview of Enrollee Rights

Comment: A number of commenters

supported HCFA’s efforts to incorporate

the Consumer Bill of Rights and

Responsibilities (CBRR) provisions in

the proposed regulations (66 FR 2627).

Another supported HCFA’s effort to

offer States a good deal of flexibility in

the application of these requirements.

Other commenters believed that

HCFA exceeded its statutory authority

in applying the CBRR to SCHIP

regulations. Commenters noted that the

requirements could be in conflict with

existing State law, severely limited

States’ flexibility in contracting, and

hampered their ability to adjust contract

provisions that are not working well.

The commenters asserted that applying

the CBRR to SCHIP could result in

coverage for children in Medicaid

expansion programs under consumer

protections available in Medicaid, while

children in separate child health

programs would be covered under State

consumer protection laws. One

commenter suggested that, where a

conflict existed, or State law imposed

similar requirements, State law should

prevail. Other commenters indicated

that the requirements presented an

administrative burden to the State.

Response: Upon further

consideration, we have revised review

requirements to permit greater State

flexibility. While we will continue to

expect States to have adequate

consumer protections for SCHIP

children, we will not require that a

State’s review process adhere explicitly

to the requirements identified in this

subpart. We believe that State law will

generally provide adequate protections

for enrollees, and the benefits of using

existing processes rather than creating a

separate process solely for SCHIP

children will greatly enhance the ease

with which States can administer their

programs. As discussed earlier, our new

policy will require States to either meet

the requirements of §§ 457.1130–

457.1180 or to demonstrate that

participating providers comply with

State-specific grievance and appeal

requirements currently in effect for

health insurance issuers (as defined in

section 2791(b) of the Public Health

Service Act) in the State.

We recognize that the protection of

enrollee rights is a critical component of

program costs for the provision of child

health assistance, and we have carefully

balanced this concern against the

administrative burden our requirements

impose on the States. We believe that

the revised requirements will address

the commenter’s concerns related to

administrative burden, and we remain

of the view that the costs of ensuring

applicant and enrollee protections need

not be large relative to the cost of

services provided to enrollees. We

believe that the revision of our previous

policy affords States even broader

flexibility to design and implement

efficient and effective review processes.

Overview of Applicant and Enrollee

Protections in Final Regulation

In the January 11, 2001 final rule, we

discussed the protections for applicants

and enrollees in separate child health

programs that had been incorporated

throughout the regulation (66 FR 2629).

Given that we have revised our policy

in this subpart and others, the following

information updates references to this

subpart and other subparts of the

regulation:

• Review Process

Upon further consideration we have

revised our requirements for a review

process for health services matters.

Previously, we defined minimum

requirements in §§ 457.1130(b) and

457.1150(b) to provide enrollees in

separate child health programs with an

opportunity for an independent external

review. Section 457.1160(b) set a

standard and expedited time frame for

reviews of health services matters.

We continue to expect that a State

will have an independent, external

review process for health services

matters and that specific time frames be

in place for such a review. However, we

have revised our requirements to afford

States greater flexibility in the design of

such a review process. More

specifically, rather than designing a new

review process specifically for a

separate child health program, States

may choose to require providers to

comply with State-specific grievance

and appeal requirements currently in

effect for health insurance issuers as a

means to comply with this regulation.

Review Processes

In the January 2001 final rule, we

clarified that matters subject to review

included eligibility and enrollment

matters and health services matters. We

further defined that an appropriate

‘‘review process’’ in a separate child

health program would address the

matters subject to review and would

include the following components: core

elements of review, impartial review,

time frames, continuation of enrollment,

and notice. Finally, we explained the

applicability of the review process when

States offer premium assistance for

group health plans.

33818 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

In the January 2001 final rule, we

clarified that a State had to implement

a review process that included all of the

components and met all of the

minimum requirements in each of these

areas. We also indicated that existing

State law that governed private health

plans would only apply to the extent

that the State law met or exceeded the

minimum requirements.

Upon further consideration of the

public comments, we have decided to

revise our review requirements as

described earlier and have articulated

our rationale in the responses to the

following summary of comments

received on subpart K published in the

Federal Register published January 11,

2001.

Comment: Commenters noted that the

lack of minimum standards for review

processes may cause lengthy time

periods for completion of grievance and

appeals processes, leaving many

enrollees without needed benefits (66

FR 2633). The commenters

recommended that HCFA establish a set

of minimum standards that States and

participating providers must meet when

providing services to enrollees. Other

commenters expressed their view that

the rules lack sufficient clarity and

specificity to ensure that consumers will

be accorded adequate due process

protections in a State that does not

adopt the Medicaid procedures.

As discussed we also received a

number of comments that HCFA

exceeded its statutory authority under

title XXI in defining specific

requirements for a review process (66

FR 2633). Several commenters believed

States should be allowed to use existing

appeal mechanisms for managed care.

One commenter noted opposition to

Federal requirements that would force

the States to alter standard commercial

plan contracts (for example, specific

appeals criteria or procedures), and

urged HCFA to allow States to develop

appeals and grievance procedures that

are consistent with State insurance

regulations. Other commenters argued

that Federal requirements for resolving

enrollee complaints and grievances

would reduce plan participation

because many plans would not be

willing to have separate processes for

SCHIP enrollees that exceed existing

State statutory requirements.

