State Budget Update: Maintenance of Effort Requirements Could Affect State Budget, Health Access For Kids

California Healthline recently reported that federal regulators were questioning whether premium hikes approved last year for the Healthy Families program, which provides low-cost health, dental and vision coverage to uninsured children in working families, could conflict with the new health care reform law passed in March. A letter from the Centers for Medicaid Systems to California's Managed Risk Medical Insurance Board (MRMIB),  the organization that administers Healthy Families, questioned whether the premium increases are in compliance with maintenance of effort requirements.

Maintenance of Effort (MOE) requirements call for grant recipients to provide their own share of funding in order to continue receiving federal funding. The health care reform law includes MOE language that prohibits states from adopting changes in participant eligibility rules that would disqualify a child for coverage under the Children's Health Insurance Program (Healthy Families in California), if that child had been eligible for the program when the health care reform law was signed by the president in March.

MRMIB representatives stressed that California is in compliance with MOE rules because Healthy Families premiums were increased before the federal health reform law was enacted. A report produced for MRMIB last month on the Healthy Families Program Benefit Options noted that, "... It is unclear as of this writing whether imposing premium increases would comply with the maintenance of effort requirements contained within the federal health reform legislation."

The outcome of the matter could have a lasting effect on the state budget, which relies on specific revenue projections, including an estimated $17.6 million from increased premiums and co-payments in the Healthy Families Program.

Last year Governor Arnold Schwarzenegger proposed to scrap the program entirely. But an eleventh hour rescue came in the form of a deal struck by the governor, legislators and First 5 California, which chipped in $81 million to save the program.

According to the California Medical Association, new assistance from the healthcare reform law would boost Healthy Families funding considerably. From 2013 to 2019, California would receive a 23-percent increase in the Federal Medical Assistance Percentage (FMAP) in Healthy Families. This means federal funding will increase, paying 88 cents out of every dollar spent on the program.

Additional Reading:

Healthy Families Benefits Options

100 Percent Campaign: Premium Increases of Nearly 250% Over Last 18 Months Proposed for Low-Income Children in Healthy Families  

Congressional Letter to DHHS Secretary Kathleen Sibelius

Center on Budget and Policy Priorities: Holding The Line on Medicaid and CHIP

‹‹Back to this week's Monday Morning Report