Matching funds for State Employees election to join an health maintenance organization. Would it be mandatory that the state matching funds for each state employee electing to join an HMO be used to defray the cost of the premium? If not mandatory, would it be optional at the decision of th

STATE OF ARKANSAS OFFICE OF THE ATTORNEY GENERAL JUSTICE BUILDING, LITTLE ROCK 72201 STEVE CLARK (501) 371-2007 ATTORNEY GENERAL OPINION NO. 85-225 December 27, 1985 - - - --Mahlon-A.- Martin, Director Department of Finance and Administration P. 0. Box 3278 Little Rock, Arkansas 72203 Dear Mr. Martin: This Letter is in response to your recent letter requesting an opinion from the Attorney General's Office. As background information, you state that a possibility exists that the State Employees' Insurance Program may have to offer participation in Health Maintenance Organization (HMOs) to its participants. You then ask the following questions: 1. Would it be mandatory that the State matching } funds for each State: employee electing to join an HMO be used to defray the cost of the premium? 2. If not mandatory, would it be optional at the decision of the State Employees' Insurance Advisory ~ Committee? HMOs are regulated by federal law, 42 USC 300(e) and 42 CFR §110.801 et seq. Pursuant to 42 CFR §110.802(b), as a condition to receipt of. funds under specific sections of the Public Health Service Act, the State is subject to the provisions of 42 CFR §110.801 et seq if (1) it offers, directly or indirectly, a health benefits plan (see §110.801) to eligible employees and (2) has received a request from a qualified HMO to be included in the plan. If the State meets the criteria of §110.802 it must include in the plan the option for membership in qualified HMOs to each eligible employee and dependent residing in the ~ HMOs' service area. 42 CFR §110.804. The request for inclusion in the plan must comply with §110.803. Contributions for HMOs are addressed by 42 CFR §110.808 (a) which requires that the HMO option be included in the plan Mahlon A. Martin, Director December 27, 1985 Page 2 on terms no less favorable, with respect to the employer's contribution or designee's cost for health benefits, than other alternatives in the plan. The following paragraphs in §110.808 address issues relevant to the employer's contri~ butions and allocation of expenses. It is my opinion that the State must offer HMOs as an option in health benefit plans in order to receive certain federal funds. The State must make a contribution to the HMO option cost and the amount must be calculated under the provisions of 42 CFR §110.801 et seg, a copy of which is enclosed for your use. The foregoing opinion which I hereby approve was drafted by Thomas S. Gay, Assistant Attorney General. Sincerely, Attornéy General JSC:TSG:jk Encl.