Response: Upon further

consideration, we have decided to

revise our policy related to establishing

minimum standards. We had previously

indicated that in an effort to strike a

balance between State flexibility and

enrollee protection consistent with the

provisions and framework of title XXI,

subpart K had been developed to assure

a minimum set of standards for all

individuals obtaining services through

SCHIP. However, in light of the fact that

the majority of States have existing

consumer protection laws that govern

the private insurance market; concerns

that providers may elect not to

participate in SCHIP if they must assure

additional (and possibly duplicative)

protections for enrollees; and concerns

related to the potential administrative

burden associated with developing and

implementing the protections identified

in this regulation we have decided to

provide additional flexibility to States

in this area.

Therefore, the revised regulation

provides States with the option of either

designing a review process that meets

the requirements of §§ 457.1130—

457.1180 or demonstrating that

participating providers comply with

State-specific grievance and appeal

requirements currently in effect for

health insurance issuers (as defined in

section 2791(b) of the Public Health

Service Act) in the State. States, with or

without State law, may still elect to use

the Medicaid fair hearing process to

satisfy the requirements of this

regulation, however it is not required.

Comment: Commenters recommended

that HCFA further define matters that

must be subject to review. Commenters

also indicated that eligibility matters

should be reviewed under separate

processes than health services matters,

and that the review process for

eligibility determinations should be the

Medicaid grievance and fair hearing

process rather than deferring to internal

appeals or State-specific insurance

practices (66 FR 2637). Another noted

that the external system of review

should be as close as possible to that of

Medicaid.

Response: We previously responded

that matters subject to review would

include eligibility and enrollment

matters and health services matters. We

agreed with the comment that internal

and external review consistent with

State insurance law may not be the

appropriate form of review for eligibility

and enrollment matters, but we left this

matter to State discretion, as long as the

minimum review requirements were

met. We decided not to require that the

external review for separate child health

programs mirror the external review

process required under Medicaid and to

take a more flexible approach consistent

with title XXI.

As discussed earlier, we have revised

this regulation to allow States to either

design a review process that meets the

requirements of §§ 457.1130—457.1180

or to demonstrate that participating

providers comply with State-specific

grievance and appeal requirements

currently in effect for health insurance

issuers (as defined in section 2791(b) of

the Public Health Service Act) in the

State. States that elect to use Statespecific grievance and appeal

requirements still must provide an

opportunity for review of all the matters

listed in § 457.1130. We recognize that

State law may not use the same

terminology as § 457.1130; however the

State law must be consistent with the

intent of § 457.1130 to comply with this

regulation. States without law that is

consistent with § 457.1130 will have to

identify a method for providing an

opportunity for review for those items

not covered by the State legislation.

Comment: We received a number of

comments on the proposed scope of the

review process (66 FR 2639). The

following summarizes the key issues

raised by commenters related to several

of the minimum requirements

(excluding matters subject to review or

the applicability of the review process

to States with premium assistance

programs, which are addressed in

separate comments):

Core Elements of Review: Several

commenters suggested that HCFA

develop minimum standards for a

review process to assure that all

enrollees in SCHIP are afforded basic

consumer protections. Other

commenters asserted that the

establishment of minimum standards

created an additional administrative

expense for States, particularly given

that many separate child health

programs involved entities that are

already subject to existing State

consumer protection law. One

commenter stated their view that a

choice between Medicaid and State

insurance practices is appropriate for

issues other than eligibility and

disenrollment determinations. Another

commenter expressed that HCFA’s

intent was not clear and that they were

unsure whether States without existing

State laws requiring internal and

external review procedures must

establish any procedures for children

enrolled in SCHIP.

Impartial Review: Several commenters

recommended that the State be involved

in all external reviews to assure that an

independent and impartial review

occurs.

Timeframes: Several commenters

noted that the regulation should require

that grievances and appeals be decided

in a timely fashion, and a number of

commenters suggested appropriate

timeframes. A different commenter,

representing providers, noted that it saw

no reason why providers should not be

expected to respond within seven days

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33819

to a request for treatment. The

commenter also believed that HCFA

should establish minimum requirements

for an expedited procedure to meet the

needs of enrollees with severe medical

conditions. Another commenter

requested that HCFA clarify whether a

State that has existing laws relating to

consumer protections is able to choose

its Medicaid procedures instead.

Notice: Several commenters expressed

support for the inclusion of rules setting

minimum standards for procedural

fairness. One commenter noted that

notice is a basic due process right

required by the U.S. Constitution under

well-settled law whenever a citizen is

denied a public benefit, and that the

rules should specify that notice must be

timely. The commenter also

recommended that for current

recipients, notice of an adverse action

should be in advance of the action.

Another commenter recommended

notice include information regarding the

right to appeal and to be accompanied

to the hearing by a representative.

Response: We previously responded

by expressing appreciation for all

commenters supporting our decision to

develop minimum requirements for a

review process and stated that we had

the statutory authority to require States

to adopt such requirements.

Because we believed that all SCHIPeligible children should be afforded a

minimum set of consumer protections

regardless of the State within which

they reside, we did not support

suggestions to allow existing State law

to apply. We argued that State laws

applicable to commercial plans may or

may not apply to a separate child health

program, depending on the provisions

of the State law. Additionally, we said

that the scope of State law varies from

State to State and enrollees would be

subject to a different degree of

protection depending upon where they

enrolled in the program. We also

indicated that we expected that States

that decide to adopt Medicaid

procedures for the review process in

their separate child health program

would thereby be meeting State law

requirements applicable to commercial

health plans.

