[Federal Register Volume 73, Number 140 (Monday, July 21, 2008)]
[Rules and Regulations]
[Pages 42416-42442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-15771]



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Part II





Department of Health and Human Services





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Administration for Children and Families



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45 CFR Parts 302, 303, 304, 305, and 308



Child Support Enforcement Program; Medical Support; Final Regulation

  Federal Register / Vol. 73, No. 140 / Monday, July 21, 2008 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Parts 302, 303, 304, 305, and 308

RIN 0970-AC22


Child Support Enforcement Program; Medical Support

AGENCY: Administration for Children and Families, Office of Child 
Support Enforcement (OCSE).

ACTION: Final regulation.

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SUMMARY: This regulation revises Federal requirements for establishing 
and enforcing medical support obligations in Child Support Enforcement 
(CSE) program cases receiving services under title IV-D of the Social 
Security Act (the Act). The changes: require that all support orders in 
the IV-D program address medical support; redefine reasonable-cost 
health insurance; require health insurance to be accessible, as defined 
by the State; and make conforming changes to the Federal interstate, 
substantial-compliance audit, and State self-assessment requirements.

DATES: Effective Date: This regulation is effective July 21, 2008.

FOR FURTHER INFORMATION CONTACT: Crystal Rodriguez, OCSE Division of 
Policy, 202-401-1381, e-mail: [email protected]. Deaf and 
hearing impaired individuals may call the Federal Dual Party Relay 
Service at 1-800-877-8339 between 8 a.m. and 7 p.m. eastern time.

SUPPLEMENTARY INFORMATION: 

Statutory Authority

    This final regulation is published under the authority granted to 
the Secretary of Health and Human Services (the Secretary) by section 
1102 of the Social Security Act, 42 U.S.C. 1302. Section 1102 of the 
Act authorizes the Secretary to publish regulations, not inconsistent 
with the Act, that may be necessary for the efficient administration of 
the title IV-D program.
    This rule also is published in accordance with section 452(f) of 
the Act, as amended by section 7307 of the Deficit Reduction Act of 
2005 (DRA of 2005), which directs the Secretary to issue regulations 
which require that State agencies administering IV-D programs ``enforce 
medical support included as part of a child support order whenever 
health care coverage is available to the noncustodial parent at 
reasonable cost.'' Section 7307 of the DRA of 2005 also added two 
additional sentences to section 452(f) of the Act: ``A State agency 
administering the program under this part [title IV-D] may enforce 
medical support against a custodial parent if health care coverage is 
available to the custodial parent at a reasonable cost, notwithstanding 
any other provision of this part [title IV-D].'' And: ``For purposes of 
this part, the term `medical support' may include health care coverage, 
such as coverage under a health insurance plan (including payment of 
costs of premiums, co-payments, and deductibles) and payment for 
medical expenses incurred on behalf of a child.''
    This regulation also is published in accordance with section 
466(a)(19) of the Act, as amended by section 7307 of the DRA of 2005, 
which requires States to have in effect laws requiring the use of 
procedures under which all child support orders enforced pursuant to 
title IV-D of the Act ``shall include a provision for medical support 
for the child to be provided by either or both parents.''

Background

    Recognizing that State Child Support Enforcement program efforts to 
secure and enforce medical support orders against child support 
obligors had met with limited success, Congress enacted the Child 
Support Performance and Incentive Act of 1998 (CSPIA). CSPIA directed 
the Secretaries of HHS and the Department of Labor (DOL) to establish a 
Medical Child Support Working Group (Working Group). The Working Group 
included 30 members representing: Federal and State CSE programs, 
employers, payroll professionals, group health plans, and children's 
advocates. The Working Group identified impediments to the effective 
enforcement of medical support by State IV-D agencies and made 
recommendations to eliminate them.
    A final report, 21 Million Children's Health: Our Shared 
Responsibility, was jointly transmitted to Congress by the Secretaries 
of HHS and DOL on August 16, 2000. This final rule responds to several 
of the Working Group's key recommendations. After review of 21 Million 
Children, OCSE consulted with a wide range of program stakeholders in 
2001 and 2002, including State and local workers and administrators, 
national organizations, advocates, and other parties interested in 
medical support enforcement. These consultations explored the 
feasibility and impact of the Working Group's recommendations, 
establishing which recommendations had wide support.
    Additionally, HHS's Health Care Coverage Among Child Support-
Eligible Children study, published in 2002 after the Working Group's 
Report, suggests that untapped employer-sponsored insurance through 
custodial mothers and their spouses might reduce the share of children 
without private health insurance more significantly than similar 
insurance through noncustodial parents, for a variety of reasons, 
including availability, accessibility, cost, and preference. ``Half of 
child support-eligible children living with their mothers are currently 
covered by [employer-sponsored] insurance. Indeed, the Working Group's 
decision matrix to determine appropriate health insurance coverage, 
presented in 21 Million Children, contains a preference for using the 
custodial parent's (or step-parent's) health insurance. The 
Administration's legislative proposal requiring States to seek medical 
support from either parent, and to enforce, at their option, an order 
that a custodial parent provide medical support is addressed in this 
legislation and also meets the requirements in section 7307 of the 
Deficit Reduction Act of 2005 (Pub. L. 109-171).

Provisions of the Regulation and Changes Made in Response to Comments

    The Notice of Proposed Rule Making (NPRM) was published in the 
Federal Register on September 20, 2006. During the comment period, we 
received 36 letters generating 308 comments. On the whole, comments 
were positive and welcomed the proposed update of medical support 
regulations, particularly with respect to the definition of reasonable 
cost and the authority to close cases in which an individual in a 
Medicaid only, child-only case is not cooperating with the IV-D agency. 
We made a number of changes to the proposed regulations to accommodate 
practices already in place in States that are leaders in seeking 
medical support for children, for example by eliminating a proposed 
specific order of allocating wage withholdings between child support 
and medical support which employers would have been required to follow. 
To impose a requirement now, when States have moved forward without 
Federal guidance or mandate, would be unfair to those States and 
contrary to our commitment to State flexibility. On the other hand, we 
did not agree with comments to expand States' authority to close 
Medicaid-only, child-only cases to include authority to close any 
Medicaid-

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only case, because the authority would be overbroad and inappropriate 
when assignment and cooperation with the IV-D agency is required in 
such cases.
    Changes made in response to comments are discussed in more detail 
under the Response to Comments section of this preamble.

Section 302.56--Guidelines for Setting Child Support Awards

    Under Sec.  302.56(c)(3), the State guidelines for setting and 
modifying child support awards must address how the parents will 
provide for the child(ren)'s health care needs through health insurance 
coverage and/or through cash medical support in accordance with Sec.  
303.31 which defines cash medical support, reasonable cost, and 
petitioning the court or administrative authority to include health 
insurance. In response to comments, we expanded the cross-reference to 
include all of Sec.  303.31, rather than just paragraph (b) which 
states that the State IV-D agency must petition the court or 
administrative authority to include health insurance when the order is 
entered or modified and establish written criteria to identify orders 
that do not address the health care needs of children.

Section 303.7--Provision of Services in Interstate IV-D Cases

    Section 303.32 mandates the use of the National Medical Support 
Notice (NMSN) to enforce the provision of health care coverage for 
children of noncustodial parents who are required to provide health 
care coverage through an employment-related group health plan pursuant 
to a child support order. We added ``Sec.  303.32'' to Sec.  
303.7(c)(7)(iii), which governs responding State responsibilities in 
processing and enforcing orders in interstate cases. This is a 
necessary technical correction identified during the review of comments 
on the proposed rule.

Section 303.11--Case Closure Criteria

    Under Sec.  303.11(b)(11) of this regulation, in order to be 
eligible for closure, a case must meet certain criteria. In response to 
comments received on the proposed regulation, the final regulation 
clarifies that case closure under paragraph (b)(11) is only authorized 
if the recipient of services is not required to cooperate with the IV-D 
agency as a condition of receiving Medicaid services.
    Section 303.11(b)(10) was revised in response to comments with 
language similar to that in paragraph (b)(11) to read as follows: ``In 
order to be eligible for closure, the case must meet at least one of 
the following criteria in a non-IV-A case receiving services under 
Sec.  302.33(a)(1)(i) or (iii), or under Sec.  302.33(a)(1)(ii) when 
cooperation with the IV-D agency is not required of the recipient of 
services, the IV-D agency is unable to contact the recipient of 
services within a 60 calendar day period despite an attempt of at least 
one letter sent by first class mail to the last known address.''

Section 303.31--Securing and Enforcing Medical Support Obligations

    Section 303.31(a)(1) defines ``cash medical support'' as ``an 
amount ordered to be paid toward the cost of health insurance provided 
by a public entity or by another parent through employment or 
otherwise, or for other medical costs not covered by insurance.'' A 
cash medical support collection would be considered current support 
only if the support was paid timely and in the specific amount required 
in the order to be paid periodically. Should that amount not be paid 
timely, the unpaid obligation becomes past-due just like any unpaid 
current child support obligation. In addition, if a family is receiving 
Medicaid and has assigned rights to cash medical support but is no 
longer receiving TANF, current cash child support would be paid to the 
family and assigned current cash medical support would be paid to the 
Medicaid agency.
    Under Sec.  303.31(a)(2), health insurance is defined to include 
fee for service, health maintenance organization, preferred provider 
organization, and other types of coverage which is available to either 
parent, under which medical services could be provided to dependent 
child(ren).
    Under Sec.  303.31(a)(3), cash medical support or the cost of 
private health insurance is considered reasonable in cost if the cost 
to the parent responsible for providing medical support does not exceed 
five percent of his or her gross income or, at State option, a 
reasonable alternative income-based numeric standard defined in State 
law, regulations, or court rule having the force of law or State child 
support guidelines adopted in accordance with 45 CFR 302.56. In 
applying the five percent or alternative State standard for the cost of 
private health insurance, the cost is the cost of adding the child(ren) 
to existing coverage or the difference between self-only and family 
coverage.
    A State would compute the five percent standard based on the income 
of the parent being ordered to secure, or pay for private health 
insurance coverage. The five percent reasonableness standard would be 
applied to the parent who is ordered to pay cash medical support for 
the premium of health insurance, whether it is provided by the 
obligated parent or another parent. If both parents are ordered to 
contribute to the cost of the premium, then the individual cost could 
not be more than five percent of each parent's income (or the 
alternative standard adopted by the State). Similarly, if a 
noncustodial parent is ordered to pay $50 a month to reimburse the 
custodial parent for out-of-pocket medical costs not covered by 
insurance, the five percent reasonableness standard would be applied to 
the obligated parent's income. Therefore, since the facts of a 
particular case would vary from case to case, a State would need to 
determine at the time the order is entered to whose income the five 
percent standard is applied. States should establish guidelines for 
applying the five percent standard as appropriate.
    In response to comments, we added ``the cost of'' before ``private 
health insurance,'' substituted the phrase ``the parent responsible for 
providing medical support'' for ``obligated parent,'' and added ``in 
State law, regulations, or court rule having the force of law or'' to 
recognize how States adopt such standards.
    Section 303.31(b)(1) requires the State to petition the court or 
administrative authority to include private health insurance coverage 
in the support order if it is accessible to the child(ren), as defined 
by the State, and is available to the parent responsible for providing 
medical support at reasonable cost, as defined under paragraph (a)(3), 
in new or modified court or administrative orders for support.
    Under Sec.  303.31(b)(2), if private health insurance described in 
paragraph (b)(1) is not available at the time the order is entered or 
modified, the IV-D agency must petition to include cash medical support 
that is reasonable in cost, as defined in paragraph (a)(3), in new or 
modified orders until such time as private health insurance, that is 
accessible and reasonable in cost as defined under paragraph (a)(3), 
becomes available. In appropriate cases, as defined by the State, cash 
medical support may be sought in addition to health insurance coverage. 
It is not mandatory that a State petition to modify an order that 
includes cash medical support if the State learns that health insurance 
is now available. However, delaying petitioning for health insurance 
coverage for as long as three years would not be in the best interests 
of the children. If the order includes

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language that requires health insurance be provided should it become 
available in the future, and that cash medical support is ordered until 
such time, the need to petition to modify the order and allow the State 
to take steps to immediately secure private health insurance coverage 
for the children would be avoided. Absent such a provision, the State 
would need to petition to modify the order to take advantage of the 
currently available coverage.
    In response to comments, we added the term ``private'' before 
``health insurance'' in Sec.  303.31(b)(1) and (2) for clarity. We also 
substituted, in paragraph (b)(1) and (2), the phrase ``the parent 
responsible for providing medical support'' for ``obligated parent'' 
for consistency with the parallel change to Sec.  303.31(a)(3). We also 
changed the word ``ordered'' to ``sought'' in paragraph (b)(2) for 
consistency with the concept that IV-D agencies petition the court or 
administrative authority to establish support orders. And finally, we 
added the phrase ``that is reasonable in cost, as defined in paragraph 
(a)(3) of this section'' after the term ``cash medical support'' in 
Sec.  303.31(b)(2) for consistency with paragraph (b)(1).
    Section 303.31(b)(3) requires a State agency to establish written 
criteria to identify orders that do not address the health care needs 
of children based on--
    (i) Evidence that private health insurance that is accessible to 
the child(ren), as defined by the State, may be available to either 
parent at reasonable cost, as defined under paragraph (a)(3); and
    (ii) Facts, as defined by State law, regulation, procedure, or 
other directive, and review and adjustment requirements under Sec.  
303.8(d), which are sufficient to warrant modification of the existing 
support order to address the health care needs of children in 
accordance with Sec.  303.31(b)(1).
    In response to comments we added the word ``private'' before health 
insurance and reference to accessibility and reasonable cost to 
subparagraph (i). We also removed reference to paragraph (b)(2) at the 
end of subparagraph (ii) in response to comments.
    Section 303.31(b)(4) requires IV-D agencies to petition to modify 
support orders to include private health insurance and/or cash medical 
support in accordance with paragraphs (b)(1) and (2). In response to 
comments, we added ``private'' before ``health insurance'' for clarity.
    Section 303.31(b)(5), under the proposed rule, required the IV-D 
agency to notify the Medicaid agency when a new or modified order 
includes health insurance and/or cash medical support. In response to 
comments it was deleted and Sec.  303.31(b)(6) was renumbered as (b)(5) 
and requires that the IV-D agency periodically communicate with the 
Medicaid agency to determine whether there have been lapses in health 
insurance coverage for Medicaid applicants and recipients.
    Section 303.31(c) requires the IV-D agency to inform an individual 
who is eligible for services under Sec.  302.33 that medical support 
services will be provided and to provide the services specified in 
Sec.  303.31(b). In response to comments, ``enforcement'' is deleted 
from the subsection.

Section 303.32--National Medical Support Notice (NMSN)

    Section 303.32(a) was amended to include reference to use of the 
NMSN to enforce the provision of health care coverage for children of 
custodial parents, at State option, in addition to noncustodial 
parents. A similar change was made to Sec.  303.32(c)(6) to require 
employers to notify the State about the termination of employment of 
custodial parents if the State has opted to use an NMSN to enforce the 
custodial parent's obligation to provide health care coverage for his/
her children.
    Proposed changes to Sec.  303.32(c)(4), which would have 
prioritized employers withholding of various support obligations if 
there were insufficient wages to satisfy all obligations, were removed 
in response to comments received.

Section 304.20(b)(11)--Services and Activities for Which FFP Is 
Available

    Under Sec.  304.20(b)(11), FFP is available for services and 
activities under approved IV-D State Plans, including required medical 
support activities as specified in Sec. Sec.  303.30, 303.31, and 
303.32. We added ``and 303.32.'' after ``Sec. Sec.  303.30, 303.31''.

Section 304.23(g)--Services and Activities for Which FFP Is Not 
Available

    In response to comments to correct an error in current regulations, 
the cross-reference in Sec.  304.23(g) has been corrected to refer to 
FFP as not being available for costs associated with cooperative 
agreements with Medicaid agencies under section 1912(a)(2) of the Act. 
We replaced reference to ``Sec. Sec.  303.30, and 303.31'' with 
``section 1912(a)(2) of the Act.''

Section 305.63(c)(5)--Providing Services Required in 75 Percent of the 
Cases Reviewed During a Substantial Compliance Audit

    Under Sec.  305.63(c)(5), for the purposes of optional Federal 
audits to determine substantial compliance with requirements, a State 
must provide certain medical support services, including all the 
requirements under Sec.  302.32, and use of the NMSN in at least 75 
percent of the cases reviewed. We added ``and Sec.  302.32'' after 
``under Sec.  303.31''.

Section 308.2--Required Medical Support Compliance Criteria for State 
Self-Assessment

    Under Sec.  308.2(e), for purposes of the State's annual self-
assessment review and report, a State must evaluate whether it has 
provided certain required medical support services including use of the 
NMSN in at least 75 percent of the cases reviewed as required in Sec.  
303.32.
    Under Sec.  308.2(e)(1), a State must determine whether the State 
is meeting its obligation to include medical support that is reasonable 
and accessible, in accordance with Sec.  303.31(b), in at least 75 
percent of new or modified support orders. Under Sec.  308.2(e)(2), 
States are required to assess their own performance according to their 
criteria, whether the NMSN was used to enforce the order in accordance 
with the requirements in Sec.  303.32, if reasonable and accessible 
health insurance was available and required in the order, but not 
obtained.
    Proposed Sec.  308.2(e)(3), which in the proposed rule required a 
State to determine whether the State Medicaid agency was informed that 
coverage had been obtained, was deleted in response to comments. 
Proposed paragraph (e)(4) (renumbered Sec.  308.2(e)(3) in the final 
rule), is revised in response to comments, to read as follows. A State 
must ``determine whether the State transferred notice of the health 
care provision, using the National Medical Support Notice required 
under Sec.  303.32 of this chapter, where appropriate, to a new 
employer when a noncustodial parent, or under State option a custodial 
parent, was ordered to provide health insurance coverage and changed 
employment.'' The reference to custodial parents was added in response 
to comments received.

