A Deeper Dive into Florida’s Lawsuit Seeking to Undermine the New Requirement for 12-Months Continuous Eligibility for Children in Separate State CHIP Programs

As my colleague Joan Alker explains, the state of Florida recently sued the federal government to block guidance from the Centers for Medicare and Medicaid Services (CMS) implementing the new requirement that all states provide 12-months continuous eligibility for children in Medicaid and the Children’s Health Insurance Program (CHIP) as of January 1, 2024.  Specifically, Florida is challenging CMS’s Frequently Asked Questions (FAQ) guidance to states issued in October 2023 (which I analyzed here) clarifying that states will no longer be permitted to disenroll children from separate state CHIP programs for failure to pay premiums during the required 12-months continuous eligibility period.  The federal district court judge assigned the case has not yet ruled on Florida’s motion for a preliminary injunction, although briefs have been submitted by both Florida and the Department of Justice.

Among several compelling arguments for denying the state’s request for a preliminary injunction, the Department of Justice, which represents CMS in federal litigation, asserts that the case is not ripe for judicial review.  CMS has not disapproved any state plan amendment or waiver including authority for continued disenrollment from Florida’s separate state CHIP program for failure to pay premiums and CMS has also not taken any other action finding Florida to be out-of-compliance with the continuous eligibility requirement.  Nor has CMS imposed any financial penalties after completing the administrative reconsideration and hearing process set under the CHIP statute and regulations.

In this blog, however, I focus on some of the flawed substantive arguments Florida made in challenging CMS’ interpretation that the Consolidated Appropriations Act, 2023 (CAA), which established the 12-months continuous eligibility requirement in Medicaid and CHIP, barred children from being disenrolled from separate state CHIP programs for failure to pay premiums.  (In its FAQ guidance, CMS indicated that states could continue to charge upfront enrollment fees and/or require payment of the first month’s premium before enrollment in a separate state CHIP program.  States may also continue to charge premiums after the first month but states may not disenroll children for failure to pay.)

CMS’ interpretation is consistent with the statutory language of the CAA.  The state argues that the CAA did not change the states’ prior authority to disenroll for failure to pay separate state CHIP premiums during a continuous eligibility period, as previously permitted under CHIP regulations at 42 C.F.R. § 457.342(b).

However, this ignores CAA’s statutory language instituting the 12-months continuous eligibility requirement in Medicaid and CHIP.  The CAA strikes the prior language at section 1902(e)(12) of the Social Security Act giving states an option for 12-months continuous eligibility (and under whose authority the existing Medicaid and CHIP regulations related to the continuous eligibility option including 42 C.F.R. § 457.342 were promulgated) and replaces it with new 1902(e)(12) language requiring 12-months continuous eligibility for children and allowing only two exceptions for age and changes in residency.  It then incorporates the continuous eligibility requirement into CHIP by amending section 2107(e) of the Social Security Act, which begins: “The following sections of this Act shall apply to States under this title in the same manner as they apply to a State under title XIX:” (italics added).  Section 2107(e)(1) then lists statutory provisions in title XIX (the Medicaid statute) that will apply exactly as in Medicaid to CHIP, unless otherwise qualified or amended.  For example, the option to cover lawfully residing immigrant children and pregnant women during their first five years in the U.S. under Medicaid in section 1903(v)(4) is available to states in in their separate state CHIP programs by cross-referencing section 1903(v)(4) in section 2107(e)(1)(O) “but only if the State has elected to apply such paragraph with respect to such category of children or pregnant women under title XIX.”

The CAA incorporates the new Medicaid requirement of 12-months continuous eligibility by adding a new subparagraph (K) to paragraph (1) of subsection 2107(e).  It cross-references the new paragraph 1902(e)(12), meaning that the Medicaid continuous eligibility requirement will apply in the same manner in CHIP as in Medicaid.  The only modification to the Medicaid requirement in section 1902(e)(12) is one additional exception for eligibility for full Medicaid benefits: “except that a targeted low-income child enrolled under the State child health plan or waiver may be transferred to the Medicaid program under title XIX for the remaining duration of the 12-month continuous eligibility period, if the child becomes eligible for full benefits under title XIX during such period.”  There is no exception allowing disenrollment for failure to pay premiums in the Medicaid requirement in paragraph 1902(e)(12) and there is no language in subparagraph 2107(e)(1)(K) that adds or clarifies that an exception for failure to pay premiums remains.  As the FAQ states: “There is not an exception to CE for non-payment of premiums.  Thus, the existing regulatory option… for states operating a separate CHIP to consider non-payment of premiums as an exception to CE will end on December 31, 2023….”

