Living benefit riders to life insurance policies: Pricing considerations and strategy
Adding benefit riders to policies provides meaningful coverage for those who need it, and carriers usually can do so at a relatively low cost.
A more flexible interpretation for states, but new compliance requirements will apply
Previous guidance issued through Frequently Asked Questions (FAQs)1,2,3 issued by the Centers for Medicaid and Medicare Services (CMS), outlining how state Medicaid programs can qualify for the 6.2% increase in the Federal Medical Assistance Percentage (FMAP), put significant restrictions on a state’s ability to make beneficiary eligibility decisions and limited a state’s ability to make programmatic changes in response to the recent budgetary challenges. CMS has now published a rule updating this interpretation, creating new obligations for states in order to continue receiving the enhanced FMAP.
In an Interim Final Rule with Request for Comments (IFC), published on October 28, 2020,4 CMS announced an updated interpretation of the Maintenance of Effort (MOE) provision related to the temporary 6.2% increase in Medicaid FMAP for states.5 This Milliman white paper provides an overview of the new MOE requirements and programmatic changes allowed by the statute. CMS explains in the IFC6 that it has considered several possible reasonable interpretations of the MOE provision. Based upon comments from states and its review of possible alternative interpretations, CMS is now adopting a “blended approach” that is somewhat different from its original interpretation.
Unlike the previous regulation, which severely restricted a state's ability to move beneficiaries into new eligibility categories, the new interpretation enables states to make changes in their programs, not only in moving beneficiaries into their correct eligibility category (with caveats discussed below and while maintaining eligibility), but also allowing programmatic changes that may be needed in these challenging budgetary times. CMS states that this interpretation is intended to ease the administrative burden anticipated by the previous interpretation of the MOE both during and after the COVID-19 Public Health Emergency (PHE).7
Generally, under the IFC, states are now required to move beneficiaries to another, more appropriate category so long as benefits are not reduced to a lower tier.
The IFC establishes three tiers of benefits for assessing a change to a beneficiary’s eligibility status:
The IFC also discusses requirements for coverage of COVID-19 testing and treatment for certain eligibility groups (including exceptions) during the PHE, as well as the availability of additional FMAP for covering these services for certain groups following the end of the PHE.
The previous interpretation of the MOE applied until the regulation was published by the Federal Register (November 6, 2020). The new interpretation applies from that publication day until the end of the month when the PHE ends. CMS is accepting comments on this IFC until January 4, 2021. Items not specifically addressed in this IFC may be addressed in statute or in previous FAQs released by CMS.
Section 6008 of the Families First Coronavirus Response Act (FFCRA)8 provides a temporary 6.2% increase in FMAP for states and territories during the COVID-19 PHE. The MOE language in the statute says that a state could not make any changes in its “eligibility standards, methodologies, or procedures under the State plan of such State…” that “…are more restrictive …than the eligibility standards, methodologies, or procedures, respectively, under such plan (or waiver) as in effect on January 1, 2020.”9 CMS issued several FAQs outlining its interpretation of the MOE provision of the FFCRA. CMS’s original interpretation of this statue was that states could not terminate any individual from Medicaid, reduce benefits, or increase cost-sharing amounts during the COVID-19 PHE.10
Based on state concerns regarding the inability to make changes in their Medicaid programs during the PHE, especially as they face difficult budget constraints, CMS revised its original interpretation of the requirements under Section 6008 of the FFCRA. CMS has determined the language in Section 6008(b)(3) of the FFCRA to be “somewhat ambiguous,”11 recognizing that the original interpretation could “impede the routine, orderly transition of beneficiaries between eligibility groups, and could lead to significant backlogs in redeterminations and appeals after the PHE for COVID-19 ends.”12 In addition, comments from states indicated that the “existing interpretation severely limits state flexibility to control program costs in the face of growing budgetary constraints.”13
Prior to releasing the most recent IFC, CMS discussed another potential option referred to as “enrollment interpretation.” Under this option a state would be able to make programmatic changes, eliminate optional benefit coverage, and/or increase cost sharing (except COVID-19 claims).14 This interpretation would allow states to make individual beneficiary changes short of disenrollment. Because this interpretation may result in a negative impact on certain beneficiaries, CMS has declined it.15
As an alternative to the enrollment interpretation scenario described above, CMS announced in this IFC its adoption of a “blended approach” as discussed in detail below. The stated goal of this blended approach is to grant flexibility to states in making decisions for the “proper and efficient operation” of their Medicaid state plans, while at the same time balancing and protecting the needs of beneficiaries and providers.16
To support the blended approach, the IFC also adds a new subpart that includes a new definition of “enrolled for benefits” and utilizes the Minimum Essential Coverage (MEC) determinations:
Following a temporary suspension due to the PHE, CMS has resumed its program integrity efforts under the Payment Error Rate Measurement (PERM) program. States that do not carefully assure compliance with the new interpretation of the MOE requirements may be at risk under a PERM audit for incorrect eligibility determinations and could be liable for the payments made for services to which a beneficiary was not entitled.28
The IFC provides several examples of the impact of the blended approach and new proposed regulations.