Response to Comments

    We received 36 letters from States, Tribes, advocacy groups, and 
other interested individuals. This section of the preamble describes 
the specific

[[Page 42419]]

aspects of the final regulations and identifies changes made to 
proposed rules. We received many thoughtful comments requesting 
clarification of aspects of medical support case processing that are 
not addressed in the Federal regulations, or asking for more 
specificity in requirements when the regulations allowed for State 
flexibility or did not agree with positions proposed in the regulation 
because the commenter's State had already implemented a policy, in the 
absence of Federal regulations, that was inconsistent with some of the 
proposed requirements. Since the Working Group's report was sent to 
Congress in 2000, many States have already moved forward to establish 
medical support services and approaches based on their recommendations 
in the absence of proposed Federal regulations in this area.
    On the whole, comments were positive and welcomed the proposed 
update of medical support regulations, particularly with respect to the 
definition of reasonable cost and the authority to close cases in which 
an individual in a Medicaid only, child-only case is not cooperating 
with the IV-D agency. We also made a number of changes to the proposed 
regulations to accommodate practices already in place in States that 
are leaders in seeking medical support for children. For instance, we 
eliminated a proposed specific order of allocation satisfaction of 
child support and medical support which employers would have been 
required to follow. To impose a requirement now, when States have moved 
forward without Federal guidance or mandate, would be unfair to those 
States and contrary to our commitment to State flexibility. On the 
other hand, we did not agree with comments to expand States' authority 
to close Medicaid-only, child-only cases to include authority to close 
any Medicaid-only case, because the authority would be too broad and 
inappropriate when assignment and cooperation with the IV-D agency is 
required in such cases.
    We believe States that have not taken the lead in medical support 
activities in the IV-D program can learn from the innovative approaches 
implemented in States that have already developed robust medical 
support programs. Therefore, changes to the regulations were not 
significant but rather technical in nature and consistent with our 
commitment to a longstanding partnership with State Child Support 
Enforcement programs.

Section 302.56--Guidelines for Setting Child Support Awards

    1. Comment: An income shares child support guidelines schedule 
incorporates some medical costs within the guideline schedule itself 
(e.g., $250 per year per child) and medical costs are considered as 
part of the basic child support obligation amount that is ordered to be 
paid by the obligated parent. Additionally, the costs of health 
insurance and/or medical costs not covered by insurance are apportioned 
between the parents based on the percentages of their respective shares 
of their combined net income. Since future out-of-pocket medical costs 
for each child are unknown and undeterminable at the time an order is 
being established or modified, it is virtually impossible for the 
courts to include a specific monthly dollar amount for cash medical 
support in support orders. Does this approach in a State's guidelines 
meet the cash medical support requirements in the proposed regulation?
    Response: Yes. As indicated in the preamble to the proposed rule, 
Sec.  302.56(c) is purposely broad, ensuring that child support 
guidelines consider not only health insurance coverage that may be 
available from either, or both parents, but also how the parents will 
meet the child's health care needs when no insurance is available, when 
the cost of insurance is beyond the reasonable means of the parents, or 
where the cost is extraordinary or unreimbursed by insurance. The 
regulation does not mandate that State guidelines label the payment of 
medical costs as a stand-alone item. However, it is possible that both 
health insurance coverage and cash medical support would be included in 
a support order. For example, where a custodial parent has access to 
health insurance coverage for the parties' child, the noncustodial 
parent may be required to pay a share of the premium's cost. Also, each 
parent may be ordered to pay a fixed sum or a percentage of the cost of 
treatments such as allergy shots, orthodontic work and/or psychological 
counseling, not covered by insurance.
    2. Comment: If the final rule eliminates the words ``other means'' 
for providing for the child(ren)'s health care needs beyond health care 
coverage and cash medical support, it is unclear how alternative health 
care coverage such as the Defense Enrollment Eligibility Reporting 
System (DEERS) enrollment provided for dependents of military service 
members or Department of Defense employees or how Indian Health 
Services (IHS) coverage would fulfill the requirement of the IV-D 
agency to obtain a medical support order. Definitions of DEERS and IHS 
coverage outside Title 45 of the Code of Federal Regulations make it 
clear that these are not forms of ``insurance'', and they may not 
require the payment of a premium or cash medical support contribution 
by either parent.
    Response: We believe that the definition of health insurance in 
Sec.  303.31(a)(2) is broad enough to encompass both DEERS and IHS 
coverage because it includes ``other types of coverage * * * under 
which medical services could be provided to the dependent child(ren).''
    3. Comment: The proposed regulation requires that State child 
support guidelines ``address how the parents will provide for the 
child(ren)'s health care needs through health insurance coverage and/or 
through cash medical support in accordance with Sec.  303.31(b) of this 
chapter.'' Proposed Sec.  303.31(b) places various medical support 
related duties on the IV-D agency, such as petitioning to establish and 
modify medical support orders. It also refers to accessibility of 
coverage ``as defined by the State,'' and to ordering cash medical 
support in addition to health insurance coverage ``in appropriate 
cases, as defined by the State.'' The commenter reads the proposed 
regulation as recognizing that medical support will inevitably be a 
guidelines issue but, since medical support affects the amount of 
support obligations, the regulation still provides States with the 
flexibility to define certain medical support standards by statute, 
regulation, or other appropriate means outside the guidelines, as the 
State determines. The commenter requests that OCSE confirm this 
reading.
    Response: We agree with this assessment of the regulations.
    4. Comment: Several commenters found the proposed Sec.  302.56(c) 
unclear because the cross-reference to Sec.  303.31(b) (medical support 
requirements for IV-D cases) creates confusion about the scope of the 
change. The guidelines regulation (Sec.  302.56) currently applies to 
all orders issued in the State, whether in IV-D or non-IV-D cases. 
However, Sec.  303.31(b) specifically says, ``The State IV-D agency 
must:'' If the reference to Sec.  303.31(b) in Sec.  302.56(c) means 
those requirements also apply in non-IV-D orders, we recommend the 
regulation not cross-reference Sec.  303.31(b).
    Response: While child support guidelines must be used in setting 
all support orders in the State, Sec.  303.31(b) clearly only applies 
to IV-D cases by its reference to the IV-D agency. Therefore, the 
required IV-D activities in

[[Page 42420]]

Sec.  303.31(b) do not apply to non-IV-D cases.
    5. Comment: The proposed rule asked for comments on whether the new 
requirements will require a change in a State's child support 
guidelines. This commenter indicated that it is likely guidelines will 
need to be revised because the new requirement is an addition to 
existing minimum requirements for guidelines in Sec.  302.56. However, 
the commenter indicates that it is likely that amending the guidelines 
cannot be accomplished before the rule becomes final because a State 
will have to seek legislative authority in early 2007 in an attempt to 
comply, with the understanding that additional changes may be needed 
once the final rule is published. The commenter asks for confirmation 
of this assumption.
    Response: States should plan to implement the medical support 
provisions of the DRA of 2005 in accordance with the statutory language 
by the appropriate effective date that applies to each State.
    6. Comment: A person with available insurance coverage can also be 
a recipient of a state-funded medical insurance program, a form of 
public assistance. Generally, courts are unwilling to order that person 
to carry coverage and/or to enforce an order requiring them to carry 
coverage.
    Response: Section 303.31(b) requires the IV-D agency to petition 
for health insurance coverage that is accessible and available at 
reasonable cost. Section 303.31(a)(3) defines reasonable cost as a cost 
that does not exceed five percent of the obligated parent's gross 
income or, at State option, a reasonable alternative income-based 
numeric standard defined in State law, regulations, or court rule 
having the effect of law or in State child support guidelines. We 
believe that these requirements allow States and courts flexibility to 
determine when it is appropriate to require an obligated person to 
carry health insurance.
    7. Comment: One commenter indicated that in an obligor child 
support guidelines model, only income and resources of the noncustodial 
parent are gathered and considered. The commenter has concerns about 
how the income and resources of both parents can effectively be 
considered in such obligor-model guidelines. Proposed regulations which 
require States to look at the income and resources of both parents in 
determining medical support responsibility means a State with that 
model of guidelines would need to gather income and resource 
information from the custodial parent for this purpose alone. This will 
lead to the need for considerable legislative changes, policy changes, 
and automated system changes. It also will be a significant human 
resource issue. Further, the commenter stated that States should be 
afforded flexibility in determining which parent shall provide medical 
support because, while Federal law clearly requires the establishment 
of medical support against either or both parents, it does not specify 
how States are to apply this provision and Federal law does not address 
reasonable cost.
    Response: We believe that the Federal statute clearly takes into 
consideration the availability of health insurance to the custodial, as 
well as the noncustodial parent, at reasonable cost. These requirements 
will ensure that parents share primary responsibility for their 
children's health care needs, when appropriate. State child support 
guidelines must, at a minimum, ``provide for the child(ren)'s health 
care needs through health insurance coverage and/or through cash 
medical support in accordance with Sec.  303.31'' [45 CFR 
302.56(c)(3)]. The mechanism for accomplishing this mandate is 
determined by each State.
    8. Comment: One commenter described a State guidelines statute as 
requiring allocation of responsibility for unreimbursed medical 
expenses between the parties based on each individual's respective 
proportion of combined income. The commenter requested clarification as 
to whether a specified amount must be ordered to be considered cash 
medical support. If so, the commenter believes that the term ``* * * 
medical costs not covered by insurance * * *'' is somewhat confusing as 
it cannot be addressed in an order until the amount of uncovered costs 
is identified.
    Response: Section 303.31(a)(1) defines cash medical support as ``an 
amount ordered to be paid * * * for other medical costs not covered by 
insurance.'' An order that includes an allocation between the parents 
for responsibility for unreimbursed medical expenses based on each 
individual's respective proportion of combined income would meet this 
requirement.
    9. Comment: One commenter was concerned that the proposed amendment 
to Sec.  302.56(c) does not require any specific language be included 
in these medical support orders, leaving each State with a great deal 
of freedom on how to comply with this amendment. The proposed amendment 
adds an additional requirement that orders States to ``address how the 
parents will provide for'' the children's health care needs. However, 
the inclusion of these words alone provides little guidance to States 
beyond what the current guidelines suggest. The Working Group 
recognized the importance of providing structured and equitable 
guidance. In their report, the Working Group proposed a ``decision 
matrix'' to provide guidance to decision-makers in deciding which 
health care coverage to order. Additional requirements, even beyond the 
recommendations in the Working Group report, are needed so that States 
can draft their respective guidelines efficiently. Requiring specific 
provisions in each support order will allow the agencies to focus on 
enforcement rather than interpreting these regulations.
    Response: We agree that the Working Group Report is a rich source 
of information for States in determining how best to proceed, given the 
flexibility allowed under these regulations. The Working Group Report 
may be found at: http://www.acf.hhs.gov/programs/cse/pubs/2000/reports/medrpt. However, we support State flexibility, within a context of 
broader Federal requirements, to determine the details of how best to 
proceed, and are confident States will implement the requirements in a 
way that protects children and families.

Section 303.11--Case Closure Criteria

    1. Comment: A number of commenters supported the language in the 
proposed rule in Sec.  303.31(b)(11) because the reference to Sec.  
302.33(a)(1) would allow closure of any Medicaid-only case, not just 
the ``child-only'' Medicaid cases, upon noncooperation of the 
custodian. These commenters favor a broad interpretation under which 
any non-TANF Medicaid cases may be closed for noncooperation of the 
custodian because it allows more flexibility for States to focus on 
providing services for custodial parents who want such services.
    Other commenters believed the proposed change to Sec.  
303.11(b)(11) was too broad because assignment of support rights and 
cooperation with the IV-D agency is a condition of eligibility for 
individuals who are included with children in a Medicaid case, unless 
the adult recipient falls within certain statutory exemptions addressed 
in DCL-00-122. DCL-00-122 explains the Federal Medicaid assignment and 
cooperation requirements and exemptions, options pertaining to 
paternity and medical support and describes the child support 
enforcement services available to families receiving Medicaid. Since 
the regulation must be consistent with Federal statute, these 
commenters request that closure for noncooperation of the custodian be 
limited to non-TANF child-only

[[Page 42421]]

Medicaid cases only if the custodian is not required to assign his or 
her rights to medical support and cooperate with the IV-D agency 
pursuant to section 1912 of the Act (42 U.S.C. 1396k.)
    Response: We agree with commenters that suggested the proposed 
revision to Sec.  303.11(b)(11) was overly broad. The change was 
proposed because former Sec.  303.11(b)(11) did not allow case closure 
for noncooperation in non-IV-A Medicaid cases and States indicated that 
there are custodial parents of children in child-only Medicaid cases 
who refuse to cooperate with the IV-D agency. However, in non-TANF 
Medicaid cases in which both the custodian and child(ren) are receiving 
Medicaid, all recipients must assign rights to medical support and 
cooperate with the IV-D agency as a condition of receipt of Medicaid. 
As stated in the letter to all Medicaid Directors shared with IV-D 
Directors in DCL-00-122:
    ``If parents or other adults apply for Medicaid on behalf of 
themselves and their children, they must assign medical support and 
payment rights to the State and cooperate in establishing paternity, 
obtaining medical support and payments, and providing information about 
liable third parties as a condition of their own eligibility, unless 
they are exempt. Pregnant women eligible under Section 1902(l)(1)(A) of 
the Act (poverty level pregnant women) are exempt from the requirements 
to cooperate in establishing paternity of a child born out of wedlock, 
and in obtaining medical support and payments for themselves and the 
child born out of wedlock. (These women must, however, assign the 
rights to medical support and payments.) In addition, individuals with 
good cause, as described by Federal regulation 42 CFR 433.147(c), are 
exempt from cooperating in establishing paternity, obtaining medical 
support and payment, and pursuing third party liability. Applicants 
must be effectively informed of these exemptions and told that the 
decision whether or not to cooperate will not affect their child's 
eligibility for Medicaid.'' Sec.  303.11(b)(11) must be revised as 
follows: (b) In order to be eligible for closure, the case must meet at 
least one of the following criteria * * * (11) In a non-IV-A case 
receiving services under Sec.  302.33(a)(1)(i) or (iii), or under Sec.  
302.33(a)(1)(ii) when cooperation with the IV-D agency is not required 
of the recipient of services, the IV-D agency documents the 
circumstances of the recipient of services' noncooperation and an 
action by the recipient of services is essential for the next step in 
providing IV-D services.
    2. Comment: Another commenter would support the approach of 
allowing States to close any Medicaid-only case in which the custodial 
parent is not cooperating. For example, States may close a case 
involving the following situation: A Medicaid-only case is referred to 
the State with a custodial parent and child receiving Medicaid. The 
custodial parent subsequently fails to cooperate, and Medicaid 
sanctions are put in place that result in only the child receiving 
Medicaid. The commenter wants to be able to close this case and is not 
clear as to whether this type of case would be considered a ``child-
only Medicaid-only'' case.
    Response: Once the custodial parent is denied receipt of Medicaid, 
the case would be considered a ``child-only, Medicaid-only'' case and 
could be closed under Sec.  303.11(a)(11) because of the documented 
noncoopertion and sanction.
    3. Comment: It has been one commenter's experience that when a 
custodial parent is receiving Medicaid services/benefits and does not 
cooperate with the IV-D program, the IV-D program is forced to bring 
the custodial parent before the court. Once before a judge the 
custodial parent has clearly stated that he/she has no interest in 
obtaining child support from the noncustodial parent and the judges 
have ruled in the custodial parent's favor, thus causing the IV-D 
program to expend time and money without a positive result for the 
child(ren).
    Response: If the custodial parent is not cooperating with the IV-D 
agency as required, the IV-D agency should notify the Medicaid agency 
and have them take steps to sanction the custodial parent accordingly. 
Threatened loss of Medicaid benefits may then encourage the custodial 
parent to cooperate. If he or she does not cooperate, the IV-D agency 
could choose to close the case under Sec.  303.11(b)(11).
    4. Comment: One commenter stated that, if OCSE will permit States 
to close child-only, Medicaid-only cases for noncooperation of a 
custodian, States should also be allowed to close cases on the request 
of the custodial person pursuant to Sec.  303.11(b)(8). If Sec.  
303.11(b)(8) is not amended, the IV-D agency would be compelled to deny 
a request for IV-D case closure from a custodian in a non-TANF Medicaid 
case. However, if the custodian subsequently fails to cooperate because 
of the custodian's lack of interest in IV-D assistance, the IV-D case 
closure requested by the custodian would eventually result. The delay 
in accomplishing case closure would be inefficient.
    Response: An amendment to Sec.  303.11(b)(8) is inappropriate. 
Although the parent is not required to assign the child's rights to 
medical support, section 1902(a)(25)(H) of the Act requires States to 
have laws which automatically assign an individual's rights to payment 
for medical care by third parties, to the extent that Medicaid has made 
a payment. These laws assign to States an individual's, (e.g. , a 
child's) rights whether or not an assignment was executed. When only 
the child is applying for Medicaid, under section 1902(a)(25)(A) the 
State must ask the parent whether the child has health insurance in 
order to identify legally-liable third party resources. Because there 
is an assignment of the child's rights to medical support as a 
condition of the child's receipt of Medicaid, a IV-D agency may not 
close the case at the request of the custodial parent or caretaker in 
such cases.
    5. Comment: A commenter indicated that the IV-D agency receives 
child-only Medicaid-only referrals, but the Medicaid agency has not 
imposed an assignment or cooperation responsibility in those cases. 
Child support services, thus, have the appearance of a choice offered 
to the family; they can continue the services or not. Given that 
scenario, rather than documenting noncooperation, is it possible to 
send child-only cases a ``continuation of services'' letter to 
determine whether or not the family wants services to continue?
    Response: Although the parent is not required to assign the child's 
rights in a child-only Medicaid case, section 1902(a)(25)(H) of the Act 
requires States to have laws which automatically assign an individual's 
rights to payment for medical care by third parties to the extent that 
Medicaid has made a payment. These laws assign to States an 
individual's rights whether or not an assignment was executed and if 
the case is referred to the IV-D agency, it is the IV-D agency's 
responsibility to seek medical support for that child. Therefore, it 
would be inappropriate to treat these cases like former TANF cases in 
which, in accordance with Sec.  302.33(a)(4), States send a notice to 
the custodial parent indicating that IV-D services will be provided 
unless the agency is notified by the custodial parent to close the 
case.
    6. Comment: Two commenters indicated that case processing would be 
facilitated if Sec.  303.11(b)(10) was expanded to include child-only 
Medicaid cases. This would allow States to close child-only Medicaid 
cases in the same manner allowed for applications and former assistance 
cases

[[Page 42422]]

when the IV-D agency is unable to contact the custodial parent within a 
60 calendar day period despite an attempt of at least one letter sent 
by first class mail to the last known address. One commenter suggested 
that we amend Sec.  303.11(b)(10) to read as follows: ``In a non-IV-A 
case receiving services under Sec.  302.33(a)(1)(i) or (iii), or under 
Sec.  302.33(a)(1)(ii) when cooperation with the IV-D agency is not 
required of the recipient of services, the IV-D agency is unable to 
contact the recipient of services within a 60 calendar day period 
despite an attempt of at least one letter sent by first class mail to 
the last known address.''
    Response: We agree with these commenters and have included the 
change to Sec.  303.11(b)(10) as requested above. The IV-D agency would 
be required to meet the requirements of Sec.  303.11(c) by sending the 
recipient of services or initiating a notice of the State's intent to 
close the case in writing 60 calendar days prior to closure of the 
case. The case should not be closed if contact is reestablished with 
the recipient of services within the 60 day timeframe.
    7. Comment: One commenter requested clarification with regard to 
custodial or caretaker noncooperation with medical support requirements 
in any IV-D case including active IV-A or IV-E foster care cases or 
non-IV-A cases. The commenter's State has taken the position thus far 
that noncooperation with medical support would not extend to closing an 
active IV-A or IV-E case or non-IV-A case.
    Response: Custodial or caretaker noncooperation with the IV-D 
agency in medical support requirements in a IV-D case, that is also an 
active IV-A, IV-E, or non-IV-A Medicaid-only case, would not authorize 
closure under Sec.  303.11(b)(10) or (11).
    8. Comment: One commenter was concerned that the proposed amendment 
to Sec.  303.11(b)(11) seems to contradict the policy behind the 
regulation, to secure medical coverage for children. Instead of 
promoting the best interests of children, the closure of the case would 
leave the custodial parent and child without assistance in obtaining 
and enforcing child support orders. Moreover, the child support and 
health care coverage enforced by the IV-D agency ultimately benefits 
the child rather than the custodial parent. Therefore, it is the child 
who stands to lose additional protections because of his or her 
parent's actions.
    Response: Case closure is optional for IV-D agencies and is allowed 
only under a limited set of specific circumstances in which there is 
little chance of success. In addition, statutory limitations with 
respect to mandated cooperation of parents and other custodians often 
remove the primary source of critical information (the custodian) 
needed by IV-D agencies.
    9. Comment: With regard to case closure for child-only Medicaid 
cases, is noncooperation with medical support services a basis for case 
closure in a non-IV-A case where the recipient of services has 
otherwise cooperated?
    Response: The final regulation clarifies that case closure under 
paragraph (b)(11), is only authorized (although not required) if the 
recipient of services is not required to cooperate with the IV-D agency 
as a condition of receiving Medicaid services.