We also addressed commenters’

concerns that certain enrollee

protections may create an additional

administrative expense for some States

by indicating that the importance of

ensuring an enrollee’s basic right to a

fair and efficient decision regarding

eligibility and enrollment or health

services matters justified the

administrative expenses that may be

incurred.

Upon further consideration, we have

decided to revise this regulatory

provision. Additional research regarding

State consumer protection law reveals

that most States do have existing laws

that govern the private insurance market

and many SCHIP providers are subject

to this law. We also recognize the valid

concern that providers may elect not to

participate in SCHIP if they must assure

additional (and possibly duplicative)

protections for enrollees; the potential

confusion for enrollees who could be

subject to a different review process

than other commercial enrollees in the

same health plan, and the concern

related to the potential administrative

burden associated with developing and

implementing the protections identified

in this regulation.

Therefore, the revised regulation

provides States with the option of either

designing a review process that meets

the requirements of 457.1130—457.1180

or demonstrating that participating

providers comply with State-specific

grievance and appeal requirements

currently in effect for health insurance

issuers (as defined in section 2791(b) of

the Public Health Service Act) in the

State. States—with or without State

law—may still elect to use the Medicaid

fair hearing process to satisfy the

requirements of this regulation,

however, it is not required.

Comment: Commenters noted the

difficulty of applying the requirements

of this subpart in States with a premium

assistance program given that States do

not directly contract with providers in

this situation. Commenters expressed

concern that no State could ever comply

thus making a premium assistance

model impossible to implement (66 FR

2644).

Response: We previously responded

by acknowledging that States’ SCHIP

programs do not have direct authority

over group health plans that may be

providing coverage under premium

assistance programs. At the same time,

we noted that there is no basis for

providing children fewer procedural

protections because they may be

enrolled in a premium assistance

program under SCHIP. In order to

balance these concerns, the regulations

provided States flexibility so that they

may offer premium assistance through

plans that do not meet the review

standards set out in these regulations, as

long as families are not required to

enroll their children in these plans.

Under § 457.1190, we indicated that a

State that has a premium assistance

program through which it provides

coverage under a group health plan that

does not meet the requirements of

§§ 457.1130(b), 457.1140, 457.1150(b),

457.1160(b), and 457.1180 must give

applicants and enrollees the option to

obtain health benefits coverage through

its direct coverage plan. The State must

provide this option at initial enrollment

and at each redetermination of

eligibility.

The revision of this regulation to

allow States to either design a review

process that complies with this subpart

or to use State-specific grievance and

appeal requirements currently in effect

provides additional flexibility to States

implementing premium assistance

programs. In addition to the option

discussed in our previous response,

States may enroll eligible children in

group health plans that provide

procedures that comply with the statespecific review requirements for health

insurance issuers in the State. If the

health plan is not subject to either the

program specific review or the

Statewide standard review, then the

State will need to notify the enrollee

that the plan does not necessarily

comply with review procedures and

must give children in the family the

option to obtain health benefits coverage

through its direct coverage plan. We

have revised § 457.1190 to reflect this

new requirement.

H. Compliance Dates

In the ‘‘Effective Dates’’ section of the

January 2001 final rule, we stated that

to the extent contract changes are

necessary, States will not be found out

of compliance until the next contract

cycle. By contract cycles, we mean the

earlier of the date of the original period

of the existing contract, or the date of

any modification or extension of the

contract (whether or not contemplated

within the scope of the contract).

As mentioned on page 2490 of the

Federal Register published on January

11, 2001, in establishing the effective

date for the regulation, we made

allowances for contract cycles. To the

extent contract changes are necessary,

States would not be found out of

compliance until the next contract

cycle. We previously defined ‘‘contract

cycle’’ as the earlier of the date of the

original period of the existing contract,

or the date of any modification or

extension of the contract (whether or

not contemplated within the scope of

the contract).

Upon further review, we note that the

definition of ‘‘contract cycle’’ leaves

open the possibility that compliance

requirements could be based on an

unrelated contract modification, such as

an update in payment rates, regardless

of whether the state had the authority or

leverage to obtain the necessary contract

changes. Therefore, we have amended

33820 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

the definition of ‘‘contract cycle’’ to be

the earlier of the date of the original

period of the existing contract, or the

date of any extension or modification

that would change the term of the

contract. This change will clarify our

intent that states ensure compliance

with this rule by no later than the end

of the contract.

We also note that the previous

definition did not allow for, to the

extent legislative changes are necessary,

states to not be found out of compliance

until the conclusion of the next

legislative cycle following the effective

date of the rule. To the extent legislative

changes are necessary, states will not be

found out of compliance until the

conclusion of the next legislative cycle

following the effective date of the rule.

III. Technical Revisions and

Clarifications

In this final rule, we have made the

following technical revisions and

clarifications to the January 11, 2001

final rule:

• In the final rule published on

January 11, 2001, we inadvertently

omitted one of the qualified entities that

may perform presumptive eligibility for

Medicaid. As a result we have made a

technical correction to §§ 435.1101 and

436.1101, adding paragraph (5) to each

of these sections. This technical change

adds entities that are authorized under

section 803 of BIPA to determine

Medicaid or SCHIP eligibility as

qualified entities for the purpose of

performing presumptive eligibility for

Medicaid. We have also made this same

conforming change under § 457.301

under the definition of ‘‘qualified

entity’’. These same entities may

perform presumptive eligibility for a

separate child health program. (See

§§ 435.1101 and 436.1101)

• The definition for State health

benefits plan was inadvertently omitted

from the final rule published in January

2001. We define the term as follows:

‘‘State health benefits plan means a plan

that is offered or organized by the State

government on behalf of State

employees or other public agency

employees within the State. The term

does not include a plan in which the

State provides no contribution toward

the cost of coverage and in which no

State employees participate, or a plan

that provides coverage only for a

specific type of care, such as dental or

vision care.’’