Tier 1 example: A person who ages out of the original eligibility group for children under age 19 must be moved to the adult group (if there is an adult group that person is eligible for), even if the adult group coverage has different benefits and cost sharing, because both meet the definition of MEC as long as the state has expanded eligibility for the adult population.
If a person becomes ineligible for a group that provides MEC and the state finds him or her eligible for coverage that does not meet the definition of MEC then the state may not move the beneficiary to the new group and must maintain the beneficiary’s access to coverage meeting the definition of MEC.
Other examples of this rule:
If a person loses eligibility for a Tier 3 coverage group, but is now eligible for a higher tier group, the state must move the beneficiary to a higher tier. However, a state must not move an individual among various Tier 3 groups, because Tier 3 groups have more limited yet widely varying benefits and are not interchangeable like Tier 1 groups (which are always MEC) and Tier 2 groups (which always include COVID-19 testing and treatment).
Tier 3 example: An individual loses eligibility for family planning benefits only but is now eligible for a group that focuses on preventing the progression of a specific disease. The state must not move the individual to the disease-specific group. The individual stays in the family planning benefits group, unless the individual voluntarily requests a move to the disease-specific group.
Note that an individual may be eligible for coverage in the optional COVID-19 testing group, in addition to another Tier 3 group, and can be enrolled in both of these limited-benefit groups if eligible.
States may make changes in their coverage, cost-sharing, and beneficiary liability terms provided the changes do not violate the individual beneficiary protections or the requirements to cover COVID-19 testing and treatment.
States are still required to follow all advance notice requirements. States may:
Despite the strict requirements to maintain eligibility as a condition of receiving the enhanced FMAP, several situations remain where a beneficiary may be terminated even during the COVID-19 PHE, including:
While this regulation provides significant flexibility to states under the MOE requirements, it still requires a careful review of eligibility determination processes, especially where a change of status occurs during the PHE. It may also require submitting clarifying questions to CMS particularly around the intersection of CHIP and Medicaid. Given the different categories and administration of CHIP across the country, and the fact that the IFC does not appear to address a beneficiary moving from Medicaid to CHIP, it would be important to clarify that issue.
The new blended approach to MOE will enable states to more accurately implement changed eligibility determinations during the PHE. This should result in the need for fewer eligibility changes after the PHE ends (to correct the temporary eligibility determinations mandated during the PHE), thus requiring less resources and a shorter period of time for the transition back to normal program operations.
1Medicaid (June 30, 2020). COVID-19 Frequently Asked Questions (FAQs) for State Medicaid and Children’s Health Insurance Program (CHIP) Agencies. Retrieved November 10, 2020, from https://www.medicaid.gov/state-resource-center/downloads/covid-19-faqs.pdf.
2Medicaid (April 13, 2020). Families First Coronavirus Response Act – Increased FMAP FAQs. Retrieved November 10, 2020, from https://www.medicaid.gov/state-resource-center/downloads/covid-19-section-6008-faqs.pdf.
3Medicaid (April 13, 2020). Families First Coronavirus Response Act (FFCRA), Public Law No. 116-127, Coronavirus Aid, Relief, and Economic Security (CARES) Act, Public Law No. 116-136: Frequently Asked Questions (FAQs). Retrieved November 10, 2020, from https://www.medicaid.gov/state-resource-center/downloads/covid-19-section-6008-CARESfaqs.pdf.
4Federal Register (November 6, 2020). Additional Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency. Interim Final Rule With Request for Comments. Retrieved November 10, 2020, from https://www.govinfo.gov/content/pkg/FR-2020-11-06/pdf/2020-24332.pdf.
8Families First Coronavirus Response Act: Public Law 116-127 (March 18, 2020). Retrieved November 10, 2020, from https://www.congress.gov/116/plaws/publ127/PLAW-116publ127.pdf.
28CMS.gov. Retrieved November 11, 2020, from https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Improper-Payment-Measurement-Programs/PERM.
3642 C.F.R. 435.725, Post-Eligibility Treatment of Income (PETI), determines the amount of a beneficiary’s income allocated to the institution to reduce the financial obligation of the state Medicaid program.
Updated eligibility maintenance options for state Medicaid programs to qualify for 6.2% FMAP during the COVID-19 emergency
Centers for Medicaid and Medicare Services has published a rule updating this interpretation, creating new compliance requirements for states in order to continue receiving the enhanced FMAP.