Section 303.31--Securing and Enforcing Medical Support Obligations

Section 303.31(a): Explanation of Terms Used in Sec.  303.31
(1) Cash Medical Support
    Comment: A commenter suggests that the term ``cash medical 
support'' be clarified, so that public coverage cases can be 
recognized, and that States be allowed to determine methods of 
reimbursement that align with each State's available programs.
    Response: We believe the current language in Sec.  303.31(a)(1), 
which defines cash medical support, does recognize public health 
coverage, such as Medicaid, State Child Health Insurance Program 
(SCHIP), the Indian Health Service, and Defense Enrollment Eligibility 
Reporting System. ``Cash medical support'' is defined as ``an amount 
ordered to be paid toward the cost of health insurance provided by a 
public entity or by another parent through employment or otherwise, or 
for other medical costs not covered by insurance.'' This would include 
the cost of premiums or co-payments required in the SCHIP or Medicaid 
program, for example. In addition, the regulation, while defining what 
can be considered as cash medical support, leaves States discretion to 
determine methods of reimbursement that align with each State's 
available programs.
    2. Comment: One commenter requested that we add two definitions to 
Sec.  303.31(a) to read: ``(4) Poverty line has the meaning given such 
term in section 673(2) of the Community Services Block Grant Act (42 
U.S.C. 9902(2)), including any revision required by such section.
    ``(5) A child is considered eligible for medical assistance under 
the State Plan under title XIX of the Social Security Act (Act) or for 
child health assistance under the State Plan under title XXI of the Act 
if the child's family income is below the income standard of the 
applicable State Plan in the State in which the child resides, 
regardless of whether the child has applied for or is enrolled in the 
program under either State Plan.''
    Response: We believe these decisions and definitions are best left 
to States unless specified under Federal statutes applicable to State 
IV-D programs.
    3. Comment: One commenter indicated that, based on experience 
working with Medicaid and SCHIP agency program staff and having 
discussions regarding distributing cash medical support to those 
agencies, it is evident that those agencies need Federal guidance on 
accepting cash medical support from the child support agency and 
reconciling those amounts. Therefore, it is their recommendation that 
collaboration between child support and public health insurance 
entities take place on a Federal level. This concern was shared by many 
commenters concerned in particular that Medicaid agencies may refuse to 
accept assigned cash medical support from the IV-D agency.
    Response: HHS has sponsored two sets of collaboration meetings over 
the past two years that brought together State program directors and 
staff from the IV-D, IV-E foster care, Medicaid, and SCHIP programs. 
States raised issues they face in securing health care for children and 
discussed possible solutions that would be needed to resolve them, 
through collaboration, regulations, or statutory change. A report on 
the 2005 meetings is at: http://www.acf.hhs.gov/programs/cse/pol/DCL/2006/dcl-06-09.
    Some State IV-D agencies reported that State Medicaid agencies 
would not accept assigned cash medical support collections because they 
had no authority to do so. In discussing this issue with Federal Center 
for Medicare and Medicaid Services (CMS) participants, we learned that, 
for States that operate Medicaid programs as fee-for-service programs, 
there is no authority to accept assigned medical support unless the 
child to whom the medical support is owed has actually received 
Medicaid services and the Medicaid agency has paid the provider a fee 
for such services. In other words, without having expended funds on the 
health care of the particular child, the Medicaid agency has no 
authority to keep the assigned cash medical support. Of course, if fees 
for services have been paid, assigned medical support may be retained 
to reimburse the Medicaid program. While directly addressing this issue 
would require a change to the Federal Medicaid statute, this problem

[[Page 42423]]

will diminish over time as more States move to a managed-care approach, 
which eliminates the problem incurred in fee-for-service programs and 
allows Medicaid agencies to retain assigned cash medical support to 
reimburse the program for the cost per child for health care under a 
managed care system. We are aware of those concerns and continue to 
work with our Federal partners to address these issues.
    4. Comment: A commenter asked if proposed Sec.  303.31(a)(1) that 
states, in relevant part, that ``Cash medical support means an amount 
ordered to be paid toward the cost of health insurance provided by a 
public entity'' is intended to address costs associated with ``managed 
care'' Medicaid coverage only, or costs associated with ``fee for 
service'' Medicaid coverage as well? The preamble states this would 
include the cost of premiums when health insurance is provided through 
Medicaid or SCHIP.
    Response: As explained in the response to the previous question, 
there is a Federal statutory impediment under the Medicaid program 
(title XIX of the Act) that prevents States using ``fee-for-service'' 
type Medicaid coverage from retaining assigned cash medical support 
collections if services have not been provided to the child(ren). The 
Medicaid agency has no authority to keep the assigned cash medical 
support.
    5. Comment: A commenter asked for clarification as to what is meant 
by the use of the term ``another parent'' in Sec.  303.31(a)(1), which 
defines ``cash medical support'' to include an amount ordered to be 
paid toward the cost of health insurance provided by a public entity or 
by another parent [emphasis added] through employment or otherwise, or 
for other medical costs not covered by insurance.'' It is not clear 
what is meant by the term ``another parent.''
    Response: The term refers to a parent providing health insurance 
who is not the parent obligated to pay cash medical support.
    6. Comment: A commenter was concerned that including the phrase 
``or for other medical costs not covered by insurance'' in the 
definition of ``cash medical support'' could mean the IV-D agency would 
be responsible for recovering ongoing medical bills. However, the 
commenter indicated that it would be a huge concern and administrative 
burden if the local agencies would now be required to track the payment 
of unreimbursed medical bills and then develop cash orders to pay them.
    Response: State IV-D agencies are not responsible for determining 
the amount of unreimbursed or uncovered medical expenses if the support 
order only addresses how such unquantified expenses are to be shared by 
parents. However, we have a longstanding policy that IV-D agencies 
would be responsible for enforcing an obligated parent's 
responsibility, under the support order, to pay for a portion or all of 
a medical expense if the custodial parent presents bills (i.e. for 
orthodontia), to the IV-D agency. See the first comment and response on 
Sec.  302.50, Support Obligations, in the final rule on ``Extension of 
IV-D Child Support Enforcement Services to Non-AFDC Medicaid Recipients 
and to Former AFDC, Medicaid and Title IV-E Foster Care Recipients,'' 
AT-91-01: Section 302.50--Support obligations as follows:

    Comment: One commenter requested clarification of whether the 
restriction in Sec.  302.50(e), that no child support collected may 
be used to satisfy a medical support obligation unless the support 
order designates a specific dollar amount for medical purposes, 
includes one-time lump sum amounts (i.e. , medical support 
judgments) or only monthly payments ordered in lieu of paying health 
insurance premiums.
    Response: If the support order designates a specific dollar 
amount for medical purposes, whether it is expressed in monthly 
increments (e.g., $50.00 per month) or as a lump sum amount (e.g., 
$1,500.00 to pay for birth expenses), the IV-D agency must collect 
the medical support. If the support order does not designate a 
specific dollar amount for medical purposes (e.g., absent parent is 
ordered to pay for child's orthodontia), enforcement of that aspect 
of the order is not a required IV-D function. We encourage States to 
develop procedures to determine when judgments for medical expenses 
for which the absent parent is responsible under the order should be 
pursued and to pursue such judgments when appropriate. Federal 
matching funds are available for these activities.

    7. Comment: A commenter asked that States not be required to 
address payment of unanticipated medical costs or costs not 
reimbursable by insurance.
    Response: States have discretion within the definition of ``cash 
medical support'' in Sec.  303.31(a)(1) to determine what medical costs 
obligated parents are ordered to pay.
    8. Comment: A number of commenters were concerned that the 
definition of cash medical support requires that medical support 
provisions must be a fixed amount ordered to be paid for health 
insurance or ``other medical costs not covered by insurance'' because 
the ordering of health insurance premiums or other medical costs not 
covered by the insurance could be an ``either/or'' proposition. For 
example, the proposed regulation provides that ``[in] appropriate cases 
cash medical support may be ordered in additional to health insurance 
coverage.'' According to the commenter, many State child support 
guidelines include a provision to order the payment of future 
reasonable health care costs not covered by insurance which cannot be 
determined at the time of the hearing and may exist whether or not 
health care coverage is in place.
    Response: Section 303.31(a)(1) allows cash medical support to be 
ordered, regardless of whether or not health insurance coverage is 
provided. It is up to each State to determine whether or not it is 
advisable to estimate a specific amount for cash medical support in the 
form of shared responsibility for medical costs not covered by 
insurance or, in the absence of health insurance, to set in the order a 
specific amount for cash medical support. For example: A medical 
support order could require that the custodial parent enroll in private 
health insurance, the noncustodial parent contribute to the cost of the 
health insurance premium (e.g., $50 a month), and the parents 
proportionately share the cost of reasonable health care expenses not 
covered by insurance.
    9. Comment: Many commenters were concerned that the responsibility 
for unreimbursed and unspecified future medical costs should not be 
included in the calculation of whether medical support is reasonable in 
cost to the obligated parent. Some commenters recommended clarifying 
the definition of cash medical support to ensure that the unreimbursed 
medical costs not covered by insurance (and that generally cannot be 
fixed at the time of the hearing) are excluded from the definition of 
cash medical support subject to the five percent cost-reasonableness 
standard. In addition, a number of commenters stated that including 
these unfixed, unreimbursed medical expenses in the definition of cash 
medical support subject to the reasonable cost limitations would 
unfairly place the burden for these costs on the custodial parent. And 
finally, a commenter asked whether, if future medical support expenses 
are not subject to the 5 percent cost-reasonableness standard, the cost 
in an order to pay a percentage of future uninsured medical expenses is 
always reasonable?
    Response: We agree that it would not be appropriate at the time an 
order is established to include the cost of future, uncertain and, 
unspecified medical costs when applying the five percent cost-
reasonableness standard (or at State option an allowable alternative

[[Page 42424]]

standard) under Sec.  303.31(a)(3). However, we do not agree that 
responsibility for extraordinary medical costs set in a subsequent 
medical support order, should be ordered without any consideration of 
the obligated parent's ability to pay at the time the cost is incurred 
or reimbursement is sought.
    The Federal statute at section 467 of the Act requires each State 
to have and use child support guidelines as a rebuttable presumption in 
setting child support awards in the State. Federal regulations at Sec.  
302.56(c)(1) require State guidelines to take into consideration all 
earnings and income of the noncustodial parent in determining the 
amount of the support order. A child or medical support order may 
deviate from the amount the guidelines would otherwise require if there 
is a written finding or specific finding on the record that the 
application of the guidelines would be unjust or inappropriate in a 
particular case, as determined by criteria established by the State and 
taking into considering the best interests of the child. Findings that 
rebut the guidelines must state the amount of support that would have 
been required under the guidelines and include a justification of why 
the order varies from the guidelines. Therefore, a State may, on a 
case-by-case basis, deviate from its guidelines in setting 
responsibility for extraordinary, uncovered medical costs incurred if 
the requirements of Sec.  302.56(f) and (g) are met.
    10. Comment: One commenter indicated that the State's guidelines 
give a credit to the parent providing the private health insurance 
which is deducted from the child support amount calculated under the 
formula. Under these guidelines, a parent who provides private health 
insurance for a child receives a credit of 50 percent of the cost of 
the insurance from the other party. When the obligor provides the 
coverage, the child support order is reduced by the amount of the 
credit. When the obligee provides the coverage, the child support order 
is increased by the amount of the credit. These amounts are not 
captured as a stand-alone amount. While the credit appears as a line 
item on the worksheets used to calculate the guidelines, this amount is 
not identified as a separate medical support item in actual orders. Is 
this acceptable?
    Response: We believe that this approach to medical support is 
acceptable because the definition of cash medical support is an amount 
ordered to be paid toward the cost of health insurance. The order 
generated by these guidelines does not include a sum certain in the 
order language itself, but the guidelines worksheet would provide 
documentation and clearly indicate that medical support was ordered.
    11. Comment: A commenter described the situation in which a 
noncustodial parent is ordered to pay an amount that the IV-D agency 
sends to the Medicaid agency. The commenter urged that this approach 
needs to be implemented carefully to avoid conflict with existing rules 
for cost-sharing in public insurance programs. Both Medicaid and SCHIP 
regulations authorize cost-sharing based on different standards. For 
both programs, these standards are applied to the custodial parent's 
household, not to the combined income of both parents. Therefore, in 
States where these costs are assessed, the custodial parent is in 
effect contributing cash medical support to the public entity, which 
may or may not be considered in ordering cash medical support against 
the noncustodial parent.
    Response: If a family is receiving SCHIP or Medicaid services, that 
fact should be explored at the time an order is entered and taken into 
consideration when establishing the cash medical support obligation. 
Whether or not a custodial parent is contributing toward the cost of 
Medicaid services, if there is an assignment of support rights in 
effect, the State has the authority to retain assigned cash medical 
support to reimburse the cost of medical services provided to the 
family. In SCHIP programs, where there is no Federal requirement for an 
assignment of rights to medical support as a condition of receipt of 
SCHIP, the receipt of SCHIP and the custodial parent's contribution to 
SCHIP should be raised at the time the order is being set to ensure 
appropriate distribution of any cash medical support the noncustodial 
parent is required to pay. For example, if a custodial parent is 
required to contribute to the cost of SCHIP, the support order could 
require that a noncustodial parent's cash medical support payments be 
forwarded to the custodial parent to contribute to, or cover, the cost 
of the SCHIP contribution.
    12. Comment: A commenter asked whether cash medical support arrears 
can be recorded on the OCSE 157 report.
     Response: Yes, cash medical support arrearages should be reported 
with other child support arrearages on the OCSE 157.
    13. Comment: A commenter indicated the preamble of the proposed 
rule states that ``the custodial parent could enroll the child(ren) [in 
private coverage] and the State could order the noncustodial parent to 
pay cash medical support towards the cost of the employee's share of 
health insurance coverage by the custodial parent. It would be up to 
the State to determine how the premium is paid, directly by the 
noncustodial parent to the plan administrator or as reimbursement to 
the custodial parent should he or she have premiums withheld from his 
or her income.'' The commenter suggested that it is not workable for 
States to allow the noncustodial parent to make the cash payment 
directly to the plan administrator. States will not be able to 
effectively monitor and enforce such payments.
     Response: We agree with the commenter that the noncustodial parent 
paying a cash premium amount directly to the plan administrator is 
inappropriate. All cash medical support payments must be sent to the 
State Disbursement Unit for distribution. However, if the obligated 
parent is providing private health insurance available through his or 
her employer, the employer must withhold any obligation of the employee 
for employee contributions necessary for coverage of the children and 
send any amount withhold directly to the plan, as required in Sec.  
303.32(c)(4).
    14. Comment: Two commenters wanted confirmation that unpaid cash 
medical support may be enforced with the same remedies as unpaid child 
support, such as Federal and State tax refund intercepts, credit bureau 
reporting, passport denial, seizure of personal and real property, and 
the like.
     Response: That is correct.
    15. Comment: The proposed rule uses as an example that if a 
custodial parent of a child enrolled in Medicaid is required to pay co-
pays or premiums, the cash medical support obligation could be used to 
reimburse the parent for the co-pay or premium. Under existing Federal 
rules, if a parent is on Medicaid, any medical support is assigned to 
the State to reimburse the State for what it is paying to vendors. Is 
this the proposed change?
     Response: This regulation does not change the requirements for 
assignment to the State under 42 CFR 433.154 or distribution of 
assigned medical support under 45 CFR 302.51(c). Therefore, it may be 
more appropriate for a medical support order to direct the noncustodial 
parent to reimburse the custodial parent for any premiums or co-
payments for SCHIP rather than Medicaid coverage.
    16. Comment: A commenter asked what happens when a custodial 
parent's medical support obligation exceeds the