We revised the definition from the

proposed rule in order to clarify that we

would not consider a benefit plan with

no State contribution toward the cost of

coverage and in which no State

employees participate as a State health

benefits plan.

• We revised § 457.60(b)(2) to refer to

the requirements regarding substitution

of coverage set forth at §§ 457.805 and

457.810. We revised § 457.60(b)(7) and

(b)(8) to remove cross-references to

other sections of part 457 that have been

removed or revised.

• In the final rule published on

January 1, 2001, we used the terms

‘‘enrollee’’ and ‘‘enrollees’’ in section

457.505(d) and (e). We changed these

terms to ‘‘eligible child’’ and ‘‘eligible

children’’ to make clear that these

provisions apply only to cost sharing

imposed on the children in a family.

• In §§ 457.1000, 457.1005 and

457.1010, we removed the term ‘‘waiver

for’’ from these sections in order to

clarify that States need only obtain

approval for an amendment to their

existing State plan, and do not need to

submit a section 1115 demonstration

project or ‘‘waiver’’ in order to

implement these sections.

IV. Summary of Revisions to the

January 11, 2001 Final Rule

In this final rule we are adopting the

provisions set forth in the January 11,

2001 final rule with the following

substantive changes:

• Revise the requirement regarding

use of social security numbers to

provide that a State may not require any

family member who is not requesting

services to provide a social security

number (including those family

members whose income or resources

might be used in making the child’s

eligibility determination). (See

§ 457.320(b)(4))

• Add an option to permit States to

require any applicant seeking assistance

under SCHIP to furnish a social security

number. The regulation adds a crossreference to the Medicaid regulations

regarding the use of social security

numbers, which would apply to States

electing this option. (See § 457.340(b))

• Add a requirement for the State to

determine the written format and timing

of information regarding Medicaid

eligibility, benefits, and the application

process that must be given to SCHIP

applicants. (See §§ 457.350 (e)(4) and

(g)(3))

• Remove the provision that the State

must not require the child to complete

a new application for the separate child

health program following a denial of

Medicaid eligibility, but may require

supplemental information to account for

any changes in the child’s

circumstances that may affect eligibility.

(See § 457.350 (f)(5)(iii))

• Revise § 457.355(b) to provide that

expenditures for coverage during a

period of presumptive eligibility

implemented in accordance with

§ 435.1102 of this chapter will be

considered as expenditures for child

health assistance under the plan. (See

§ 457.355 (b))

• Revise the provisions regarding

Secretary-approved coverage to permit

comprehensive coverage for children

under a Medicaid demonstration project

under section 1115 of the Act to be

considered Secretary-approved

coverage. (See § 457.450(b))

• Add the requirement that States

may offer coverage that is the same as

that provided by Florida, New York, and

Pennsylvania under their existing

comprehensive State-based coverage

programs. (See § 457.450(e))

• Revise § 457.495(d) to allow States

to use either the standards established

in § 457.495(d) or existing State law

regarding prior authorization of health

services.

• Remove § 457.560(a) regarding costsharing amounts that the family has a

‘‘legal obligation to pay’’ to allow each

State to define how it counts costsharing amounts against the cumulative

cost-sharing maximum.

• Revise § 457.560(b) to limit

cumulative cost sharing to five percent

of family income for all children

enrolled in SCHIP, regardless of family

income. We have also made a

conforming change to revise the cross

reference at § 457.540(f) to refer to

§ 457.560(a).

• Remove the requirement that States

collect and provide data in the annual

report regarding the primary language of

SCHIP enrollees. (See § 457.750(b)(7))

• Revise the Procurement standards

requirements to refer to part 92 or part

74 for defining a complete contract. (See

§ 457.940(b) and (d))

• Remove the requirement that the

State must establish methodologies to

verify whether beneficiaries have

received services for which providers

have billed, to allow State flexibility in

establishing a program integrity system

that identifies, reports, and verifies the

accuracy of claims. (See § 457.980)

• Revise § 457.1120 to provide that

the State must have either a program

specific review process that meets the

requirements of subpart K or a

Statewide standard review process that

complies with State review

requirements currently in effect for

health insurance issuers in the State.

• Amend §§ 457.1130, 457.1140,

457.1150, 457.1160, 457.1170, and

457.1180, by adding ‘‘Program Specific

Review Process:’’.

• Revise § 457.1190 to refer to ‘‘a

program specific review or a statewide

standard review.’’

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33821

V. Waiver of Proposed Rulemaking

We ordinarily publish a notice of

proposed rulemaking in the Federal

Register and invite prior public

comment on proposed rules. A notice of

proposed rulemaking includes a

reference to legal authority under which

the rule is proposed, and the terms and

substance of the proposed rule or a

description of the subjects and issues

involved. In this case, a notice of

proposed rulemaking was published on

November 8, 1999 and a final rule was

published on January 11, 2001 in

response to comments received on the

proposed rule. The January 11, 2001

rule’s effective date was delayed so that

we could give further consideration to

the comments we had already received

on the proposed rule. Because, this final

rule including the modifications made

in this publication is the product of

notice and comment procedure, there is

no need to engage in a further notice of

proposed rulemaking before adopting

this rule.

