To amend titles XIX and XXI of the Social Security Act to make certain changes to the State Children's Health Insurance Program and the Medicaid Program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicaid and SCHIP Beneficiary 
Choice Improvement Act of 2009''.

SEC. 2. EASING ADMINISTRATIVE BARRIERS TO STATE COOPERATION WITH 
              EMPLOYER-SPONSORED INSURANCE COVERAGE.

    (a) Requiring Some Coverage for Employer-Sponsored Insurance.--
            (1) In general.--Section 2102(a) of the Social Security Act 
        (42 U.S.C. 1397b(a)) is amended--
                    (A) in paragraph (6), by striking ``and'' at the 
                end;
                    (B) in paragraph (7), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(8) effective for plan years beginning on or after 
        October 1, 2010, how the plan will provide for child health 
        assistance with respect to targeted low-income children who 
        have access to coverage under a group health plan.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply beginning on October 1, 2010.
    (b) Federal Financial Participation for Employer-Sponsored 
Insurance.--Section 2105 of such Act (42 U.S.C. 1397d) is amended--
            (1) in subsection (a)(1)(C), by inserting before the 
        semicolon at the end the following: ``and, subject to paragraph 
        (3)(C) of subsection (c), in the form of payment of the 
        premiums for coverage under a group health plan that includes 
        coverage of targeted low-income children and benefits 
        supplemental to such coverage''; and
            (2) by amending paragraph (3) of subsection (c) to read as 
        follows:
            ``(3) Purchase of employer-sponsored insurance.--
                    ``(A) In general.--Payment may be made to a State 
                under subsection (a)(1)(C), subject to the provisions 
                of this paragraph, for the purchase of family coverage 
                under a group health plan that includes coverage of 
                targeted low-income children unless such coverage would 
                otherwise substitute for coverage that would be 
                provided to such children but for the purchase of 
                family coverage.
                    ``(B) Waiver of certain provisions.--With respect 
                to coverage described in subparagraph (A)--
                            ``(i) notwithstanding section 2102, no 
                        minimum benefits requirement (other than those 
                        otherwise applicable with respect to services 
                        within the categories of basic services 
                        described in section 2103(c)(1) and emergency 
                        services) under this title shall apply; and
                            ``(ii) no limitation on beneficiary cost-
                        sharing otherwise applicable under this title 
                        or title XIX shall apply.
                    ``(C) Required provision of supplemental 
                benefits.--If the coverage described in subparagraph 
                (A) does not provide coverage for the services in each 
                of the categories of basic services described in 
                section 2103(c)(1) and for emergency services, the 
                State child health plan shall provide coverage of such 
                services as supplemental benefits.
                    ``(D) Limitation on ffp.--The amount of the payment 
                under subsection (a)(1)(C) for coverage described in 
                subparagraph (A) (and supplemental benefits under 
                subparagraph (C) for individuals so covered) during a 
                fiscal year may not exceed the product of--
                            ``(i) the national per capita expenditure 
                        under this title (taking into account both 
                        Federal and State expenditures) for the 
                        previous fiscal year (as determined by the 
                        Secretary using the best available data);
                            ``(ii) the enhanced FMAP for the State and 
                        fiscal year involved; and
                            ``(iii) the number of targeted low-income 
                        children for whom such coverage is provided.
                    ``(E) Voluntary enrollment.--A State child health 
                plan--
                            ``(i) may not require a targeted low-income 
                        child to enroll in family coverage described in 
                        subparagraph (A) in order to obtain child 
                        health assistance under this title;
                            ``(ii) before providing such child health 
                        assistance for such coverage of a child, shall 
                        make available (which may be through an 
                        Internet website or other means) to the parent 
                        or guardian of the child information on the 
                        coverage available under this title, including 
                        benefits and cost-sharing; and
                            ``(iii) shall provide at least one 
                        opportunity per fiscal year for beneficiaries 
                        to switch coverage under this title from 
                        coverage described in subparagraph (A) to the 
                        coverage that is otherwise made available under 
                        this title.
                    ``(F) Information on coverage options.--A State 
                child health plan shall--
                            ``(i) describe how the State will notify 
                        potential beneficiaries of coverage described 
                        in subparagraph (A);
                            ``(ii) provide such notification in writing 
                        at least during the initial application for 
                        enrollment under this title and during 
                        redeterminations of eligibility if the 
                        individual was enrolled before October 1, 2010; 
                        and
                            ``(iii) post a description of these 
                        coverage options on any official Internet 
                        website that may be established by the State in 
                        connection with the plan.
                    ``(G) Semiannual verification of coverage.--If 
                coverage described in subparagraph (A) is provided 
                under a group health plan with respect to a targeted 
                low-income child, the State child health plan shall 
                provide for the collection, at least once every six 
                months, of proof from the plan that the child is 
                enrolled in such coverage.
                    ``(H) Rule of construction.--Nothing in this 
                section is to be construed to prohibit a State from--
                            ``(i) offering wrap around benefits in 
                        order for a group health plan to meet any 
                        State-established minimum benefit requirements;
                            ``(ii) establishing a cost-effectiveness 
                        test to qualify for coverage under such a plan;
                            ``(iii) establishing limits on beneficiary 
                        cost-sharing under such a plan;
                            ``(iv) paying all or part of a 
                        beneficiary's cost-sharing requirements under 
                        such a plan;
                            ``(v) paying less than the full cost of the 
                        employee's share of the premium under such a 
                        plan, including prorating the cost of the 
                        premium to pay for only what the State 
                        determines is the portion of the premium that 
                        covers targeted low-income children;
                            ``(vi) using State funds to pay for 
                        benefits above the Federal upper limit 
                        established under subparagraph (D);
                            ``(vii) allowing beneficiaries enrolled in 
                        group health plans from changing plans to 
                        another coverage option available under this 
                        title at any time; or
                            ``(viii) providing any guidance or 
                        information it deems appropriate in order to 
                        help beneficiaries make an informed decision 
                        regarding the option to enroll in coverage 
                        described in subparagraph (A).
                    ``(I) Group health plan defined.--In this 
                paragraph, the term `group health plan' has the meaning 
                given such term in section 2791(a)(1) of the Public 
                Health Service Act (42 U.S.C. 300gg-91(a)(1)).''.