[[Page 42425]]

child support obligation he or she is supposed to be receiving?
     Response: It is up to the State to decide how to proceed in such a 
situation either in accordance with State law and child support 
guidelines, or on a case-by-case basis by rebutting the presumption 
under State law and guidelines of the support order amounts.
    17. Comment: If the State adopts the five percent test for 
determining whether health insurance coverage is available at 
reasonable cost, does the State then have to apply the same definition 
of reasonable cost to cash medical support? To allow the States 
flexibility in this area is important because of the interplay between 
the State's child support guidelines (cash child support) and medical 
support orders as well as the wide range of medical support orders that 
are issued in the absence of required health insurance coverage, and 
the unpredictability of children's future medical expenses that are not 
covered by private health insurance.
     Response: A State may establish a reasonable alternative income-
based numeric standard that includes a five percent standard of cost 
reasonableness for private health insurance and a different definition 
of cost reasonableness for cash medical support.
(2) Health Insurance
    1. Comment: In Sec.  303.31(a)(2), health insurance is defined as 
HMO, PPO, or ``other type under which medical services can be 
provided.'' Would vision, dental, or prescription only policies be 
included in the definition of ``other type under which medical services 
can be provided'' and count as medical support provided for purposes of 
the OCSE-157 report?
     Response: Yes.
    2. Comment: Some employers have self-insured (i.e., self-funded) 
health care plans that pay the health care claims of their employees, 
rather than purchasing health insurance from an insurance company. 
These may not be considered ``insurance plans'' in the traditional 
sense. For this reason, the commenter asked if the definition of 
``health insurance'' found in Sec.  303.31(a)(2) should specifically 
address these plans to remove any doubt that they are included in the 
definition.
     Response: We believe the language in Sec.  303.31(a)(2), ``other 
types of coverage which is available to either parent, under which 
medical services could be provided to the dependent child(ren),'' 
covers this type of plan.
    3. Comment: Does the definition of health insurance requiring that 
the IV-D agency look to either parent for available coverage, mean the 
IV-D agency may not proceed with an establishment until it has located 
and joined both parents to the establishment proceeding? Often children 
live with a nonparent relative. In this circumstance, may the State 
seek a support order against only one parent? We recommend even if the 
IV-D agency has cases to seek support against both parents, the agency 
have the flexibility to proceed against one parent at a time, if that 
is what is most expedient.
     Response: If the custodial caretaker is not a parent of the 
child(ren) and the location of both parents is known, the State must 
determine whether private health insurance, that is reasonable in cost 
and accessible to the child(ren), is available to either parent. Should 
the State be unable to locate one of the parents, the State may proceed 
against the other parent.
(3) Cash Medical Support or Private Health Insurance That Is Considered 
Reasonable in Cost
    1. Comment: A number of commenters asked for clarification with 
respect to Sec.  303.31(a)(3) as to which parent's income is subject to 
the five percent affordability standard. The proposed language 
indicates that the income of the ``obligated parent'' is compared to 
the five percent standard. However, it is unclear whether that is the 
parent obligated to provide coverage, or the parent obligated to 
contribute toward that coverage, or both. In addition, it is unclear 
whether the proposed regulation applies the five percent standard to 
the premium cost, or whether it applies to each parent's proportional 
share of the premium cost. If the five percent is compared to the 
premium cost paid by the parent providing insurance before 
reimbursement from the other parent, many health care plans will be 
deemed not affordable.
     Response: We believe that Sec.  303.31(a)(3), as written, is clear 
that States must determine to whose income (the custodial or 
noncustodial parent or both) the five percent standard applies. A State 
would compute the five percent standard based on the income of the 
parent being ordered to secure, or pay for private health insurance 
coverage. The five percent reasonableness standard would be applied to 
the parent who is ordered to pay cash medical support for the premium 
of health insurance, whether it is provided by the obligated parent or 
another parent. If both parents are ordered to contribute to the cost 
of the premium, then the individual cost could not be more than five 
percent of each parent's income (or the alternative standard adopted by 
the State). Similarly, if a noncustodial parent is ordered to pay $50 a 
month to reimburse the custodial parent for out-of-pocket medical costs 
not covered by insurance, the five percent reasonableness standard 
would be applied to the obligated parent's income. Therefore, since the 
facts of a particular case would vary from case to case, a State would 
need to determine at the time the order is entered to whose income the 
five percent standard is applied. States should establish guidelines 
for applying the five percent standard as appropriate.
    2. Comment: A commenter indicated that proposed Sec.  303.31(a)(3) 
uses the term ``gross income,'' but does not define ``gross income.'' 
In this commenter's State, ``gross income'' is a term of art in the new 
child support guidelines, meaning income received from wages and 
salaries, but also including income such as spousal maintenance 
received, and excluding income such as spousal maintenance or child 
support ordered. The commenter recommended that the language should be 
clarified to define gross income, or provide the appropriate cross-
reference if the term is already defined for child support purposes.
     Response: Neither title IV-D of the Act nor Federal IV-D 
regulations define ``gross income.'' That definition of ``gross 
income'' is currently left to the States and we believe it is 
appropriate that States define the term for internal consistency with 
other possible uses of the term in the State.
    3. Comment: A commenter indicated that Sec.  303.31(a)(3) is 
unclear as to the impact of insurance not being ``reasonable'' in cost 
and assumes that the result would be that the insurance would no longer 
be considered by the court. Again, if that is the result, then the 
regulation needs to be clearly drafted to avoid situations where 
parents remain on public coverage when private insurance is available.
     Response: We believe that Sec.  303.31(b)(2)-(4) provides rules 
for the required steps States must take if private health insurance is 
not available at the time the order is entered. For new or modified 
orders, under Sec.  303.31(b)(2), a State must petition to include cash 
medical support. For existing orders not currently subject to review, a 
State must use the criteria established in Sec.  303.31(b)(3) to 
identify orders that do not address the health care needs of children 
but for which there is evidence that health insurance may be available

[[Page 42426]]

or facts which are sufficient to warrant modification of the existing 
support order to address the health care needs of children. Under 
paragraph (b)(4), States are required to petition to modify those 
support orders that meet the conditions in the State's criteria.
    4. Comment: One commenter praised the income-based standard of cost 
reasonableness for health insurance because it will benefit the 
agencies responsible for enforcing these regulations. Instead of making 
inquiries regarding the availability of employer-sponsored insurance 
for each individual case, the agency personnel would have a clear 
standard to apply. However, the commenter stated that some exception is 
needed to the minimum requirement for families with incomes below 150 
percent of the Federal poverty level. Where families fall below 150 
percent of the Federal poverty level, the commenter believes that it is 
necessary that the Government assist them by providing health coverage 
so that their resources can be used elsewhere. This exception should 
also be uniform in every State, with the same income requirement 
enforced in each State.
    Response: Under Sec.  303.31(a)(3), cash medical support or private 
health insurance is considered reasonable in cost if the cost to the 
obligated parent does not exceed five percent of his or her gross 
income or, at State option, a reasonable alternative income-based 
numeric standard defined in State law, regulation, or court rule having 
the effect of law or in child support guidelines. This language allows 
States the option of adopting an alternate standard, that is 
reasonable, income-based, and numeric. Using this option, States would 
have flexibility to adopt an exception to the minimum requirement for 
families with incomes below 150 percent (or some other percentage) of 
the Federal poverty level. Some States, for example New Jersey and 
Minnesota, already have variations of such an approach in State law 
and/or child support guidelines. We support State flexibility to make 
decisions that are appropriate for families and children within each 
State.
    5. Comment: A number of comments requested clarification of 
whether, in the event that the obligor has health insurance available 
but has not previously opted to enroll in the coverage, the 
``reasonable cost'' determination is to be applied to the difference 
between the cost of coverage for the employee only and coverage for the 
child(ren) in the IV-D case or whether it would also apply to the cost 
of enrolling the obligor, if the employee must be enrolled to obtain 
dependent coverage. Others asked whether the cost is only the 
difference in cost to the obligated parent between single coverage and 
family coverage or whether it means a pro rata amount of premium for 
the child, taking into consideration all other dependents covered by 
that family coverage premium.
    Commenters explained that this issue arises because, in most 
employment-based coverage, the employee must enroll in order to cover 
his/her dependents. Thus, if an employee has not enrolled, he/she will 
have to do so in order to obtain ordered coverage for the children. 
Since there may be a substantial difference between the cost for an 
individual and the cost for covering the individual plus dependents, 
this could be an issue. This commenter urged that there be a uniform 
standard and that this decision not be left up to the States because 
similarly situated parents should be treated similarly. Only then will 
they perceive that the system treats them fairly.
    Other commenters stated that the regulation should specify that the 
five percent limit applies to the total cost of coverage, not just the 
child's coverage for the following reasons. Many low income workers 
forgo coverage for themselves, because of the cost. Coverage for a 
dependent is typically an additional increment. Requiring coverage 
where the increment for the dependent is five percent of gross income, 
but the coverage for the obligor/ee is an additional amount, will 
significantly burden low income parents and erode the income available 
for contribution toward child support. Most commenters, however, 
favored excluding the cost of the coverage for the obligor for the 
purpose of applying the ``reasonable cost'' test because including the 
overall cost might preclude ordering coverage when the combined cost 
exceeds the cost-reasonableness standard.
    Response: We appreciate the wide range of comments and specified 
concerns with respect to application of the five percent or alternative 
State standard. We believe it is appropriate to establish a unified 
approach to determining the cost-reasonableness of available private 
health insurance based on these comments and the consequences to 
parents and children of whether the five percent or alternative State 
standard is applied to the entire cost of insurance as opposed to the 
incremental cost of adding children to an insurance policy. Therefore, 
Sec.  303.31(a)(3) has been revised to apply the standard to the 
incremental cost of all children or the difference between self-only or 
family coverage. The standard would NOT be applied to the cost of 
adding each child to the insurance plan but rather the cost of family 
vs. individual coverage. However, in accordance with Sec.  302.56(f) 
and (g), States would still have the ability to rebut the presumption 
that the cost of available health insurance is reasonable by including 
a written or specific finding on the record for the award of child 
support stating that the guidelines amount would be unjust in a 
particular case.
    We also agree with commenters that it is important to make it clear 
that there are very different financial consequences to parents and 
children, depending on which route results in health insurance 
coverage. If the reasonable cost standard were applied to the entire 
cost of a family plan for a parent ordered to provide available health 
insurance who had previously had not signed up for such insurance, we 
agree that the child in effect would be subsidizing the individual 
coverage for the responsible parent. In addition, we agree that the 
full cost of a family plan is more likely to exceed the reasonable cost 
standard, making it considerably less likely that the responsible 
parent will provide coverage through health insurance. As a result, 
cash medical support would become more prevalent. This may not be the 
best outcome for children, who may benefit more from health care 
coverage than from a cash contribution that is insufficient to permit 
the custodial parent to purchase coverage. Finally, we believe that to 
condition coverage on the entire cost of the insurance, rather than to 
the incremental cost, might encourage obligated parents not to seek 
individual coverage in hopes that the cost of family coverage would 
exceed the five percent or alternative State standard. However, as 
stated above, States retain the authority under Sec.  302.56(f) and (g) 
to deviate from the determination that available health insurance is 
reasonable in cost, on a case-by-case basis.
    6. Comment: A number of commenters asked the Office of Child 
Support Enforcement (OCSE) to clarify that the five percent reasonable 
cost test (or State alternative) is applied at the time the order is 
established, not at the time that the medical support is enforced by 
sending an employer a National Medical Support Order (NMSN). Commenters 
indicated that it would be difficult or impossible for IV-D agencies to 
monitor and track the five percent standard on an ongoing basis and 
take modification or enforcement action based on this criterion alone.

[[Page 42427]]

    Response: We agree that IV-D agencies should not be required to 
revisit the application of the five percent standard every time the 
NMSN is sent. The five percent or alternative State standard must be 
applied at the time the order is established and when judgments for 
medical costs are sought, as discussed earlier. It is reasonable for a 
IV-D agency to enforce a medical support order by sending the NMSN 
without reevaluating the cost-reasonableness of the ordered health 
insurance. Should the cost or availability of health insurance change, 
the obligated parent would be expected to seek modification of the 
order if conditions in the State for modification are met.
    7. Comment: Another commenter stated that, if the five percent or 
alternative State standard must be applied each time that the IV-D 
agency enforces health insurance deductions through the employer, then 
the two-day requirement to send the NMSN after a new hire hit should be 
addressed in this proposed rule. Is the IV-D agency still required to 
meet the two business day time standard set forth in 303.32(c)(2)?
    Response: The IV-D agency is required to meet the two business day 
time standard in Sec.  303.32(c)(2). A determination of whether health 
insurance is available at reasonable cost is not made between the time 
of receipt of information from the New Hire Directory and when the NMSN 
is issued two days later.
    8. Comment: One commenter stated that the regulations should allow 
the IV-D agency to also petition for private insurance coverage even if 
the cost exceeds five percent of the obligated parent's gross income as 
long as that parent wants to provide or continue to provide such 
coverage.
    Response: This would be allowable using the State's discretion 
under Sec.  302.56(f) and (g) to rebut the presumption that the amount 
of support that would be ordered under the State's guidelines is the 
appropriate amount of support to be ordered.
    9. Comment: A commenter asked, if there is an exception to having 
medical support in a IV-D support order if both parents are very low 
income, that this discretion be clearly stated in the regulation.
    Response: We believe the regulation is adequately drafted. If both 
parents have low or no income, the State's option to establish an 
alternative to the five percent cost-reasonableness standard could 
cover this situation.
    10. Comment: A number of commenters believe that the requirement 
set forth in Sec.  303.31(a)(3) is too restrictive by offering only a 
guidelines alternative to the Federal five percent standard. The 
commenters stressed that, since guidelines nationwide are adopted 
variously as statute, regulation, or court rule, the regulatory 
language should be expanded by inserting the phrase ``under State law, 
regulation, or court rule having the force of law, or'' in Sec.  
303.31(a)(3) after the word ``support.''
    Response: We agree that States adopt guidelines in various ways and 
have inserted the language in Sec.  303.31(a)(3) to recognize that the 
cost-reasonableness standard may be addressed in ``State law, 
regulation, or court rule having the force of law or'' in State 
guidelines.
    11. Comment: A commenter was concerned that the imposition of a 
``reasonable'' numeric standard may decrease the number of children 
receiving health insurance because States already have a numeric 
standard in place to limit the amount of total support paid by the 
parent responsible: the Consumer Credit Protection Act (CCPA) limits. 
Using another standard for reasonable cost, one that is presumably 
lower than the CCPA limits, establishes inequities in parents' 
responsibilities to their children.
    Response: The CCPA limits apply to the maximum amount that may be 
withheld from an employee's paycheck to meet that employee's 
responsibility to meet any obligations. It is not a substitute for a 
cost-reasonable quantitative standard as addressed in these 
regulations.
    12. Comment: A commenter asked how the State is expected to obtain 
information regarding the cost of health insurance premiums when 
setting a medical support order that is reasonable in cost.
    Response: States require parents to provide information at the time 
a support order is established. Information on private health insurance 
availability and the cost of that health insurance are reasonable 
components of that requirement.
    13. Comment: A commenter asked, if a parent fails to provide income 
and/or the cost of obtaining health insurance information, are States 
to assume coverage is or is not available at reasonable cost?
    Response: Under section 466(a)(19) of the Act, States are required 
to enact laws and use procedures under which support orders include 
medical support as part of any child support order. Should a parent 
fail to provide income or health insurance cost information upon 
request, the State must take independent steps to determine this 
information, including actions to compel a parent to disclose this 
information.
    14. Comment: A commenter suggested that the five percent of gross 
income recommendation of the Working Group may be outdated and should 
be adjusted to a higher percentage. The commenter indicated that, 
according to 2004 statistics provided by Kaiser Family Foundation's 
State health facts, the average cost of family coverage in New York is 
$10,397 with $8,307 paid by employers and $2,090 paid by the employee. 
Based on the five percent rule, a parent would need to have gross 
income equal to or greater than $41,800 for such cost to be considered 
reasonable. The commenter also suggested that a self support reserve 
for parents whose incomes fall below 135 percent of the Federal poverty 
level be established as a low income protection in consideration of the 
increasing cost of health insurance borne by the employee.
    Response: States have discretion under Sec.  303.31(a)(3) to set a 
reasonable alternative income-based numeric standard that could include 
both suggestions.
    15. Comment: A commenter suggested that, because cash medical 
support is defined by the proposed amendments to Sec.  303.31(a)(1) to 
include ``an amount ordered to be paid toward the cost of health 
insurance * * *'', the reference in paragraph (a)(3) to ``or private 
health insurance'' after `cash medical support' appears to be 
unnecessary.
    Response: We believe it is important to include the phrase 
``private health insurance'' in the paragraph because the definition of 
cash medical support only addresses amounts ordered to be paid toward 
the cost of health insurance provided by a public entity or by another 
parent but does not address the responsibility of a parent to secure 
private health insurance him or herself and pay any premium required by 
that insurance policy. We have added ``the cost of'' before that phrase 
``private health insurance'' for additional clarity.
    16. Comment: A commenter indicated that use of the term 
``considered to be reasonable in cost'' in Sec.  303.31(a)(3), appears 
to create a per se rule, not subject to rebuttal. If the regulation was 
intended to create a rebuttable presumption, then it should read ``Cash 
medical support or private health insurance is presumed reasonable * * 
* ``According to the commenter, allowing the five percent of gross 
income rule (or alternative State standard) to be rebutted would be 
consistent with Sec.  302.56(f), which states that child support 
guidelines set by the States must create a rebuttable presumption that 
the guideline amount is correct.