While we have decided to afford the

public an opportunity to comment on

the changes in the January 11, 2001 rule

made by this document, we are doing

this in the interest of openness and

public participation, rather than as a

legal obligation. In any event, the

Administrative Procedure Act provides

a mechanism under which advance

notice and comment procedure may be

waived, if the agency finds that good

cause exists to waive that procedure.

Good cause exists if the agency

determines that notice and comment

procedure is impracticable,

unnecessary, or contrary to the public

interest and the agency incorporates a

statement of the finding and its reasons

in the rule issued.

While under the Administrative

Procedure Act we do not believe we are

required to engage in notice and

comment procedure at this juncture, we

believe that good cause would exist

were it necessary for dispensing with

notice and comment because

expeditious publication of the final rule

will afford states with the additional

certainty of the options which they will

have available to them in implementing

SCHIP programs. These will facilitate

their ability to provide needed health

care coverage to increased numbers of

currently uninsured children.

Accordingly, we find that notice and

comment procedure in this instance

would be contrary to the public interest

since that procedure would

unnecessarily impede furnishing

needed health care coverage to needy

children.

VI. Response to Comments

Because of the large number of items

of correspondence we normally receive

on Federal Register documents

published for comment, we are not able

to acknowledge or respond to them

individually. We will consider all

comments we receive by the date and

time specified in the ‘‘DATES’’ section

of this preamble, and, when we proceed

with a subsequent document, we will

respond to the comments in the

preamble to that document.

VII. Regulatory Impact Statement

We have examined the impacts of this

rule as required by Executive Order

12866 (September 1993, Regulatory

Planning and Review) and the

Regulatory Flexibility Act (RFA)

(September 19, 1980 Public Law 96–

354). Executive Order 12866 directs

agencies to assess all costs and benefits

of available regulatory alternatives and,

if regulation is necessary, to select

regulatory approaches that maximize

net benefits (including potential

economic, environmental, public health

and safety effects, distributive impacts,

and equity). A regulatory impact

analysis (RIA) must be prepared for

major rules with economically

significant effects ($100 million or more

annually).

The RFA requires agencies to analyze

options for regulatory relief of small

businesses. For purposes of the RFA,

small entities include small businesses,

nonprofit organizations and government

agencies. Most hospitals and most other

providers and suppliers are small

entities, either by nonprofit status or by

having revenues of $25 million or less

annually. Individuals and States are not

included in the definition of a small

entity.

In addition, section 1102(b) of the Act

requires us to prepare a regulatory

impact analysis if a rule may have a

significant impact on the operations of

a substantial number of small rural

hospitals. This analysis must conform to

the provisions of section 604 of the

RFA. For purposes of section 1102(b) of

the Act, we define a small rural hospital

as a hospital that is located outside of

a Metropolitan Statistical Area and has

fewer than 100 beds.

Section 202 of the Unfunded

Mandates Reform Act of 1995 also

requires that agencies assess anticipated

costs and benefits before issuing any

rule that may result in expenditure in

any one year by State, local, or tribal

governments, in the aggregate, or by the

private sector, of $110 million.

This interim final rule merely revises

certain policies set forth in the January

11, 2001 final rule, which includes

implementing regulations for the SCHIP

program. The provisions set forth in this

interim final rule will not have an

impact of $110 million or more

annually. Neither is this rule expected

to impose an unfunded mandate on

States exceeding $110 million annually.

Therefore, we have not prepared an

analysis of cost and benefits as required

by E.O. 12866 and the Unfunded

Mandates Act for rules with significant

economic impacts or that impose

significant unfunded mandates on

States. Also, we believe the changes

being promulgated in this document

will have very little direct impact on

small entities as defined under the RFA

or on small rural hospitals as defined

under section 1102(b) of the Social

Security Act. Therefore, we are not

preparing analyses for either the RFA or

section 1102(b) of the Act because we

have determined, and we certify, that

this rule will not have a significant

economic impact on a substantial

number of small entities or a significant

impact on the operations of a substantial

number of small rural hospitals. For a

detailed discussion of the impact of the

SCHIP program, refer to the January 11,

2001 final rule (66 FR 2659).

In accordance with the provisions of

Executive Order 12866, this regulation

was reviewed by the Office of

Management and Budget.

Federalism

Executive Order 13132 establishes

certain requirements that an agency

must meet when it promulgates a

proposed rule (and subsequent final

rule) that imposes substantial direct

costs on State and local governments,

preempts State law, or otherwise has

federalism implications. In the January

11, 2001 issuance, on pages 2662 and

2663 of the Federal Register, we

described extensive agency activities

that involved consultation with State

and local officials on program issues

that have directly resulted in policies in

both the proposed and the final rules.

These activities are ongoing and

continue to inform the development of

agency policies and procedures. The

description of these activities set forth

in the January issuance is still valid and

the activities discussed have informed

development of the revisions contained

in this document. Indeed, these

revisions are essential to address

concerns raised by State and local

officials and to minimize the burden on

State and local governments.

33822 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

VIII. Collection of Information

Requirements

This rule does not impose any new

information collection and record

keeping requirements subject to the

Paperwork Reduction Act of 1995

(PRA).