SEC. 3. IMPROVING BENEFICIARY CHOICE IN SCHIP.

    (a) Requiring Offering of Alternative Coverage Options.--Section 
2102 of the Social Security Act (42 U.S.C. 1397b), as amended by 
section 1, is amended--
            (1) in subsection (a)--
                    (A) in paragraph (7), by striking ``and'' at the 
                end;
                    (B) in paragraph (8), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(9) effective for plan years beginning on or after 
        October 1, 2010, how the plan will provide for child health 
        assistance with respect to targeted low-income children through 
        alternative coverage options in accordance with subsection 
        (d).''; and
            (2) by adding at the end the following new subsection:
    ``(d) Alternative Coverage Options.--
            ``(1) In general.--Effective October 1, 2010, a State child 
        health plan shall provide for the offering of any qualified 
        alternative coverage that a qualified entity seeks to offer to 
        targeted low-income children through the plan in the State.
            ``(2) Application of uniform financial limitation for all 
        alternative coverage options.--With respect to all qualified 
        alternative coverage offered in a State, the State child health 
        plan shall establish a uniform dollar limitation on the per 
        capita monthly amount that will be paid by the State to the 
        qualified entity with respect to such coverage provided to a 
        targeted low-income child. Such limitation may not be less than 
        90 percent of the per capita monthly payment made for coverage 
        offered under the State child health plan that is not in the 
        form of an alternative coverage option. Nothing in this 
        paragraph shall be construed--
                    ``(A) as requiring a State to provide for the full 
                payment of premiums for qualified alternative coverage;
                    ``(B) as preventing a State from charging 
                additional premiums to cover the difference between the 
                cost of qualified alternative coverage and the amount 
                of such payment limitation;
                    ``(C) as preventing a State from using its own 
                funds to provide a dollar limitation that exceeds the 
                Federal financial participation as limited under 
                section 2105(c)(8).
            ``(3) Qualified alternative coverage defined.--In this 
        section, the term `qualified alternative coverage' means health 
        insurance coverage that--
                    ``(A) meets the coverage requirements of section 
                2103; and
                    ``(B) is offered by a qualified insurer, and not 
                directly by the State.
            ``(4) Qualified insurer defined.--In this section, the term 
        `qualified insurer' means, with respect to a State, an entity 
        that is licensed to offer health insurance coverage in the 
        State.''.
    (b) Federal Financial Participation for Qualified Alternative 
Coverage.--Section 2105 of such Act (42 U.S.C. 1397d), as amended by 
sections 301(a) and 601(a) of the Children's Health Insurance Program 
Reauthorization Act of 2009 (Public Law 111-5), is amended--
            (1) in subsection (a)(1)(C), by inserting before the 
        semicolon at the end the following: ``and, subject to 
        subsection (c)(12)(C), in the form of payment of the premiums 
        for coverage for qualified alternative coverage''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(12) Purchase of qualified alternative coverage.--
                    ``(A) In general.--Payment may be made to a State 
                under subsection (a)(1)(C), subject to the provisions 
                of this paragraph, for the purchase of qualified 
                alternative coverage.
                    ``(B) Waiver of certain provisions.--With respect 
                to coverage described in subparagraph (A), no 
                limitation on beneficiary cost-sharing otherwise 
                applicable under this title or title XIX shall apply.
                    ``(C) Limitation on ffp.--The amount of the payment 
                under paragraph (1)(C) for coverage described in 
                subparagraph (A) during a fiscal year in the aggregate 
                for all such coverage in the State may not exceed the 
                product of--
                            ``(i) the national per capita expenditure 
                        under this title (taking into account both 
                        Federal and State expenditures) for the 
                        previous fiscal year (as determined by the 
                        Secretary using the best available data);
                            ``(ii) the enhanced FMAP for the State and 
                        fiscal year involved; and
                            ``(iii) the number of targeted low-income 
                        children for whom such coverage is provided.
                    ``(D) Voluntary enrollment.--A State child health 
                plan--
                            ``(i) may not require a targeted low-income 
                        child to enroll in coverage described in 
                        subparagraph (A) in order to obtain child 
                        health assistance under this title;
                            ``(ii) before providing such child health 
                        assistance for such coverage of a child, shall 
                        make available (which may be through an 
                        Internet website or other means) to the parent 
                        or guardian of the child information on the 
                        coverage available under this title, including 
                        benefits and cost-sharing; and
                            ``(iii) shall provide at least one 
                        opportunity per fiscal year for beneficiaries 
                        to switch coverage under this title from 
                        coverage described in subparagraph (A) to the 
                        coverage that is otherwise made available under 
                        this title.
                    ``(E) Information on coverage options.--A State 
                child health plan shall--
                            ``(i) describe how the State will notify 
                        potential beneficiaries of coverage described 
                        in subparagraph (A);
                            ``(ii) provide such notification in writing 
                        at least during the initial application for 
                        enrollment under this title and during 
                        redeterminations of eligibility if the 
                        individual was enrolled before October 1, 2010; 
                        and
                            ``(iii) post a description of these 
                        coverage options on any official website that 
                        may be established by the State in connection 
                        with the plan.
                    ``(F) Rule of construction.--Nothing in this 
                section is to be construed to prohibit a State from--
                            ``(i) establishing limits on beneficiary 
                        cost-sharing under such alternative coverage;
                            ``(ii) paying all or part of a 
                        beneficiary's cost-sharing requirements under 
                        such coverage;
                            ``(iii) paying less than the full cost of a 
                        child's share of the premium under such 
                        coverage, insofar as the premium for such 
                        coverage exceeds the limitation established by 
                        the State under subparagraph (C);
                            ``(iv) using State funds to pay for 
                        benefits above the Federal upper limit 
                        established under subparagraph (C); or
                            ``(v) providing any guidance or information 
                        it deems appropriate in order to help 
                        beneficiaries make an informed decision 
                        regarding the option to enroll in coverage 
                        described in subparagraph (A).''.