[[Page 42428]]

    Response: We believe the existing authority in Sec.  302.56(f) and 
(g) to rebut the presumption that the amount of the order that would 
result from application of the guidelines is the correct amount to be 
awarded would apply to the five percent or alternative State standard 
on a case-by-case basis. Even if the standard for setting medical 
support orders is adopted by statute, regulation, or court rule having 
the force and effect of law, the cross-reference in Sec.  302.56(c)(3) 
to Sec.  303.31 includes the cost-reasonableness standard as an element 
of setting support orders that is rebuttable on a case-by-case basis. 
While the proposed rule only cross-referenced Sec.  303.31(b), we 
believe that changing the cross-reference to the entire Sec.  303.31 
ties the cost-reasonable standard into the guidelines calculation, and 
therefore, the rebuttable presumption exception.
    17. Comment: A commenter asked how the five percent reasonable cost 
limit is applied when the noncustodial parent has more than one case? 
For example, what if the noncustodial parent is ordered to pay cash 
medical support to the custodial parent of that child and, in the 
noncustodial parent's second case, the noncustodial parent is ordered 
to carry health insurance for the child of the relationship with the 
second custodial parent. Is the five percent or alternative State 
reasonable cost limit applied to each of the noncustodial parent's 
individual cases, or is it applied to all of the noncustodial parent's 
cases in the aggregate? If the limit is applied to each case 
individually, then what would be the limit if the noncustodial parent 
has more than one case?
    Response: While Federal regulations do not impose requirements on 
application of guidelines in multiple cases involving the same 
noncustodial parent, State guidelines often provide guidance on 
imposing support obligations in cases involving a second or third 
family. We assume States would develop guidance for the suggested 
scenarios as well, as is appropriate, either as part of setting orders 
or as a rebuttable presumption to the ordered-amount on a case-by-case 
basis under Sec.  302.56(f) and (g).
    18. Comment: A commenter expressed concern about the option for 
States to implement an income-based numerical standard, without any 
limitation. The commenter recommends a Federal regulation implementing 
a limit on contribution toward the cost of coverage from low-income 
individuals. The proposed regulation commentary sites the New Jersey 
grant approach that ``no parents whose net income is at or below 200 
percent of the Federal poverty level should be ordered to provide 
health care coverage, unless the coverage is available at no cost to 
the parent.'' The commenter recommends a similar limitation be enacted 
in the Federal regulations.
    Response: The New Jersey grant project endorsed a standard of 
reasonableness measured against five percent of the net income of the 
person ordered to provide coverage. However, no coverage would be 
required from ``parents whose net income is at or below 200 percent of 
the Federal poverty level,'' unless the coverage is available at no 
cost to the parent. See A Feasibility Study for Review and Adjustment 
for Medical Support and SCHIP Collaboration (Feasibility Study). New 
Jersey's report is available at http://www.acf.hhs.gov/programs/cse/pol/dcl/dcl-03-10.htm. While we recognize the commenter's concern, we 
believe it is appropriate and consistent with State flexibility 
concepts to allow States to adopt a reasonable income-based numeric 
standard to the five percent standard. We are confident that States 
will turn to other States' adopted alternative standards for guidance 
in setting their own alternative standard.
    19. Comment: A commenter asked if State statute that provides that 
a premium payment that is 20 percent or more of a parent's gross income 
is considered unreasonable would be acceptable as a State's 
``reasonable alternative income-based numeric standard'' for whether 
health insurance is considered to be reasonable in cost.
    Response: It is acceptable under the final regulation for a State 
to provide that a payment of 20 percent or more of a parent's gross 
income is unreasonable if that is the amount needed to add the 
child(ren) to existing coverage, or that is the amount of the 
difference between the cost of self-only and family coverage.
    20. Comment: A couple of commenters pointed out that in the context 
of child support enforcement, the term ``obligated parent'' is almost 
universally used to refer to the person responsible for paying cash 
child support. A commenter stated that, while the commenter supports 
the new requirement under the Deficit Reduction Act (DRA) of 2005 that 
custodial parents may be ordered to provide health insurance, States 
are not required to enforce a medical support order against the 
custodial parent. Referring to the custodial parent as ``obligated 
parent'' is likely to cause confusion. The commenter recommends 
replacing ``obligated parent'' with ``the parent responsible for 
providing medical support'' or similar language.
    Response: We agree with the commenter and, for clarity, we have 
substituted the phrase ``the parent responsible for providing medical 
support'' for ``obligated parent'' in Sec.  303.31(a)(3).
    21. Comment: Another commenter asked if the ``obligated parent'' 
means the parent ordered to provide private health insurance, the 
parent ordered to provide cash medical support, or both.
    Response: The term ``obligated parent'' has been changed to ``the 
parent responsible for providing medical support.'' There could be 
multiple individuals ordered to provide medical support, including both 
the custodial and noncustodial parent. One parent could be ordered to 
provide health insurance and the other to pay or contribute to the cost 
of the premium, for example.
    22. Comment: The proposed regulation does not discuss how medical 
costs will be divided if there are multiple children. Would the 
combined total for medical support be five percent, or would a separate 
percentage be indicated for each child (i.e., 2.5 percent for each 
child)?
    Response: The five percent standard in Sec.  303.31(a)(3) is linked 
to the obligated parent's gross income and not to the number of 
children. However, a State has the option of adopting a reasonable 
alternative income-based numeric standard defined by the State.

Section 303.31(b)--IV-D Agency's Responsibilities

1. Petitioning for Medical Support in Child Support Orders--Sec.  
303.31(b)(1) and (2)
    1. Comment: Under Sec.  303.31(a)(1) and (2), health insurance can 
be either private or public insurance. If the definition of health 
insurance includes both public and private coverage, it should be clear 
that the evaluation for accessibility and affordability under Sec.  
303.31(b)(1) and (2) applies only to private health insurance. Each of 
those proposed rules uses the term ``health insurance.'' However, the 
preamble regarding these proposed rules unmistakably maintains that the 
court order should include ``private health insurance'' if it is 
accessible and affordable. That same language should be used in Sec.  
303.31(b)(1) and (2).
    Response: We agree and have added the term ``private'' before 
``health insurance'' in Sec.  303.31(b)(1) and (2) of the regulations.
    2. Comment: A commenter agreed that the new definition of 
reasonable cost mitigates the possibility that the cost of health 
insurance would reduce cash

[[Page 42429]]

child support awards for those with high-priced employer-sponsored 
insurance. However, the commenter expressed concern about the proposed 
rule's requirement that the IV-D agency must petition for a cash 
medical support order when private health insurance is not available at 
reasonable cost to either parent. The commenter believes that 
petitioning for cash medical support should be left to the discretion 
of the IV-D agency to enable States to strike the right balance on a 
case-by-case basis between the family's needs for cash child support 
and for cash medical support. Those without insurance have a range of 
different circumstances--some are self-employed with sufficient income 
to purchase insurance but have chosen not to get coverage, while others 
simply do not have enough money to pay for premiums.
    The commenter also indicated that ordering a noncustodial parent to 
make a cash contribution toward public insurance expenses is likely to 
reduce the cash child support available to the poor families who need 
it most, with the result that some may seek Temporary Assistance for 
Needy Families (TANF) benefits. It also will impose a higher financial 
burden on noncustodial parents who are unemployed or underemployed in 
low-wage jobs that do not offer insurance at a reasonable cost, if at 
all.
    Response: Section 466(a)(19) of the Act requires State laws and 
procedures which include a provision for medical support for the child 
be provided by either or both parents in all child support orders 
enforced under title IV-D of the Act. We believe it is more 
appropriate, as stated earlier, that States use current authority under 
Sec.  302.56(f) and (g) to rebut the presumption that cash medical 
support be provided in the absence of private health insurance 
available to either parent on a case-by-case basis. In addition, a 
State is authorized to establish an alternative cost-reasonableness 
standard for cash medical support as well as the cost of private health 
insurance under Sec.  303.31(a)(3).
    3. Comment: A commenter suggested the last sentence of Sec.  
303.31(b)(2) be changed to provide that cash medical support ``may be 
sought,'' instead of ``may be ordered,'' since this section applies to 
the IV-D agency, not the entity setting child support orders.
    Response: We agree with the commenter and have revised Sec.  
303.31(b)(2) as suggested.
    4. Comment: A commenter asked for confirmation that Sec.  
303.31(b)(1)-(4) would not mandate a requirement to modify every order 
where insurance is not being provided to include a provision for cash 
medical support.
    Response: These regulations do not apply retroactively to orders 
established prior to the implementation date; the requirements apply to 
new or modified orders established or modified after the date of 
publication.
    5. Comment: A commenter explained that IV-D staff who act as local 
``decision-makers,'' should not be required to review, evaluate, and 
select the appropriate coverage in accordance with the Federal 
regulations because it would require the IV-D staff to have a thorough 
understanding of the health needs of the children to be covered, a 
comparison of multiple insurance policy to meet the needs, determining 
if the insurance providers serve a specific area, and continual review 
every time health insurance coverage changes.
    Response: The final regulations focus on two aspects of health 
insurance coverage: whether the insurance is reasonable in cost and 
accessible to the child(ren). We believe these two criteria are 
critical to ensuring children benefit from private health insurance 
coverage and parents providing it when appropriate. Health insurance 
has little or no value if the child does not have geographic access to 
the services provided by the coverage. Extensive scrutiny of various 
insurance plans is not mandated by the regulations.
    6. Comment: Two commenters discussed the Working Group's 
suggestions that health insurance coverage is comprehensive if it 
includes at least medical and hospital coverage and provides for 
preventative, emergency, acute, and chronic care and that in deciding 
between two plans, the decision-maker consider factors such as basic 
dental coverage, orthodontics, eyeglasses, mental health services, and 
substance abuse treatment. The commenter indicated that, although the 
Working Group provided some interpretations of this term, the proposed 
regulations do not adopt any of these interpretations. The commenters 
indicated that the regulations should offer a specific definition of 
``availability'' and ``comprehensiveness'' because the regulations 
essentially leave the definitions of these terms completely to the 
discretion of the State.
    Response: The Working Group Report includes a wealth of information 
on medical support and is a valuable resource to States in determining 
how to establish procedures that meet Federal requirements but that may 
go well beyond the requirements in areas addressed in the Report and 
not mandated in the regulation. We believe it provides ample guidance 
for determining appropriate health care that is accessible, 
comprehensive, and affordable. The Federal regulation contain 
requirements for critical aspects of the medical support process but 
appropriately leave discretion to States to fine tune their medical 
support processes. We have encouraged State innovation and 
experimentation with respect to medical support initiatives and the 
knowledge gained from those projects as well as the results from 
independent State activities should be helpful to all States.
    7. Comment: A commenter suggested that OCSE clarify that the order 
state the specific dollar amount cap or limit for the premium (which 
would be equivalent to five percent of the parent's gross income, or 
the alternative numeric definition adopted by the State) because 
nonspecific orders are very difficult for other States to monitor and 
enforce.
    Response: We agree that States should consider establishing medical 
support obligations that state the specific dollar amount limit for a 
health insurance premium, whenever possible, to make enforcement of 
that order easier.
    8. Comment: A commenter recommended that the regulation allow 
States to consider additional components of appropriateness as defined 
by the State, such as comprehensiveness or special needs of the child, 
when petitioning the court to include health insurance.
    Response: States are free to consider additional components of 
appropriateness beyond those specified in the regulation.
    9. Comment: The proposed rule requires States to petition for cash 
medical support until reasonably-priced health insurance becomes 
available. Does this mean States must develop automated means of 
tracking health insurance available to both parents? Such a proposal 
would require extensive reprogramming, especially since States would 
then have to track employment data for the custodial parent. If States 
are to use locate and tracking systems already in place, do they now 
have to submit data on the custodial parent to these resources?
    Response: Section 303.31(b)(2) requires States to petition for cash 
medical support if health insurance is not available at the time the 
order is entered or modified and until such time as health insurance, 
that is accessible and reasonable in cost becomes available to either 
parent. Private health insurance, if available at reasonable cost and 
accessible to the child(ren), remains the preferred method of providing 
medical support for children.

[[Page 42430]]

    There is no specific requirement for States to develop automated 
means of tracking health insurance available to both parents. However, 
States should currently have the capability to seek information from 
State and Federal sources on custodial parent's income, assets, and 
location for various IV-D program results and, States should be 
capturing the fact that a parent is providing health insurance or that 
the employee's employer does not offer health insurance. OCSE currently 
matches names in the Federal Case Registry, which includes custodial as 
well as noncustodial parents, with the National Directory of New Hires, 
and returns successful matches to each State.
    10. Comment: The same commenter asked if the State learns, through 
current locate and tracking methods (i.e., New Hire Reporting, medical 
support vendor), that health insurance coverage is available, whether 
the State should initiate action to modify the order?
    Response: When a State establishes a child support order, if the 
State does not include language ordering health insurance coverage, and 
only includes a cash medical support order, the State would have to 
petition to modify the order to require that health insurance coverage 
be provided before the new employee can be required to provide the 
insurance if it is reasonable in cost and accessible to the child. If 
the order already includes a requirement to provide health insurance 
that is reasonable in cost and accessible to the child when it becomes 
available, there would be no need to modify the order and the State 
could send the NMSN to the new employer within two days of receipt of 
the new hire information in the State Directory of New Hires.
    11. Comment: A commenter asked, if the parent ordered to provide 
health insurance changes employment and the cost of the health 
insurance premiums at the new employer exceeds the reasonable cost 
standard, is the State required to take an action or is it incumbent 
upon the obligated parent to request a modification of the order? 
Please note, in this situation, the medical insurance was reasonable 
when the order was entered.
    Response: As indicated earlier in response to a concern about the 
two-day timeframe to send a NMSN, it is reasonable for a IV-D agency to 
enforce a medical support order by sending the NMSN without 
reevaluating the cost-reasonableness of the ordered health insurance. 
Should the cost or availability of health insurance change, the 
obligated parent would be expected to seek modification of the order if 
conditions in the State for modification are met.
    12. Comment: A commenter opined that, while one of the goals of the 
proposed changes to the regulation is to increase the number of 
children covered by private health insurance, the Federal five percent 
standard may actually result in fewer children being covered than are 
covered today. As current orders, where the children are already 
covered, are reviewed and modified to include the five percent 
standard, States may actually be required to terminate existing 
coverage where the existing premium does not meet the five percent 
standard.
    Response: States have authority to set a reasonable alternative 
income-based numeric standard that is higher than the five percent 
standard. Or, a State may rebut the presumption in such a case that 
health insurance is not unreasonable in cost and order that private 
health insurance be provided.
    13. Comment: A commenter suggested that ``at reasonable cost'' be 
added immediately after the phrase, ``petition to include cash medical 
support'' in Sec.  303.31(b)(2) to be consistent with Sec.  
303.31(b)(1) that requires health insurance to be reasonable in cost.
    Response: We agree and have revised Sec.  303.31(b)(2) to add this 
condition as follows: ``If health insurance described in paragraph 
(b)(1) of this section is not available at the time the order is 
entered or modified, petition to include cash medical support that is 
reasonable in cost, as defined in paragraph (a)(3) of this section, in 
new or modified orders * * *''
    14. Comment: Several commenters indicated that the proposed rule 
inserted into Sec.  303.31(b)(2) an additional requirement beyond the 
requirement to petition for orders for cash medical support. The 
phrase, ``until such time as health insurance, that is accessible and 
reasonable in cost as defined under paragraph (a)(3) of this section, 
becomes available'' may require IV-D agencies, which had already 
obtained an order for cash medical support, to seek modification to 
stop the order for cash medical support and to start an order for 
health insurance. This goes beyond the mandate in Sec.  303.31(b)(3) 
and (4) to petition to include medical support in orders that do not 
address medical support if certain state-adopted criteria are met. We 
do not believe IV-D agencies have the resources to repeatedly modify 
orders that already contain provisions for medical support, in addition 
to the current IV-D mandates to review and adjust or modify support 
orders. We believe existing requirements to review orders under 42 
U.S.C. 666(a)(10), and the proposed rule to re-evaluate medical support 
at every modification under Sec.  303.31(b)(1), are sufficient. We 
recommend the proposed phrase and any such mandate be removed.
    Response: We do not read Sec.  303.31(b)(2) to mandate that a State 
petition to modify an order that includes cash medical support if the 
State learns, for example, through NDNH or SDNH data, that health 
insurance is now available. However, delaying petitioning for health 
insurance coverage for as long as three years would not be in the best 
interests of the children. If the order includes language that requires 
health insurance be provided should it become available in the future, 
and that cash medical support is ordered until such time, the need to 
petition to modify the order and allow the State to take steps to 
immediately secure private health insurance coverage for the children 
would be avoided. Absent such a provision, the State would need to 
petition to modify the order to take advantage of the currently 
available coverage.
    15. Comment: One commenter stated that the proposal will delete 
Sec.  303.31(b)(2) under which the IV-D agency must petition the court 
to include medical support whether or not health insurance was 
available to the parent at the time the order was entered. Is it the 
regulation's intent to weaken that requirement or is it assumed that 
other sections of the proposed regulation continue the mandate to 
include medical support whether or not it is available at the time the 
order is entered? Another commenter indicated that it is preferable to 
include language in all orders to require the obligors to carry health 
and dental insurance if it is available for a certain amount per month 
or to pay a specific amount per month in cash medical support if 
insurance is not available. The commenter said he/she had been using 
this language for almost two years now in an attempt to reduce the 
workload by needing fewer modifications of orders for medical insurance 
language.
    Response: The mandate to include health insurance in a support 
order whether or not it is available at reasonable cost at the time the 
order is entered is eliminated in the revision to Sec.  303.31(b)(2). 
However, as stated above by the second commenter, we believe it would 
be prudent for States to consider continuing to include such language 
to avoid the need to revise the order should the State learn that 
health insurance, that is accessible and reasonable in cost, becomes 
available

[[Page 42431]]

through a change of employment or otherwise.
    16. Comment: If cash medical support goes unpaid, would arrears 
accrue? If so, this seems inequitable because if the premium were to go 
unpaid due to CCPA limits and the priority for employer allocation of 
funds withheld, arrears aren't accrued. This will negatively impact 
arrears.
    Response: Cash medical support that is unpaid becomes an arrearage 
just like any other ordered payment of support. If a health insurance 
premium is unpaid in the circumstances mentioned above, a State might 
consider reevaluating the support order to ensure that it is set at an 
amount the obligated parent can afford, based on his or her current 
ability to pay.
    17. Comment: A State's guidelines that currently provide adjustment 
of the basic support obligation based on which party is providing 
coverage/paying the premium seems to be consistent with the intent of 
the proposed rule. It does not seem worthwhile to order a cash medical 
amount to be paid toward the cost of health insurance provided by 
another parent. If this were to become a mandate, it would seem more 
worthwhile to mandate a cash medical amount to be paid only toward the 
cost of health insurance provided by a public entity.
    Response: While the definition of cash medical support includes 
payments toward health insurance provided by a public entity or another 
person, States are not required to include in every order an amount to 
be paid toward the cost of health insurance provided by another parent, 
or by a public entity for that matter. How the State meets the 
requirement to provide for medical support in every order depends on 
State law and child support guidelines, including the type described in 
the question.
    18. Comment: It appears from the proposed rule that a State would 
have to differentiate between cash medical support owed to Medicaid, 
SCHIP, and the custodial parent. This will require significant 
technical enhancements, as we need to develop an interface with SCHIP, 
and our automated system would require a major allocation of resources 
and time to accommodate cash medical.
    Response: Section 303.31(b)(2) does not require a State to order 
cash medical support to be paid to a Medicaid or SCHIP agency. These 
options are included as possibilities because some families may best 
receive health care, in the absence of private health insurance, 
through receipt of Medicaid or SCHIP services should those families be 
determined to be eligible for those programs' services. It is up to a 
State to determine how best to provide medical support consistent with 
the Federal requirements in Sec.  303.31.
    19. Comment: A cash contribution toward medical support is 
potentially a simple surcharge for the support obligations of all low 
income obligors. The contribution will not purchase insurance, which 
cannot be purchased piecemeal. Contributions toward unpaid medical 
expenses are better obtained after the fact, with proof of such 
expenses. Otherwise, there could be a demand for accounting of how the 
``medical contribution'' is expended. Such a requirement would be 
detrimental. It would take valuable court time, foster a battleground 
to refuel old resentments, and require proof that is unlikely to exist, 
given the way many households, especially those with very limited 
incomes, operate. The medical cash contribution would likely open the 
door to further calls for child support accounting. For this reason, 
cash contributions toward medical costs should be based on actual 
expenditures.
    Response: We agree that requiring custodial parents to account for 
how ordered support is expended is detrimental in the ways described. 
We believe it is inappropriate to consider such an approach absent 
clear evidence that this is an identified problem. It is up to a State 
to determine how cash medical support will be ordered in appropriate 
cases.
    20. Comment: The requirement that IV-D agencies petition for 
medical support when there is evidence that either parent may have 
coverage available at reasonable cost, should be limited to situations 
where there is no SCHIP coverage. SCHIP coverage may be available to 
families at higher incomes in some States than in some other States. 
For example, families with incomes between 135 and 185 percent of 
poverty can qualify for SCHIP coverage with co-payments but no 
premiums. Under the proposed rule, a custodial parent in this situation 
could conceivably have access to coverage for five percent of gross 
income or less and the noncustodial parent could be ordered to 
contribute toward the capitated cost of the SCHIP coverage. States 
should be afforded leeway not to pursue the custodial parent for 
employer-sponsored insurance in this situation, especially where there 
is a mechanism in place for the recovery of the cost of the SCHIP 
payments.
    Response: States have discretion under these regulations and 
existing child support guidelines to rebut the presumption that the 
result of an application of the State's law and guidelines would not be 
appropriate in a particular case, as long as there is a specific 
written finding on the record in accordance with Sec.  302.56(f) and 
(g).
    21. Comment: If private health insurance is not available, States 
are required to ensure orders are entered for cash medical support 
until private health insurance is available. The courts in various 
jurisdictions prohibit the IV-D agency from unilaterally enforcing 
orders to secure health insurance if reasonable in cost through 
employment without a review under the support guidelines. These 
restrictive orders have posed a quandary for the IV-D agency's ability 
to use automation fully. Currently a State must review each and every 
order prior to enforcing the medical support provision. This would 
definitely be the case under the new regulation. States will most 
likely use the review and adjustment process to review the parties' 
income and availability of private health coverage and require 
adjustment to the child support cash award to account for the private 
health insurance. This will potentially have significant impact on 
workload associated with constant review and adjustment activities as 
custodial and noncustodial parent employment and insurance coverage 
change.
    Response: Children need appropriate health care and their parents 
should be the first source of available health care for their children. 
States should do everything possible to ensure coverage when private 
health insurance is available at reasonable cost and accessible to the 
children.
    22. Comment: When health insurance is not available at a reasonable 
cost and/or is not accessible under the State's definition, if the 
court enters an order requiring each parent to pay 50 percent of 
medical expenses without ordering a specific dollar amount, is that 
considered ``medical support provided'' for purposes of the OCSE 157 
report?
    Response: It would only be considered ``medical support provided'' 
on the OCSE form 157 if the State received from one parent a bill for 
medical expenses for the child and then recovered 50 percent of the 
bill amount or any portion thereof from the other obligated parent.
    23. Comment: A commenter indicated that Sec.  303.31(b)(2) appears 
to require States to seek orders for cash medical support that are 
contingent upon the unavailability of medical insurance. For the order 
to be a judgment by operation of law, as required by 42 U.S.C. 
666(a)(9), the order must be final and in a fixed amount that is clear 
on the