The information collection

requirements in §§ 457.50, 457.60,

457.70, 457.350, 457.360, 457.361,

457.431, 457.440, 457.525, 457.740,

457.750, 457.760, 457.810, 457.940,

457.965, 457.985, 457.1005, 457.1015,

and 457.1140 of the January 11, 2001

final rule (66 FR 2490), have been

approved by OMB under OMB control

number 0938–0841. We sought

comments on these requirements in the

November 8, 1999 proposed rule and in

the January 11, 2001 final rule and have

made no changes to the requirements in

this interim final rule. For a detailed

discussion of the paperwork burden

imposed by these provisions, see the

January 2001 final rule (66 FR 2663).

List of Subjects

42 CFR Part 435

Aid to Families with Dependent

Children, Grant programs—health,

Medicaid, Reporting and record keeping

requirements, Supplemental Security

Income (SSI), Wages.

42 CFR Part 436

Aid to Families with Dependent

Children, Grant programs—health,

Guam, Medicaid, Puerto Rico,

Supplemental Security Income (SSI),

Virgin Islands.

42 CFR Part 457

Administrative practice and

procedure, Grant programs—health,

Children’s Health Insurance Program,

Reporting and record keeping

requirements.

42 CFR chapter IV, amended at 66 FR

2490 January 11, 2001, is further

amended as set forth below:

A. Part 435 is amended as follows:

PART 435—ELIGIBILITY IN THE

STATES, DISTRICT OF COLUMBIA,

THE NORTHERN MARIANA ISLANDS,

AND AMERICAN SAMOA

1. The authority citation for part 435

continues to read as follows:

Authority: Sec. 1102 of the Social Security

Act (42 U.S.C. 1302).

Subpart L—Option for Coverage of

Special Groups

2. In § 435.1101, republish the

introductory text of the definition of

‘‘Qualified entity’’ and amend the

definition as follows:

A. Redesignate paragraphs (8), (9),

and (10) as paragraphs (9)(i), (9)(ii), and

(9)(iii), respectively.

B. Redesignate paragraphs (5) through

(7) as paragraphs (6) through (8).

C. Add a new paragraph (5).

D. Revise newly redesignated

paragraph (9).

E. Redesignate paragraph (11) as

paragraph (10).

The addition and revision read as

follows:

§ 435.1101 Definitions related to

presumptive eligibility for children.

* * * * *

Qualified entity means an entity that

is determined by the State to be capable

of making determinations of

presumptive eligibility for children, and

that—

* * * * *

(5) Is authorized to determine

eligibility of a child for medical

assistance under the Medicaid State

plan, or eligibility of a child for child

health assistance under the State

Children’s Health Insurance Program;

* * * * *

(9) Is an organization that—

(i) Provides emergency food and

shelter under a grant under the Stewart

B. McKinney Homeless Assistance Act;

(ii) Is a State or Tribal office or entity

involved in enrollment in the program

under title XIX, Part A of title IV, or title

XXI; or

(iii) Determines eligibility for any

assistance or benefits provided under

any program of public or assisted

housing that receives Federal funds,

including the program under section 8

or any other section of the United States

Housing Act of 1937 (42 U.S.C. 1437) or

under the Native American Housing

Assistance and Self Determination Act

of 1996 (25 U.S.C. 4101 et seq.); and

* * * * *

B. Part 436 is amended as follows:

PART 436—ELIGIBILITY IN GUAM,

PUERTO RICO, AND THE VIRGIN

ISLANDS

1. The authority citation for part 436

continues to read as follows:

Authority: Sec. 1102 of the Social Security

Act (42 U.S.C. 1302).

Subpart L—Option for Coverage of

Special Groups

2. In § 436.1101, republish the

introductory text of the definition of

‘‘Qualified entity’’ and amend the

definition as follows:

A. Redesignate paragraphs (8), (9),

and (10) as paragraphs (9)(i), (9)(ii) and

(9)(iii), respectively.

B. Redesignate paragraphs (5) through

(7) as paragraphs (6) through (8),

respectively.

C. Add a new paragraph (5).

D. Revise newly redesignated

paragraph (9).

E. Redesignate paragraph (11) as

paragraph (10).

The addition and revision read as

follows:

§ 436.1101 Definitions related to

presumptive eligibility for children.

* * * * *

Qualified entity means an entity that

is determined by the State to be capable

of making determinations of

presumptive eligibility for children, and

that—

* * * * *

(5) Is authorized to determine

eligibility of a child for medical

assistance under the Medicaid State

plan, or eligibility of a child for child

health assistance under the State

Children’s Health Insurance Program;

* * * * *

(9) Is an organization that—

(i) Provides emergency food and

shelter under a grant under the Stewart

B. McKinney Homeless Assistance Act;

(ii) Is a State or Tribal office or entity

involved in enrollment in the program

under this title, Part A of title IV, or title

XXI; or

(iii) Determines eligibility for any

assistance or benefits provided under

any program of public or assisted

housing that receives Federal funds,

including the program under section 8

or any other section of the United States

Housing Act of 1937 (42 U.S.C. 1437) or

under the Native American Housing

Assistance and Self Determination Act

of 1996 (25 U.S.C. 4101 et seq.); and

* * * * *

C. Part 457 is amended as follows:

PART 457—ALLOTMENTS AND

GRANTS TO STATES

1. The authority citation for part 457

continues to read as follows:

Authority: Section 1102 of the Social

Security Act (42 U.S.C. 1302).