SEC. 4. APPLICATION TO MEDICAID.

    In accordance with rules established by the Secretary of Health and 
Human Services, the requirements imposed under a State child health 
plan under title XXI of the Social Security Act under the amendments 
made by the preceding sections of this subtitle shall apply in the same 
manner to a State plan under title XIX of such Act, except that--
            (1) such requirements shall not apply to individuals whose 
        eligibility for medical assistance under such title is based on 
        being aged, blind, or disabled or to individuals with a 
        category of individuals described in section 1937(a)(2)(B) of 
        such Act;
            (2) the national per capita expenditures shall be 
        determined based on a benchmark coverage described in section 
        1937(b)(1) of such Act but without regard to expenditures for 
        individuals described in paragraph (1) or for nursing facility 
        services and other long-term care services (as determined by 
        the Secretary).

SEC. 5. EXPANSION OF HEALTH OPPORTUNITY ACCOUNT PROGRAM.

    (a) In General.--Section 613 of the Children's Health Insurance 
Program Reauthorization Act of 2009 (Public Law 111-3) is repealed.
    (b) Expansion.--Section 1938(a)(2) of the Social Security Act (42 
U.S.C. 1396u-8(a)(2)) is amended--
            (1) in subparagraph (A) by striking everything following 
        the first sentence; and
            (2) by striking subparagraph (B).

Summary: Medicaid and SCHIP Beneficiary Choice Improvement Act of 2009 - Amends title XXI (State Children's Health Insurance Program) (SCHIP, also known as CHIP) of the Social Security Act to require an SCHIP plan to describe how it will provide for child health assistance with respect to targeted low-income children who have access to coverage under a group health plan.

Requires the Secretary of Health and Human Services (HHS) to pay to each state with an approved SCHIP plan a certain amount for the payment of premiums for coverage under an employer-sponsored group health plan that includes coverage of targeted low-income children and benefits supplemental to such coverage.

Revises requirements regarding the purchase of employer-sponsored insurance. Prohibits any minimum benefits requirement or any limitation on beneficiary cost-sharing.

Declares that, if the basic coverage of such insurance does not extend to each of certain categories of basic services, the plan shall cover such services as supplemental benefits.

Prohibits a plan from requiring a targeted low-income child to enroll in family coverage in order to obtain child health assistance. Requires an annual voluntary enrollment period for switching from one plan to another.

Requires the offering of alternative coverage options under SCHIP. Prescribes requirements for federal financial participation for qualified alternative coverage.

Declares that the requirements imposed under a state child health plan under this Act shall apply in the same manner to a state plan under title XIX (Medicaid), except that: (1) such requirements shall not apply to individuals whose Medicaid eligibility is based on being aged, blind, or disabled or to individuals in certain categories; and (2) the national per capita expenditures shall be determined based on a specified benchmark coverage but without regard to expenditures for such excluded individuals or for nursing facility services and other long-term care (LTC) services.

Amends the Children's Health Insurance Program Reauthorization Act of 2009 to repeal the prohibition against the Secretary's approval of any new health opportunity account demonstration programs. 

Converts the Health Opportunity Account demonstration program into a permanent program.