[[Page 42432]]

record. OCSE should encourage States to ensure that both requirements 
are observed in applying the new regulation.
    Response: Section 466(a)(9) of the Act does not require medical 
support orders to be in a fixed amount that is clear on the record. 
Rather, that section requires in part that any payment of support under 
any child support order is a judgment by operation of law, with the 
full force, effect and attributes of a judgment of the State, including 
the ability to be enforced. This regulation provides States with a 
number of options for ensuring medical support is provided for children 
by their parents whenever possible. The various methods allowed by the 
regulations and discussed in many of these comments and responses are 
consistent with the requirements of title IV-D of the Act.
    24. Comment: One commenter stated that the Working Group 
recommended that geographic access be determined by a 30 miles/30 
minutes standard. The commenter also recommended that coverage be 
sought only if, based on the obligated parent's work history, coverage 
was likely to be in place for at least one year. Under the Working 
Group's proposal, States would have the option to adopt different 
standards if they felt it appropriate. The commenter recommended that 
the Federal regulations adopt the Working Group's approach rather than 
leave the definition of accessibility up to States. While recognizing 
the need for some State flexibility, the commenter also believes that 
Federal guidance on the standards to be used is appropriate. Another 
commenter indicated that the description of accessibility in the 
Working Group Report is somewhat problematic in rural America as there 
are numerous places where it would be further than 30 minutes or 30 
miles to a doctor, but health insurance coverage would still be 
worthwhile to the custodian.
    Response: The Working Group's Report is full of recommendations 
States should consider in determining the appropriate approach to 
securing medical support from parents. The 30 mile/30 minute standard 
for accessibility in the Report seems to be a good benchmark. We are 
unaware of any strong reason, however, to place an additional 
requirement on States unless there is evidence that it is needed. 
Therefore, we encourage States to consider the 30 mile/30 minute 
standard if appropriate. However, it is up to the State to define 
``accessible'' and therefore, a different definition is acceptable.
    25. Comment: A commenter requested regulatory guidance with respect 
to interstate cases. How will States be audited when enforcing support 
collection in a responding case with respect to medical support 
enforcement? Is it the responsibility of the initiating State to modify 
its medical support order requirement when the noncustodial parent 
obviously resides where services and providers are unavailable to the 
child in the initiating State?
    Response: If a responding State has been asked by an initiating 
State to establish a medical support order, the responding State must 
determine if private health insurance is accessible to the children and 
available to the noncustodial parent at reasonable cost. If health 
insurance is not accessible or available at reasonable cost to the 
noncustodial parent, the responding State should inform the initiating 
State and the initiating State should determine if private health 
insurance is available to the custodial parent. If private health 
insurance is available to the custodial parent at reasonable cost and 
accessible to the children, the initiating State should require the 
custodial parent to secure the health insurance coverage and inform the 
responding State. If the initiating State requires the custodial parent 
to secure private health insurance, the responding State should 
determine whether or not to require the noncustodial parent to provide 
cash medical support to the custodial parent. If private health 
insurance is not accessible to the child(ren) or available at 
reasonable cost to the custodial parent, the initiating State should 
notify the responding State so that the responding State may seek cash 
medical support from the noncustodial parent.
    In response to the question about how States will be audited in a 
responding State with respect to medical support enforcement, States 
are required to report information regarding the enforcement of cash 
medical support obligations, including interstate case activity, on the 
OCSE-157 in accordance with OCSE AT-05-09 dated September 6, 2005. 
Additionally, information related to the enforcement of medical support 
obligations reported on several lines of the OCSE-157 for Intrastate 
and Interstate IV-D cases is subject to the Data Reliability Audit in 
accordance with the document entitled ``Data Reliability Guide for 
Auditing'' issued by the Federal Office of Child Support Enforcement. 
And finally, medical support enforcement activities are included as 
part of a State's self-assessment under 45 CFR 308.2(e).
    26. Comment: A commenter requested a more thorough definition of 
what is included in ``medical care.'' Federal guidance would prove 
helpful to more than just the IV-D program. The draft rule mentions 
allergy shots, orthodontic treatment, and psychological counseling as 
covered medical care costs. Would this also include routine dental 
preventive care, fillings, root canals, crowns, etc. performed by 
licensed dentists, endodontists, or oral surgeons?
    Response: We believe that States are in a better position to define 
comprehensive health care coverage. However, a definition of 
comprehensive dental insurance that provides for the suggested services 
could be adopted by the State.
    27. Comment: If the court orders the custodial parent to pay cash 
medical support to the noncustodial parent, the IV-D agency may have to 
open a second case for the cash medical support obligation because 
there are multiple payers and payees. Would OCSE re-affirm or re-state 
its position on whether or not:
    (1) The IV-D agency is responsible for recording (in the statewide 
computer system) certain obligations that have been placed on the 
custodial parent;
    (2) The IV-D agency is responsible for monitoring compliance with 
certain obligations that have been placed on the custodial parent; or
    (3) The IV-D agency is responsible for enforcing certain 
obligations that have been placed on the custodial parent.
    Response: A State is responsible for monitoring support 
obligations, even if the State opts not to enforce them because the 
State needs to know if the custodial parent has covered the children or 
not, if ordered to do so. This information is important for Medicaid 
purposes or for purposes of modifying the order. It could also help a 
State determine if enforcement against custodial parents is needed or 
not, to make an informed decision as to whether or not to enforce 
orders against custodial parents using the NMSN.
    28. Comment: The proposed rule's preamble states, ``For example, if 
a custodial parent of a child enrolled in SCHIP is required to pay a 
co-payment or premium for SCHIP, the cash medical support obligation of 
the noncustodial parent could be used to pay or reimburse the custodial 
parent for any co-payment or premium owed to SCHIP.'' In the sentence, 
it is unclear who ``required'' the custodial parent to pay a co-payment 
(is it a reference to a court order or is it a reference to a SCHIP 
agency's payment expectation?).
    Response: It is a reference to a SCHIP agency payment expectation.

[[Page 42433]]

    29: Comment: Is the IV-D agency expected to: (1) Establish a cash 
medical support obligation against a custodial parent receiving 
Medicaid (an amount presumably payable to the Medicaid agency) if 
appropriate? (2) Establish a health insurance obligation against a 
custodial parent receiving Medicaid, if appropriate?
    Response: If after taking all steps required to determine if health 
insurance is available to either parent, application of the State's 
guidelines, and a determination that the health insurance available to 
the custodial parent is reasonable in cost and accessible to the 
child(ren) are met, it would be appropriate to require the custodial 
parent to secure such health insurance for the child(ren), unless the 
State rebuts the presumption that the results of these calculations 
would be inappropriate in a particular case, as authorized in Sec.  
303.56(f) and (g). Similarly, with respect to cash medical support, a 
State would need to go through the steps of determining appropriate 
medical support requirements to be included in the order, and an order 
against the custodial parent for cash medical support might be 
appropriate.
2. Petitioning To Modify Existing Orders To Include Medical Support 
Based on Criteria Established by the State Sec.  303.31(b)(3)-(4)
    1. Comment: A commenter stated that the ``written criteria'' in 
Sec.  303.31(b)(3)(i) should be re-written as follows: ``Establish 
written criteria to identify orders that do not address the health care 
needs of children based on * * * Evidence that health insurance that is 
accessible to the child(ren), as defined by the State, may be available 
to either parent at reasonable cost, as defined under paragraph (a)(3) 
of this section * * *.'' This would ensure the concepts of 
accessibility and reasonable cost are consistently brought into the 
written criteria requirement.
    Response: We agree and have made the change to Sec.  
303.31(b)(3)(i).
    2. Comment: The proposed Sec.  303.31(b)(3)(ii) should be clarified 
by deleting the last phrase: ``and (2) of this section''. Clause (i) 
requires the criteria include evidence that health insurance may be 
available. This seems appropriate. However, by adding the last phrase 
in clause (ii) the rule would require, in addition to evidence health 
insurance may be available, that ``health insurance * * * is not 
available'', which is what (b)(2) specifies.
    Response: We agree and have removed reference to paragraph (b)(2) 
in Sec.  303.31(b)(3)(ii).
    3. Comment: The proposed Sec.  303.31(b)(3)(i) requires States to 
establish criteria to identify when health insurance may be available. 
Because health insurance can include health insurance provided by a 
public entity, the regulation should be clarified to remove any mandate 
the IV-D agency must identify when a child might be eligible for 
Medicaid or SCHIP.
    Response: We agree and this result was not our intent. Therefore, 
we have inserted ``private'' before the words ``health insurance'' in 
Sec.  303.31(b)(3)(i).
3. Providing Notice of Health Insurance Policy Information to the 
Custodian--Former Sec.  303.31(b)(5) and Notice to the Medicaid 
Agency--Proposed Sec.  303.31(b)(5)
    1. Comment: Two commenters suggested that deleting former 
subsection (b)(5), which required the IV-D agency to provide the 
custodian with health insurance policy information, may result in 
custodial persons not receiving notice regarding health coverage from 
plans that are not sponsored by employers or if the IV-D agency did not 
provide the custodian's address on the NMSN because of security 
concerns, such as domestic violence. While employers are required to 
provide information to the Alternate Recipient pursuant to a NMSN, no 
such requirement exists if the health coverage is provided through 
nonemployer sponsored plans. State IV-D agencies should retain 
responsibility for advising parents of the health care coverage that 
has been secured.
    Response: While we agree that in some instances, such as those 
mentioned above, custodial parents may not get notice of health plan 
information from the plan administrator, we believe the IV-D agency 
will be well aware of those instances in which notice to the custodial 
parent remains necessary and provide notice in those instances, without 
a Federal mandate to do so.
    2. Comment: Several commenters indicated that proposed Sec.  
303.31(b)(5) states that the IV-D agency should inform the Medicaid 
Agency when a new or modified court order for child support includes 
health insurance and/or cash medical support. Rather than mandating 
that child support notifies the Medicaid Agency every time health 
insurance or cash medical support is ordered, it is more worthwhile to 
institute this requirement on cases where the children are enrolled in 
health coverage and/or cash medical support payments have actually been 
collected.
    Response: Based on these comments and upon review of Sec. Sec.  
303.31(b)(5), 303.30(a)(7) and 302.51(c)(1), we believe Sec.  
303.31(b)(5) is unnecessary and have deleted it from the regulation. We 
agree that it is preferable to provide the Medicaid agency with health 
insurance coverage information at the time the insurance is provided. 
Section 303.30(b) requires the IV-D agency to inform the Medicaid 
agency whether the noncustodial parent has a health insurance policy 
and, if so, the policy names and number(s) and name(s) of person(s) 
covered, in accordance with Sec.  303.30(a)(7). In addition, Sec.  
302.51(c)(1) requires the IV-D agency to send assigned cash medical 
support collections to the Medicaid agency. Therefore, since these two 
existing requirements already require appropriate notice to the 
Medicaid agency, Sec.  303.31(b)(5) is redundant and has been removed.
    3. Comment: We recommend that Sec.  303.31(b) be modified to 
include language requiring that custodial parents provide evidence of 
enrollment of the child(ren) in a health care plan if receiving cash 
medical support for premiums from the noncustodial parent.
    Response: As indicated, States are not required to enforce orders 
requiring the custodial parent to provide medical support. However, 
State should require custodial parents ordered to provide health 
insurance to provide proof of the children's coverage whether or not a 
noncustodial parent is ordered to contribute to the cost of the 
insurance and whether or not the State opts to enforce the order 
against the custodial parent should he or she fail to provide the 
ordered coverage. Without requiring such notice, a State would not be 
able to meet its requirement to notify the Medicaid agency of the 
health insurance information or would not be able to report on the 157 
statistical report that medical support is ordered and provided.
4. Notice That Medical Support Services Will Be Provided in All IV-D 
Cases--Sec.  303.31(c)
    1. Comment: Section 303.31(c) would require the IV-D agency to 
inform the non-IV-A applicant for IV-D services that ``medical support 
enforcement services'' will be provided. We would suggest that 
``medical support services'' be used instead. Including the word 
``enforcement'' has a limited connotation and may be construed as not 
including establishment of medical support obligations.
    Response: We agree and have deleted ``enforcement'' from Sec.  
303.31(c). However, a discussed above, a State may opt not to enforce 
medical support orders against custodial parents.

[[Page 42434]]

5. Distribution and Disbursement of Cash Medical Support
    1. Comment: May the State Disbursement Unit (SDU) distribute a cash 
medical support collection to an SCHIP agency? What if this is a State 
in which SCHIP is not a Medicaid expansion program, but distinct from 
Medicaid? We note under 42 U.S.C. 657, 654(5) and 654(11), collections 
under the IV-D program may be retained by the State if assigned under 
IV-A or IV-E or Medicaid programs, or must be distributed to the 
family. (There is no assignment of medical support to the SCHIP program 
in States which do not have the Medicaid expansion program.)
    Response: There may be circumstances under which the SDU may send 
support payments to an address other than that of the obligee, for 
example, if a Tribe operates a Tribal TANF program, requires as a 
condition of eligibility for Tribal TANF that an individual assign 
support rights to the Tribe and the individual is receiving IV-D 
services from the State; or if an obligee provides an address other 
than a home address to the SDU and directs the SDU to send support 
payments to that address; or if a State SCHIP program opted to require 
an assignment of support rights, and cooperation with the IV-D program 
as a condition of receiving SCHIP in the State.
    2. Comment: One commenter asked for clarification that all types of 
cash medical support should be paid to the IV-D agency and then 
distributed and disbursed by the SDU.
    Response: All child, spousal, and cash medical support payments 
collected by the IV-D program must be paid to the SDU in accordance 
with section 454B of the Act.
    3. Comment: A commenter indicated that distribution of cash medical 
support paid to a public entity needs to be clarified. The preamble 
states that a ``health insurance premium or cash medical support 
obligation is current support for purposes of distribution and 
allocation between cash child support and cash medical support.'' This 
distribution issue is not addressed in the body of the proposed 
regulation. However, if cash medical support is always treated as 
current support, the IV-D agency would, in some instances, distribute 
money to the State Medicaid agency as cash medical support before it 
distributes money owed to the family as cash child support. This would 
appear to be contrary to the family first distribution rules in 42 
U.S.C. 657.
    Response: The preamble language was unclear. A cash medical support 
collection would be considered current support only if the support was 
paid timely and in the specific amount required in the order to be paid 
periodically. Should that amount not be paid timely, the unpaid 
obligation becomes past-due just like any unpaid current child support 
obligation. In addition, if a family is receiving Medicaid and has 
assigned rights to cash medical support but is no longer receiving 
TANF, current cash child support would be paid to the family and 
assigned current cash medical support would be paid to the Medicaid 
agency.
    Section 454(5)(B) of the Act requires that ``in any case in which 
support payments are collected for an individual pursuant to the 
assignment made under section 1912 [of the Act], such payments shall be 
made to the State for distribution pursuant to section 1912, except 
this clause shall not apply to such payments for any month after the 
month in which the individual ceases to be eligible for medical 
assistance.'' These requirements are also addressed at Sec.  
302.51(c)(1) which requires the IV-D agency to forward assigned medical 
support payments to the Medicaid agency for distribution under 42 CFR 
433.154. Under Sec.  302.51(c)(2), when a family ceases receiving 
Medicaid, the medical support assignment terminates, ``except with 
respect to any unpaid medical support obligation that has accrued under 
the assignment.'' The subsection further requires the IV-D agency to 
attempt to collect any unpaid specific dollar amounts designated in the 
support order for medical purposes and forward amounts collected to the 
Medicaid agency for distribution under 42 CFR 433.154.
    4. Comment: If States elect to pass through support in accordance 
with revised section 457(a)(1) of the Act, as amended by the DRA of 
2005, what will be the distribution scheme for pass-through States that 
also elect to have a cash contribution requirement for Medicaid cases, 
if the payment cannot cover both or all?
    Response: OCSE-AT-98-24, http://www.acf.dhhs.gov/programs/cse/pol/AT/1998/at-9824.htm, states:
    ANSWER 22: Section 457 of the Act does not address specifically 
distribution of medical support collections. However, distribution of 
assigned medical support is addressed under section 1912(b) of the Act 
and 42 CFR 433.154, statute and regulations governing the Medicaid 
program. In addition, section 459(i)(2) of the Act defines child 
support to include orders which provide ``for monetary support, health 
care, arrearages or reimbursement * * * '' And, Federal regulations at 
45 CFR 302.51 address disbursement of assigned medical support and 
require that:

    (1) Amounts collected by the IV-D agency which represent 
specific dollar amounts designated in the support order for medical 
purposes that have been assigned to the State under 42 CFR 433.146 
shall be forwarded to the Medicaid agency for distribution under 42 
CFR 433.154.
    (2) When a family ceases receiving assistance under the State's 
title XIX plan, the assignment of medical support rights under 
section 1912 of the Act terminates, except for the amount of any 
unpaid medical support obligation that has accrued under such 
assignment. The IV-D agency shall attempt to collect any unpaid 
specific dollar amounts designated in the support order for medical 
purposes. Under this requirement, any medical support collection 
made by the IV-D agency under this paragraph shall be forwarded to 
the Medicaid agency for distribution under 42 CFR 433.154.