Subpart A—Introduction; State Plans

for Child Health Insurance Programs

and Outreach Strategies

§ 457.60 [Amended]

2. Amend § 457.60 as follows:

A. Revise paragraph (b)(2).

B. In paragraph (b)(7) remove ‘‘and

457.353’’.

C. In paragraph (b)(8) remove

‘‘§§ 457.1130, 457.1160, 457.1170,

457.1180 and 457.1190’’ and add in its

place ‘‘§ 457.1120’’.

Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations 33823

§ 457.60 Amendments.

* * * * *

(b) * * *

(2) Procedures to prevent substitution

of private coverage as described in

§ 457.805, and in § 457.810 for premium

assistance programs.

* * * * *

Subpart C—State Plan Requirements:

Eligibility, Screening, Applications,

and Enrollment

§ 457.301 [Amended]

3. Amend § 457.301 as follows:

A. Republish the introductory text of

the definition of ‘‘Qualified entity’’ and

amend the definition as follows:

i. Redesignate the definition in

alphabetical order.

ii. Redesignate paragraphs (8), (9), and

(10) as paragraphs (9)(i), (9)(ii), and

(9)(iii), respectively.

iii. Redesignate paragraphs (5)

through (7) as paragraphs (6) through

(8), respectively.

iv. Add a new paragraph (5).

v. Revise newly redesignated

paragraph (9).

vi. Redesignate paragraph (11) as

paragraph (10).

B. Add a definition of ‘‘State health

benefits plan,’’ in alphabetical order.

The addition and revision read as

follows:

§ 457.301 Definitions and use of terms.

* * * * *

Qualified entity means an entity that

is determined by the State to be capable

of making determinations of

presumptive eligibility for children, and

that—

* * * * *

(5) Is authorized to determine

eligibility of a child for medical

assistance under the Medicaid State

plan, or eligibility of a child for child

health assistance under the State

Children’s Health Insurance Program;

* * * * *

(9) Is an organization that—

(i) Provides emergency food and

shelter under a grant under the Stewart

B. McKinney Homeless Assistance Act;

(ii) Is a State or Tribal office or entity

involved in enrollment in the program

under this title, Part A of title IV, or title

XXI; or

(iii) Determines eligibility for any

assistance or benefits provided under

any program of public or assisted

housing that receives Federal funds,

including the program under section 8

or any other section of the United States

Housing Act of 1937 (42 U.S.C. 1437) or

under the Native American Housing

Assistance and Self Determination Act

of 1996 (25 U.S.C. 4101 et seq.); and

* * * * *

State health benefits plan means a

health insurance coverage plan that is

offered or organized by the State

government on behalf of State

employees or other public agency

employees within the State. The term

does not include a plan in which the

State provides no contribution toward

the cost of coverage and in which no

State employees participate, or a plan

that provides coverage only for a

specific type of care, such as dental or

vision care.

* * * * *

4. Amend § 457.320 by revising

paragraph (b)(4) to read as follows:

§ 457.320 Other eligibility standards.

* * * * *

(b) * * *

(4) Require any family member who is

not requesting services to provide a

social security number (including those

family members whose income or

resources might be used in making the

child’s eligibility determination);

* * * * *

§ 457.340 [Amended]

5. Amend § 457.340 by redesignating

paragraphs (b) through (e) as (c) through

(f) and adding a new paragraph (b) to

read as follows:

§ 457.340 Application for and enrollment in

a separate child health program.

* * * * *

(b) Use of social security number. A

State may require a social security

number for each individual requesting

services consistent with the

requirements at § 435.910(b), (e), (f), and

(g) of this chapter.

* * * * *

§ 457.350 [Amended]

6. Amend § 457.350 as follows:

A. Add paragraphs (e)(4) and (g)(3).

B. Remove paragraph (f)(5)(iii).

The additions read as follows:

§ 457.350 Eligibility screening and

facilitation of Medicaid enrollment.

* * * * *

(e) * * *

(4) The State will determine the

written format and timing of the

information regarding Medicaid

eligibility, benefits, and the application

process required under this paragraph

(e).

* * * * *

(g) * * *

(3) The State will determine the

written format and timing of the

information regarding Medicaid

eligibility, benefits, and the application

process required under this paragraph

(g).

* * * * *

§ 457.355 [Amended]

7. Amend § 457.355 as follows:

A. Redesignate paragraph (a) as

paragraph (b).

B. Add paragraph designation (a) and

paragraph heading to the introductory

text.

C. Revise newly redesignated

paragraph (b).

The revisions read as follows:

§ 457.355 Presumptive eligibility.

(a) General rule. * * *

(b) Expenditures for coverage during a

period of presumptive eligibility.

Expenditures for coverage during a

period of presumptive eligibility

implemented in accordance with

§ 435.1102 of this chapter may be

considered as expenditures for child

health assistance under the plan.

Subpart D—State Plan Requirements:

Coverage and Benefits

8. Revise § 457.450 to read as follows:

§ 457.450 Secretary-approved coverage.

Secretary-approved coverage is health

benefits coverage that, in the

determination of the Secretary, provides

appropriate coverage for the population

of targeted low-income children covered

under the program. Secretary-approved

coverage, for which no actuarial

analysis is required, may include, but is

not limited to the following:

(a) Coverage that is the same as the

coverage provided to children under the

Medicaid State plan.

(b) Comprehensive coverage for

children offered by the State under a

Medicaid demonstration project

approved by the Secretary under section

1115 of the Act.

(c) Coverage that either includes the

full Early and Periodic Screening,

Diagnosis, and Treatment (EPSDT)

benefit or that the State has extended to

the entire Medicaid population in the

State.