Florida incorrectly claims that the CAA does not actually require continuous enrollment.  While acknowledging that the CAA requires continuous eligibility, Florida claims that the CAA does not require continuous enrollment and failure to pay premiums is a condition of enrollment, not of eligibility.  However, this incorrect distinction between eligibility and enrollment ignores how the prior option for continuous eligibility was implemented in all states (and how states are now implementing the CAA requirement of 12-months continuous eligibility).

Under the prior 12 months continuous eligibility state option in section 1902(e)(12) of the Social Security Act, which was then struck and replaced by the CAA, children “shall remain eligible” during the continuous eligibility period even if they otherwise would be ineligible for reasons such as income.  This has always been operationalized by states adopting continuous eligibility in Medicaid and/or CHIP prior to the CAA as a protection against disenrollment during the continuous eligibility period with only limited statutory ineligibility exceptions (e.g. end of the 12 months continuous eligibility period or age in section 1902(e)(12) of the Social Security Act in Medicaid) and regulatory ineligibility exceptions (e.g. death, erroneous determination of eligibility, voluntary termination of eligibility, change in residency in Medicaid under 42 C.F.R § 435.926 and additionally, failure to pay premiums or enrollment fees in CHIP under 42 C.F.R § 457.342).  (CMS notes in its principal guidance from September 2023 that it continues to allow disenrollment in the case of death, voluntary disenrollment and erroneous finding of eligibility due to agency error or fraud.  While additional exceptions for death, voluntary disenrollment and error are not explicitly included in the statutory language, such exceptions are not inconsistent with the CAA, do not undermine the 12-months continuous eligibility requirement and are important to protecting program integrity unlike in the case of disenrollment for non-payment of premiums.)

Moreover, Florida never acknowledges that it has been the view of CMS over the last 15 years that premiums are to be considered an eligibility criterion in other situations in Medicaid and CHIP.  For example, CMS determined in State Medicaid Director Letter 09-005 in August 2009 that increased premiums were a violation of the maintenance of effort (MOE) requirement tied to the American Rescue and Recovery Act of 2009 (ARRA) increase in the federal Medicaid matching rate (FMAP).  That MOE requirement prohibited states from making “eligibility standards, methodologies and procedures” (italics added) more restrictive while the ARRA FMAP increase was in place.  The Affordable Care Act added a similar MOE protection for children in Medicaid and CHIP in section 1902(gg) of the Social Security Act, which was recently extended through 2029 under the CAA.  In State Medicaid Director Letter 11-001 (February 25, 2011), CMS stated: “Under the Recovery Act Medicaid MOE provision, CMS guidance indicated that the imposition and requirement for individuals to pay premiums was considered to be an eligibility provision for purposes of the MOE compliance.  Thus, the imposition of increases to existing premiums or the imposition of new premiums after the Recovery Act MOE date was not consistent with the MOE.  In general, under the Affordable Care Act MOE provisions this is still the case” (italics added).  The same letter also made clear that in contrast, co-payments were “not conditions of eligibility.”

In other words, failure to pay premiums is not a specified ineligibility exception to 12 months continuous eligibility in Medicaid and CHIP under the CAA, including in separate state CHIP programs, so the prohibition against disenrollment during the continuous eligibility period still applies in the case of a family’s failure to pay premiums during that period.  Therefore, CMS’ determination that states may not disenroll for failure to pay premiums is consistent with the CAA’s statutory language, how states have always implemented continuous eligibility, and longstanding CMS interpretation of federal Medicaid and CHIP law.  As noted above, however, states can still charge upfront premiums and enrollment fees before enrollment.  They also can continue to charge and collect premiums during the 12-months continuous eligibility period (which many families will pay, although children cannot be disenrolled if their families fail to pay such premiums).

The author would like to thank Leo Cuello and Kelly Whitener for their assistance with this blog.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.