    Federal distribution regulations at 45 CFR 302.51 apply to both 
child and medical support payments which are ordered to be paid in 
specific dollar amounts. In the preamble to the final regulations 
published in the Federal Register on February 26, 1991 (56 FR 7988) and 
issued by OCSE-AT-91-01 on March 8, 1991, we stated that: ``When less 
than the total amount of the obligation is collected, the IV-D agency 
should allocate the amount collected between the child support and the 
medical support specified in the order in proportionate shares. Current 
support must be given priority over past-due support, except with 
respect to collections made through the Federal income tax refund 
offset process.'' The allocation of collections between child support 
and medical support would apply to payments on arrearages as well as 
current support. See also OCSE-PIQ's-93-05 and 93-06.
    Once a State allocates the amount collected between child support 
and medical support designated in the support order, distribution of 
any medical support collection must be in accordance with 45 CFR 
302.51, section 457 of the Act and OCSE-AT-97-17, including the order 
in which assigned financial and medical support collections are 
distributed and the forwarding to the title XIX agency of any amount of 
assigned medical support.
6. National Medical Support Notice (NMSN)--Sec.  303.32
    1. Comment: Changes to the NMSN are not included in the proposed 
rule changes. However, Sec.  303.32(a) directs the use of the NMSN 
specifically for noncustodial parents. The proposed rules allow the 
custodial parent to be ordered to carry health insurance, so it seems 
appropriate to allow agencies to

[[Page 42435]]

use the NMSN to enforce that obligation. Some changes also need to be 
made to the notice itself to make it appropriate for use for custodial 
parents. For example, the NMSN often uses the term ``noncustodial 
parent/participant.'' With the rule changes, the custodial parent could 
be the participant.
    Response: Necessary changes to the NMSN will be made before 
February 2008, when approval for the NMSN must be renewed. However, 
States may use the current version of the NMSN to enforce an order 
requiring a custodial parent to provide health insurance coverage 
through her employment. Changes to Sec.  303.32(a) to include reference 
to use of the NMSN when the responsible parent is the custodial parent 
are addressed later in this preamble.
    2. Comment: OCSE received the greatest number and disparity of 
comments on the proposed requirement in Sec.  303.32(c)(4)(ii) that 
establishes a priority in which different types of child and medical 
support obligations must be satisfied if there are insufficient funds 
available to meet the employee's contribution necessary for coverage of 
the child(ren) and to also comply with any withholding orders received 
by the employer with respect to the same employee. Rather than list and 
respond separately to all comments received on the proposed priority 
order, the following paragraphs summarize the many, varied positions 
and rationale expressed by commenters and the response that follows 
explains the conclusion drawn from these widely divergent preferences. 
We believe it is important to consider the body of comments provided 
and to then explain the conclusions drawn from the comments as a whole, 
and changes made to the proposed regulation based on the comments.
    Only a couple of commenters were satisfied with the proposed 
priority order for satisfying various obligations. However, these 
commenters had concerns about the possible conflict with child support 
distribution requirements, discussed in more detail below. A number of 
commenters preferred that States continue to be allowed to set a 
priority among health insurance premiums, current child support, 
current cash medical support, spousal support, and arrearages in 
situations in which all obligations cannot be satisfied because of the 
Consumer Credit Protection Act limits on the amount of money that may 
be withheld from an employee's wages. Other commenters preferred a 
priority that would satisfy health care premiums before current child 
support because unless the entire health insurance premium is paid, the 
policy would be cancelled and the child(ren) would lose coverage. 
Several others, citing good social policy, preferred to satisfy all 
current child and medical support obligations before satisfying any 
spousal support obligation, because securing child support is the IV-D 
program's primary goal. Still others preferred to satisfy all child 
support before applying any withheld amount to health insurance 
premiums or cash medical support.
    Some of these latter commenters opposed the priority set out in the 
proposed rule because in their view it was contrary to ``family first'' 
distribution authorized under the DRA of 2005 and would result in some 
families receiving less child support that is critical to their self-
sufficiency. Several of these commenters argued that any child support 
owed to the family should be satisfied before any portion of the amount 
withheld is applied to cash medical support assigned to the State as a 
condition of receipt of Medicaid. Still others wanted all child 
support, current and arrearages, to be satisfied before any health 
insurance premium or cash medical support obligation. Others requested 
that employers be directed to follow the directive of a custodial 
parent in a nonassistance case if there are insufficient funds to 
provide both current child support and health insurance coverage, and 
the custodial parent prefers to receive health insurance coverage over 
child support, or vice versa.
    A number of commenters were concerned that the priority set forth 
in Sec.  303.32(c)(4)(ii) was inconsistent with and violated the 
Federal requirements for distribution of child support collections in 
section 457 of the Act, Sec.  302.51 and guidance issued by OCSE. One 
commenter liked the proposed priority but was concerned that it is in 
conflict with the established distribution hierarchy which the 
commenter believes places current child support and medical support 
above spousal support. Others proposed that the priority language be 
included in Sec.  303.100, which contains Federal requirements for 
withholding income. And still others did not object to the priority 
order that applied to employers because once the withheld amounts are 
received by the IV-D agency, the Federal distribution rules would apply 
and, in fact, the amounts withheld may not be applied to satisfy 
obligations in the same sequence that employers are required to follow.
    There were a number of commenters concerned with the phrase ``Other 
child support obligations'' which appears in proposed Sec.  
303.32(c)(4)(ii)(D) because the phrase is unclear and leaves a number 
of unresolved potential issues about what is included or excluded from 
that phrase. Among those listed were: What is a State to do if there is 
more than one child support order? Does the reference to ``other child 
support obligations'' include child support orders with respect to 
different child(ren) of the same obligated parents? Or does the 
priority of satisfying arrearages before ``other child support 
obligations'' violate the Federal distribution requirement to pay 
current support before arrearages? What if a State integrates day care, 
education, long distance transportation, and other child rearing costs 
into the cash child support amount? Does the regulation intend that 
these awards are all examples of ``other child support obligations?''
    Some commenters wanted OCSE to clarify that the priority applied in 
both IV-D and non-IV-D cases while others asked for clarification that 
the priority applied only to IV-D cases. Another asked if the priority 
applied only to payments from employers or if all payments would be 
subject to this prioritization. Another commenter objected to the 
option, in Sec.  303.32(c)(4)(ii), to allow courts or administrative 
decision-makers to set a different priority in a support order than 
that laid out in the regulation because it would be confusing to 
employers and, if allowed, any alternative to the general priority 
order must be determined to be in the best interest of the child(ren) 
involved. Another commenter favored this flexibility provided in the 
proposed regulation to allow deviation from the prescribed priority if 
included in the court or administrative order. A commenter also raised 
the possibility of employers receiving multiple income withholding 
orders for multiple custodial parents and child(ren) against a single 
employee, each with a different priority.
    One commenter stated that the proposed priority scheme imposes a 
new requirement on States, and that, while well intended, this 
provision is problematic in that it may conflict with State law, 
regulation or procedure that have been in place for some time in the 
absence of a federally-imposed priority, as to the treatment of health 
care costs under the State's support guidelines or otherwise. For 
example, some States' guidelines may require that health insurance 
premium costs must be considered as mandatory and are netted

[[Page 42436]]

out of income prior to the calculation of the support amount. In this 
example, placing current child support withholding as a priority over 
withholding for health insurance would conflict with other State law. 
Employers will have difficulty in determining amounts to be withheld in 
the circumstance wherein there is sufficient income to withhold current 
support, not enough to withhold for the health insurance premium (which 
must be paid in full) but enough that support could be withheld to 
address arrears. The current regulation does not set a Federal priority 
and thus has allowed States flexibility in consideration of health 
insurance costs and State policy choices. This commenter believes that 
the election of priorities between current support, medical support, 
and payment of arrears for the support of the children implicates 
significant policy issues and concerns. And, according to the 
commenter, such choices are made by Congress or State legislatures.
    And finally, a commenter argued that, as part of the NMSN 
requirements, States were given the flexibility and the option of 
deciding the respective priority scheme for the payment of current 
child support, child support arrearages, and medical support. Each 
State carefully considered its options, and made its respective 
decision of the appropriate priority scheme, in its implementation of 
the NMSN requirements. The commenter requests that the final regulation 
continue to afford States with this much needed flexibility in order to 
meet the needs of each individual State as to the priority of 
withholding with respect to current child support, child support 
arrears, and medical support or health insurance.
    Response: We have found the body of comments to be compelling in 
its diversity, conviction, and expressed concerns with the approach 
contained in the proposed regulation. While there are a number of 
issues raised in the comments summarized above that would warrant 
explanation or correction were we to retain the proposed priority, we 
have concluded that for a number of reasons, including many articulated 
by commenters above, it is inappropriate at this time (six years after 
final regulations governing the NMSN were issued), to impose a mandated 
priority where States to date have been afforded flexibility.
    There is no evidence of which we are aware that compels setting a 
federal-level priority for employers to use in circumstances in which 
the CCPA limits preclude satisfaction of all obligations. States, in 
good faith, considered this issue, and as allowed under the NMSN 
regulations, determined the best approach to take given the 
circumstances in the particular State, including, as suggested above, 
the different ways that State guidelines calculate child support and 
determine parental responsibility for the health care needs of 
children. There was no general consensus in comments about an 
alternative priority, or suggestions for resolving some of the more 
complex scenarios set out in the comments, for example, multiple NMSNs 
and withholding orders received by the same employer for the same 
employee but for different families and from different States. While 
such situations are possible, articulating in Federal regulations how 
States are to resolve such issues goes far beyond the level of detail 
addressed in Federal regulations. These issues are best resolved on a 
case-by-case basis, if and when they occur and States have many years 
experience with such circumstances, however rare they may be.
    Had Federal regulations governing the NMSN that were published in 
late 2000, shortly after the Working Group's Report was sent to the 
Congress in August of 2000, contained a mandated priority order for 
employers to use when faced with inadequate wages to satisfy all 
support orders, States would not have proceeded to determine the 
appropriate priority order. Some may have adopted a portion or most of 
the priority order recommended in that Report and proposed in these 
regulations. However, we are convinced by commenters that to do so at 
this time, more than six years after States have used the flexibility 
accorded to them in the NMSN regulations, would be inappropriate and 
ill-timed. Therefore, we have removed the changes proposed in Sec.  
303.32(c)(4) and that regulation will remain as in current regulations 
as follows: Employers must withhold any obligation of the employee for 
employee contributions necessary for coverage of the child(ren) and 
send any amount withheld directly to the plan.
    We do believe, however, that it is important to address some 
misconceptions States have with respect to various distribution 
requirements in Federal regulations with respect to child support and 
cash medical support collections, including those assigned to the State 
and owed to families. And we intend that, as requested by some 
commenters, the Distribution Workgroup will further consider the 
intersection of distribution requirements for child and medical 
support, beyond the clarifications articulated later in this preamble.
    3. Comment: Several commenters expressed concern that, even if IV-D 
agencies substitute the agency addresses on the NMSN, noncustodial 
parents receive information about family doctors and medical issues on 
the explanation of benefits forms that they receive as policyholders. 
One commenter indicated that when the IV-D agency explains this to 
custodial parents with safety concerns, many of those who have 
relocated due to family violence would rather forgo enforcement of 
medical support than take the risk that the noncustodial parent could 
discover their location. Certain custodial parents with compelling 
safety concerns therefore choose to take on the responsibility and cost 
required to provide health insurance for their children so that they 
can retain control of their personal information. Yet noncustodial 
parents who may present a danger to their families should remain 
accountable for medical support for their children whenever possible. 
The commenter believes that cash medical support can be an appropriate 
option in these situations and asked that States be permitted to tailor 
medical support orders in this way, when appropriate for cases that 
have critical safety needs.
    Response: We believe it would be appropriate in the circumstances 
described above for a State to rebut the presumption that the 
noncustodial parent should be ordered to provide health insurance, in 
accordance with Sec.  302.56(f) and (g) if supported by a written 
finding or specific finding on the record that the application of the 
guidelines would be unjust or inappropriate in a particular case, as 
determined under criteria established by the State. The State's 
criteria for rebutting the guidelines presumption must take into 
consideration the best interests of the child, and therefore, allow an 
exception to order cash medical support in the circumstances described 
by the commenter.
    4. Comment: One commenter stated that the DRA of 2005 makes 
enforcement of medical support order against custodial persons 
optional. Therefore, the commenter suggested that the language in Sec.  
303.32 be clarified to provide that the NMSN is only mandatory against 
employers of noncustodial parents.
    Response: We agree that addressing the option to enforce an order 
against a custodial parent using the NMSN in Sec.  303.32 would be 
appropriate, as well as making a parallel conforming change to Sec.  
308.2(e)(3). Therefore, we have made a change to Sec.  303.32(a), which 
requires use of the NMSN to enforce the

[[Page 42437]]

provision of health care coverage of children of noncustodial parents, 
to include reference to ``and, at State option, custodial parents'' 
after reference to ``noncustodial parents''. For conformity, we also 
added reference to ``custodial parent's, at State option,'' after the 
term ``noncustodial parent's'' in Sec.  303.32(c)(6), so that employers 
must notify the State agency promptly whenever a noncustodial parent's 
or custodial parent's, at State option, employment is terminated.
    5. Comment: Several commenters expressed concern that the proposed 
priority order of satisfaction of cash medical support vs. child 
support would, in some circumstances result in the State being paid 
cash medical support first before the family receives its arrearages. 
Commenters were concerned that satisfying assigned cash medical support 
before satisfying child support arrearages owed to the family in former 
assistance cases would violate distribution requirements under section 
457 of the Act, Sec.  303.51, and guidance issued by OCSE.
    Response: Although we have removed the proposed revision to Sec.  
303.32(c)(4) in response to comments addressed earlier in this 
preamble, we believe it is important to respond to State concerns about 
violation of child support distribution rules in Federal statute and 
regulations if an employer withholds payments to satisfy assigned cash 
medical support before withholding amounts to satisfy child support 
arrearages, and a State retains assigned cash medical support 
collections when child support arrearages are owed to a former 
assistance family. Title IV-D of the Act contains requirements for 
distribution of child support collections under section 457 of the Act 
and distinct requirements for distribution of assigned cash medical 
support collections under section 454(5) of the Act. Under section 
454(5)(B) of the Act, ``in any case in which support payments are 
collected for an individual pursuant to the assignment made under 
section 1912 [the Medicaid program assignment requirement], such 
payments shall be made to the State for distribution pursuant to 
section 1912, except that this clause shall not apply to such payments 
for any month after the month in which the individual ceases to be 
eligible for medical assistance.'' Federal regulations at Sec.  
302.51(c)(1) require that the ``amounts collected by the IV-D agency 
which represent specific dollar amounts designated in the support order 
for medical purposes that have been assigned to the State under 42 CFR 
433.146 shall be forwarded to the Medicaid agency for distribution 
under 45 CFR 433.154.''
    Therefore, if, in accordance with a support order, amounts are 
collected which represent both child support (whether assigned to the 
State or owed to a family), and cash medical support assigned to the 
State, Federal statute and regulations specify how such amounts are to 
be distributed. A cash medical support collection in accordance with a 
support order is not child support and therefore, not subject to child 
support distribution requirements. Removing the proposed priority for 
employers to use to satisfy various support obligations does not impact 
the employer's responsibility to meet the requirements under Sec.  
303.100(a)(5) for dealing with multiple withholding notices or the 
State's responsibility to meet all distribution requirements addressed 
above.
    6. Comment: A commenter asked whether a change was needed to Sec.  
302.32(a) because it mentions ``health care coverage,'' in light of the 
inclusion of a definition for ``health insurance'' (rather than 
``health care coverage'') in the new Sec.  303.31(a).
    Response: No. The term ``health care coverage'' is used in section 
466(a)(19) of the Act. The term ``health insurance'' as defined in 
Sec.  303.31(a)(2), and ``cash medical support'' as defined in Sec.  
303.31(a)(1) are each a type of health care coverage.

Part 304

Section 304.20--Availability and Rate of Federal Financial 
Participation (FFP)

    1. Comment: A commenter agreed with the change to Sec.  
304.20(b)(11) to add reference to Sec.  303.32 on use of the NMSN, but 
pointed out an inconsistency between Sec.  304.20(b)(11) which allows 
FFP for required medical support activities under Sec. Sec.  303.30, 
303.31, and 303.32, and Sec.  304.23(g) that prohibits FFP for the 
medical support activity performed under cooperative agreements in 
accordance with Sec. Sec.  303.30 and 303.31. The commenter indicated 
his State had interpreted Sec.  304.20(b)(1)(ix), which allows FFP for 
the cost of the establishment of agreements with Medicaid agencies 
necessary to carry out required IV-D activities with respect to the 
Medicaid program, and Sec.  304.23(g), to require an agreement between 
the IV-D and XIX agencies to be funded by Title XIX incentives.
    Response: Section 304.23(g) is referring to optional cooperative 
agreements with Medicaid programs under section 1912(a)(1) of the Act, 
for which no FFP under the IV-D program is available. The reference in 
Sec.  304.23(g) to Sec. Sec.  303.30 and 303.31 is no longer accurate 
because former Sec. Sec.  303.30 and 303.31, governing optional 
cooperative agreements with Medicaid agencies to provide services not 
mandated under title IV-D of the Act or IV-D program regulations, were 
eliminated many years ago. Therefore, we have corrected the reference 
in Sec.  304.23(g) to cross-reference cooperative agreements with 
Medicaid agencies under section 1912(a)(2) of the Act.