(d) Coverage that includes benchmark

health benefits coverage, as specified in

§ 457.420, plus any additional coverage.

(e) Coverage that is the same as the

coverage provided under § 457.440.

(f) Coverage, including coverage

under a group health plan purchased by

the State, that the State demonstrates to

be substantially equivalent to or greater

than coverage under a benchmark health

benefits plan, as specified in § 457.420,

through use of a benefit-by-benefit

33824 Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Rules and Regulations

comparison which demonstrates that

coverage for each benefit meets or

exceeds the corresponding coverage

under the benchmark health benefits

plan.

9. Revise § 457.495(d) to read as

follows:

§ 457.495 State assurance of access to

care and procedures to assure quality and

appropriateness of care.

* * * * *

(d) That decisions related to the prior

authorization of health services are

completed as follows:

(1) In accordance with the medical

needs of the patient, within 14 days

after receipt of a request for services. A

possible extension of up to 14 days may

be permitted if the enrollee requests the

extension or if the physician or health

plan determines that additional

information is needed; or

(2) In accordance with existing State

law regarding prior authorization of

health services.

Subpart E—State Plan Requirements:

Enrollee Financial Responsibilities

§ 457.505 [Amended]

10. Amend § 457.505 as follows:

A. In paragraph (d)(1) remove

‘‘enrollees’’ and add ‘‘eligible children’’

in its place.

B. In paragraph (d)(3) remove

‘‘enrollees’’ and add ‘‘eligible children’’

in its place.

C. In paragraph (e) remove ‘‘by an

enrollee’’ and add ‘‘on behalf of an

eligible child’’ in its place.

§ 457.540 [Amended]

11. Amend § 457.540(f) by removing

‘‘§ 457.560(b)’’ and adding

‘‘§ 457.560(a)’’ in its place.

§ 457.560 [Amended]

12. Amend § 457.560 as follows:

A. Remove paragraphs (a) and (b).

B. Redesignate paragraphs (c) and (d)

as paragraphs (a) and (b).

C. Revise newly redesignated

paragraph (a) to read as follows:

§ 457.560 Cumulative cost-sharing

maximum.

(a) A State may not impose premiums,

enrollment fees, copayments,

coinsurance, deductibles, or similar

cost-sharing charges that, in the

aggregate, exceed 5 percent of a family’s

total income for the length of a child’s

eligibility period in the State.

* * * * *

Subpart G—Strategic Planning,

Reporting, and Evaluation

§ 457.750 [Amended]

13. In § 457.750 remove paragraph

(b)(7) and redesignate paragraph (b)(8)

as (b)(7).

Subpart I—Program Integrity

§ 457.940 [Amended]

14. Amend § 457.940 as follows:

A. In paragraph (b)(1), remove ‘‘45

CFR 74.43’’ and add in its place ‘‘45

CFR 74.43 or 45 CFR 92.36, as

applicable’’.

B. In paragraph (d) remove ‘‘45 CFR

part 74’’ and add in its place ‘‘45 CFR

part 74 or 45 CFR part 92, as

applicable’’.

§ 457.980 [Amended]

15. Amend § 457.980 as follows:

A. Remove paragraph (a); and

B. Remove paragraph designation (b).

Subpart J—Allowable Waivers:

General Provisions

§ 457.1000 [Amended]

16. Amend § 457.1000 as follows:

A. In paragraph (a)(1) remove the

phrase ‘‘for a waiver’’.

B. In paragraph (a)(2) remove the

phrase ‘‘a waiver for’’.

§ 457.1005 [Amended]

17. Amend § 457.1005 by removing

‘‘Waiver for’’ from the section heading.

§ 457.1010 [Amended]

18. Amend § 457.1010 by removing

‘‘Waiver for’’ from the section heading.

Subpart K—State Plan Requirements:

Applicant and Enrollee Protections

19. Section 457.1120 is revised to read

as follows:

§ 457.1120 State plan requirement:

Description of review process.

(a) The State must have one of the

following review processes:

(1) Program specific review. A process

that meets the requirements of

§§ 457.1130, 457.1140, 457.1150,

457.1160, 457.1170, and 457.1180; or

(2) Statewide Standard Review. A

process that complies with State review

requirements currently in effect for all

health insurance issuers (as defined in

section 2791 of the Public Health

Service Act) in the State.

(b) The State plan must include a

description of the State’s review

process.

§§ 457.1130, 457.1140, 457.1150, 457.1160,

457.1170, and 457.1180 [Amended]

20. Amend §§ 457.1130, 457.1140,

457.1150, 457.1160, 457.1170, and

457.1180 by adding ‘‘Program specific

review process:’’ at the beginning of

each section heading.

§ 457.1190 [Amended]

21. In § 457.1190, remove

‘‘§§ 457.1130(b), 457.1140, 457.1150(b),

457.1160(b), and 457.1180’’ and add ‘‘a

program specific review or a Statewide

standard review, as described in

§ 457.1120,’’ in its place.

(Catalog of Federal Domestic Assistance

Program No. 93.767, State Children’s Health

Insurance Program)

Dated: June 18, 2001.

Thomas A. Scully,

Administrator, Health Care Financing

Administration.

Approved: June 20, 2001.

Tommy G. Thompson,

Secretary.

[FR Doc. 01–15910 Filed 6–22–01; 8:45 am]

BILLING CODE 4120–01–P