Part 305

Section 305.63--Standards for Determining Substantial Compliance With 
IV-D Requirements

    1. Comment: A commenter asked if, in an interstate case, Sec.  
303.7(c)(7)(iii) and State option, under section 452(f) of the Act, to 
enforce health insurance orders against custodial parents, means that, 
if a responding State opts as its intrastate policy not to enforce 
orders for health insurance against custodial parents, that it need not 
enforce such an order if requested to by an initiating State that has 
opted to enforce such an order?
    Response: The answer is yes: if a responding State does not opt to 
enforce medical support orders against a custodial parent, that State 
is not required to do so in interstate cases, in accordance with the 
introductory phrase in Sec.  303.7(c)(iii), under which, the ``IV-D 
agency must provide any necessary services as it would in intrastate 
IV-D cases * * *'' However, in considering this comment, we realized 
that a conforming change is necessary to include reference to Sec.  
303.32, after Sec.  303.31 in Sec.  303.7(c)(7)(iii) when referring to 
processing and enforcing orders referred by another State. We have made 
that conforming change to cross-reference Sec.  303.32 in this final 
rule.
    2. Comment: A commenter requested that we delay paying incentives 
and imposing penalties on medical support audit requirements for as 
long as possible because of the frequent change in obligated parents' 
employment and employers' health insurance carriers, as well as the 
fact that the whole issue of medical support is very time consuming and 
frustrating.
    Response: There is currently no legislative authority to pay 
incentives for medical support performance under the IV-D program, 
although States do benefit from cash medical support collections with 
respect to earning incentives. In addition, while the Federal 
government has authority, under 45 CFR Part 305 to conduct audits and 
impose penalties if appropriate for

[[Page 42438]]

a State's failure to meet Federal IV-D requirements, in accordance with 
Sec.  305.60(c)(2), such discretionary audits would only be conducted 
under specific circumstances. Audits to determine substantial 
compliance would be initiated based on substantiated evidence of a 
failure by the State to meet IV-D requirements. Evidence, which could 
warrant a substantial compliance audit, includes: ``(i) The results of 
two or more State self-reviews conducted under section 454(15)(A) of 
the Act [and 45 CFR Part 308] which: Show evidence of sustained poor 
performance; or indicate that the State has not corrected deficiencies 
identified in previous self-assessments, or that those deficiencies are 
determined to seriously impact the performance of the State's program; 
or (ii) Evidence of a State program's systemic failure to provide 
adequate services under the program through a pattern of noncompliance 
over time.''
    In FY 2004, OCSE and State partners developed two possible 
performance measures addressing medical support. While not currently 
subject to incentives or penalty, lines on the OCSE-157 that will be 
used for the proposed medical support establishment measure and the 
medical support enforcement measure will be subject to FY 2006 data 
reliability audits. Medical support audit related findings are for 
management purposes only.

Part 308

Section 308.2--Required Program Compliance Criteria Paperwork Reduction 
Act

    1. Comment: The proposal requires that for the purposes of the 
annual self-assessment audit and report, States must have in place and 
use procedures that ensure that the issuance of the NMSN meets a 75 
percent compliance rate. The commenter asked whether cases involving 
coverage provided through the Defense Manpower Data Center (DMDC) 
should not be included in the audit sample, since PIQ-06-02 instructs 
IV-D agencies to ``not send the NMSN to the DMDC for dependants of 
active duty and retired military personnel?''
    Response: That is correct.
    2. Comment: A commenter asked whether, under proposed Sec.  
308.2(e)(4), the NMSN is only necessary if the agency knows that `` * * 
* the new employer provides health care coverage.'' Is knowledge of the 
employer's benefits really necessary or is the State required to issue 
the NMSN if it doesn't know the employer's benefit package? Another 
commenter suggested the following changes to proposed paragraph (e)(4):
    ``Determine whether the State transferred notice of the health care 
provision, using the National Medical Support Notice required under 
Sec.  303.32 of this chapter where appropriate, to a new employer when 
a noncustodial parent, or under State option a custodial parent, was 
ordered to provide health insurance coverage and changed employment and 
the new employer provides health care coverage.'' The commenter 
indicated that this language would correct a cite (in the NPRM, the 
cite, Sec.  302.32, was incorrect), bring in the ``where appropriate'' 
language from Sec.  303.32, and reflect the State option to enforce 
medical support against a custodial parent.
    Response: In response to the first commenter, under Sec.  
303.32(c)(2), the State agency must send the NMSN to the employer 
within two business days after the date of entry of an employee who is 
an obligor in a IV-D case in the State Directory of New Hires. There is 
no exception provided if the State does not know the employer's benefit 
package. To reflect this clarification and because we agree with the 
proposed revision to proposed Sec.  308.2(e)(4) (renumbered Sec.  
308.2(e)(3)) to reflect the State's option to enforce an order 
requiring the custodial parent to provide health insurance coverage, 
renumbered Sec.  308.2(e)(3) is revised to read: ``Determine whether 
the State transferred notice of the health care provision, using the 
National Medical Support Notice required under Sec.  303.32 of this 
chapter where appropriate, to a new employer when a noncustodial 
parent, or under State option a custodial parent, was ordered to 
provide health insurance coverage and changed employment.''
    3. Comment: Two commenters asked if proposed Sec.  308.2(e)(2) 
requires a State to determine the State has issued an NMSN to enforce 
an order to provide health coverage against the custodial person.
    Response: If the State opts to enforce orders requiring custodial 
parents to secure health insurance coverage for their children, the 
State must determine if the State issued a NMSN to enforce the order.
    4. Comment: A commenter requested that the words ``and accessible'' 
be stricken from proposed Sec.  308.2(e)(2) because there is no way a 
State could evaluate ``accessibility'' of health insurance and still 
meet the two-day time requirement to send the NMSN to an employer in 
Sec.  303.32(c)(2).
    Response: Section 308.2(e)(2) requires a State to: ``If reasonable 
in cost and accessible health insurance was available and required in 
the order, but not obtained, determine whether the National Medical 
Support Notice was used to enforce the order in accordance with 
requirements of Sec.  303.32 of this chapter.'' That requirement only 
requires a State, if the support order requires reasonable in cost and 
accessible health insurance, and the health insurance was not obtained, 
to determine if the order was enforced by sending the NMSN. It does not 
require a State to look behind the support order or to determine if 
health insurance was in fact accessible at the time an order was 
entered.
    5. Comment: A commenter asked whether, with respect to proof of 
issuance of the NMSN for either Sec.  303.8(e)(2) and proposed (4), the 
recordation of issuance and information obtained as provided on the 
State's automated system is sufficient or must the State be able to 
also provide a copy of the NMSN as proof? The commenter's State has 
issued more than half a million NMSNs and would appreciate Federal 
guidance as to the retention of the documents. The commenter prefers 
that a State not be required to retain a copy of each NMSN as long as 
the State's automated system reflects the issuance of the NMSN to the 
employer and includes any information obtained from the NMSN's response 
from the employer.
    Response: We agree that no further documentation than that 
suggested would be required for purposes of a self-assessment under 
Sec.  303.8(e)(2) and proposed (e)(4) which has been renumbered as 
paragraph (e)(3).
General Comments
    1. Comment: A number of commenters were concerned about the major 
impact of the final regulations on the IV-D program's operation and 
systems. One commenter requested at least two years after publication 
of the final rule and enactment of any required State law change to 
implement the new requirements. Another commenter recommended that 
States be given sufficient lead time to implement these new regulatory 
requirements especially since some of the requirements may require the 
enactment or amendment of State laws, regulations, or procedures 
including modifications to the State's automated system. And finally, a 
commenter referred to preamble language in the proposed regulations 
that indicated that ``States will be required to submit an amended page 
providing assurances that laws and procedures require inclusion of 
medical support provisions in new and modified

[[Page 42439]]

orders.'' The commenter pointed out that the proposed regulations do 
not mention the grace period provided by section 7311 of the DRA of 
2005, Exception to General Effective Date for State Plans Requiring 
State Law Amendments, that indicates that if a change in law is needed, 
States will have an extended period in which to secure legislative 
changes through the State General Assembly.
    Response: The commenter is correct that section 7311 of the DRA of 
2005 includes an exception to the general effective date. However, this 
NPRM was published in September of 2006; seven months after the passage 
of the DRA of 2005. By the time this final regulation is published, the 
effective delay date for this provision will have passed. We have 
consistently said that States will not be penalized for implementation 
of the DRA provisions based on their best interpretation of the 
statute. As indicated in the preamble, this regulation is effective 
upon publication.
    2. Comment: Several commenters indicated that these regulations 
will result in increased expenditures of more than $100 million per 
year. One State commenter indicated that the State anticipates 
substantial expenditures to fully implement the requirements of the 
regulations. That commenter indicated that there will be numerous 
system changes, to both the Child Support and Medicaid automated 
systems, in order to modify guidelines calculations, account for cash 
medical support payments, and effectuate an accurate means of advising 
Medicaid of cash medical support payments. The commenter assumes that 
similar costs will be incurred in each State and Territory in the 
Nation, which could exceed $100 million nationally as implementation 
occurs. The same commenter who was concerned about the impact of the 
new requirements to consider health insurance available to either 
parent indicated that meeting the requirements will require 
considerable legislative changes, policy changes and automated systems 
changes, as well as a significant human resource issue.
    Response: As indicated in the section of the preamble addressing 
section 202 of the Unfunded Mandates Reform Act, that Act requires that 
a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year. The Department has determined that these proposed regulations 
would not impose a mandate that will result in the expenditure by 
State, local, and Tribal governments, in the aggregate, or by the 
private sector, of more than $100 million in any one year.
    Many of the requirements in this final rule are not new, including 
child support guidelines that provide for the child(ren)'s health care 
needs, through health insurance coverage or other means; providing 
information, and forwarding assigned cash medical support, to the 
Medicaid agency; petitioning to include health insurance available to 
noncustodial parents in support orders; and establishing criteria to 
determine when to modify an order to include health insurance and 
seeking modification of the order if the appropriate criteria are met. 
States have been required to meet certain medical support requirements 
in Federal regulations for as long as 20 years and to use the NMSN to 
enforce orders since 2000.
    States also are authorized to include, and many already do include, 
a cash medical support obligation, whether or not health insurance is 
ordered. This practice has increased over the years as reasonable-cost 
health insurance became less and less available. According to the 
Working Group's Report, about half of the States already consider 
health insurance available to either parent in seeking a medical 
support obligation. Additions to State case closure authority in Sec.  
303.11, as well as elimination of a number of requirements under 
previous and the proposed medical support regulation, will reduce the 
burden and cost on State Child Support Enforcement programs. And, 
finally, only one State that uses percentage-based child support 
guidelines raised the issue of securing financial information from 
custodial parents, despite the fact that, according to two reports 
identifying how many States employ each model guidelines for 
determining child support, Dollars and Sense: Improving the 
Determination of Child Support Obligations for Low-Income Mothers, 
Fathers and Children of 2002, and Evaluation of Child Support 
Guidelines (1994), approximately 15 States base their child support 
guidelines on the Percentage-of-Income Model. Therefore, most States 
will not face large costs to meet the Federal requirements.
    3. Comment: Several commenters supported a centralized search of 
health insurance databases to locate coverage. One commenter indicated 
that the centralized approach has worked quite well with the DMDC 
matches and believes that centralization of this function is far more 
efficient than each State conducting an individual match.
    Response: Federal legislation would be required to allow a match 
with health insurance databases.
    4. Comment: A commenter states that HIPAA (The Health Insurance 
Portability and Accountability Act) has made it difficult to gain 
cooperation for insurance companies to obtain sufficient details and 
information to enable State Child Support Enforcement agencies to 
enforce medical and dental insurance orders and requested that the 
Federal government do more education with employer and insurance 
markets.
    Response: OCSE has an Employer Liaison group that provides 
extensive technical assistance to, and education of employers. This 
unit also deals with health insurance issues raised by employers and 
employer groups. OCSE has issued policy guidance to States that permits 
a covered entity to disclose protected health information to a ``law 
enforcement official'' for law enforcement purposes in compliance with 
court orders, grand jury subpoenas, or certain written administrative 
requests. An employee of a IV-D agency who is acting, in accordance 
with State or Federal law, to enforce a medical child support order 
meets the definition of a law enforcement official. The National 
Medical Support Notice which is sent by the IV-D agency to the employer 
and health plan administrator for completion would constitute a written 
administrative request by a law enforcement official (see PIQ-04-03 at 
http://www.acf.hhs.gov/programs/cse/pol/PIQ/2004/piq-04-03.htm). 
Additional assistance will be provided as appropriate and requested in 
the future.
    5. Comment: The proposed regulations use the terms ``must'' and 
``shall'' to describe a mandatory condition. Is there a distinction 
between the two terms, or are they to be considered interchangeable?
    Response: The terms ``must'' and ``shall'' are considered 
interchangeable when used in Federal child support regulations and 
guidance.
    6. Comment: A commenter suggested that there should be a national 
conference for child support enforcement personnel within a year after 
the implementation of these policies. This would allow the workers to 
discuss some issues faced as well as successful strategies for 
implementation. This would prove invaluable to the workers responsible 
for enforcing these provisions, ultimately ensuring a smooth transition 
to implementing the proposed amendments.
    Response: There are multiple, existing opportunities every year for 
child

[[Page 42440]]

support workers to discuss medical support issues, including those 
raised by Federal regulations. In addition to State and OCSE Regional 
child support meetings and conferences, there are large annual training 
conferences held by the National Child Support Enforcement Association, 
Eastern Regional Interstate Child Support Association, and Western 
Interstate Child Support Enforcement Council.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995, Public Law 104-13, all 
Departments are required to submit to the Office of Management and 
Budget (OMB) for review and approval any reporting or recordkeeping 
requirements inherent in a proposed or final rule. Interested parties 
may comment to OMB on these reporting requirements as described below. 
This Final rule contains changes to reporting requirements in Part 308, 
which the Department has submitted to OMB for its review.
    Section 308.1(e) contains a requirement that a State report the 
results of annual self-assessment reviews to the appropriate OCSE 
Regional Office and to the Commissioner of OCSE. The information 
submitted must be sufficient to measure State compliance with Federal 
requirements for expedited procedures and to determine whether the 
program is in compliance with title IV-D requirements and case 
processing timeframes. The results of the report will be disseminated 
via ``best practices'' to other States and also be used to determine 
whether technical assistance is needed. The preprint page for this 
requirement (page 2.15, State Self-assessment and Report) was approved 
by OMB on January 18, 2001, under OMB Number 0970-0223, and 
periodically as required thereafter.
    The revisions to Sec.  308.2(e), which address securing and 
enforcing medical support, will slightly reduce the paperwork burden on 
States, by eliminating three information collection and reporting 
requirements because, under these final regulations, medical support 
will be included in all new and modified support orders, but the 
reduced paperwork burden would be negligible.
    Respondents: State child support enforcement agencies in the 50 
States, the District of Columbia, Guam, Puerto Rico, and the Virgin 
Islands.
    This information collection requirement will impose the estimated 
total annual burden on the agencies described in the table below:

----------------------------------------------------------------------------------------------------------------
                                                           Number of        Average burden
               Information collection                    responses per         hours per         Total annual
                                                          respondent           response          burden  hours
----------------------------------------------------------------------------------------------------------------
Section 308.1.......................................               54/1               3,866             208,764
----------------------------------------------------------------------------------------------------------------

    The Administration for Children and Families (ACF) will consider 
comments by the public on the information collection in order to 
evaluate the accuracy of ACF's estimate of the burden of the collection 
of information. Comments by the public on this collection of 
information will be considered in the following areas:
    Evaluating the accuracy of the ACF estimate of the burden of the 
collection[s] of information, including the validity of the methodology 
and assumptions used;
    Enhancing the quality, usefulness, and clarity of the information 
to be collected; and
    Minimizing the burden of the collection of information on those who 
are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technology, e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in these regulations between 30 and 60 days after 
publication of this document in the Federal Register. Therefore, a 
comment is best assured of having its full effect if OMB receives it 
within 30 days of publication. Comments to OMB for the proposed 
information collection should be sent directly to the following: Office 
of Management and Budget, Paperwork Reduction Project, 725 17th Street, 
NW., Washington, DC 20503, Attn: Desk Officer for the Administration 
for Children and Families.

Regulatory Flexibility Analysis

    The Secretary certifies, under 5 U.S.C. 605(b), and enacted by the 
Regulatory Flexibility Act (Pub. L. 96-354), that this final regulation 
will not result in a significant impact on a substantial number of 
small entities. The primary impact is on State governments. State 
governments are not considered small entities under the Act.

Regulatory Impact Analysis

    Executive Order 12866 requires that regulations be reviewed to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. These rules provide solutions to problems 
in securing private health care coverage for children who live apart 
from one or both of their parents and the Department has determined 
that they are consistent with the priorities and principles set forth 
in the Executive Order.
    These regulations implement section 7307 of the Deficit Reduction 
Act of 2005, the requirement that States consider medical support 
available to either parent in establishing a medical support 
obligation, and to enforce medical support at their option when the 
obligated parent is the custodial parent. They also address certain 
recommendations of the Medical Child Support Working Group, which 
included public deliberation, and additional input from State and local 
IV-D administrators and other child support enforcement stakeholders.
    These rules do not introduce new requirements for including medical 
support in child support orders, a long-standing program requirement, 
but rather broaden States' options for addressing the availability and 
accessibility of health care coverage. For example, by focusing on 
health insurance coverage available to either parent, these rules 
recognize that untapped employer-sponsored insurance through custodial 
mothers and their spouses might reduce the share of children without 
private health insurance. An HHS study, Health Care Coverage Among 
Child Support-Eligible Children, 2002, found that half of child 
support-eligible children living with their mother are currently 
covered by employer-sponsored insurance.
    These regulations are significant under section 3(f) of the 
Executive Order because they raise novel policy issues and therefore 
have been reviewed by the Office of Management and Budget.

Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act requires that a 
covered agency prepare a budgetary impact statement before promulgating 
a rule that includes any Federal mandate that may result in the 
expenditure by

[[Page 42441]]

State, local, and Tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. The Department 
has determined that these regulations would not impose a mandate that 
will result in the expenditure by State, local, and Tribal governments, 
in the aggregate, or by the private sector, of more than $100 million 
in any one year.

Congressional Review

    These proposed regulations are not a major rule as defined in 5 
U.S.C., chapter 8.

Assessment of Federal Regulations and Policies on Families

    Section 654 of the Treasury and General Government Appropriations 
Act of 1999 requires Federal agencies to determine whether a policy or 
regulation may affect family well-being. These regulations will have a 
positive impact on family well-being as defined in the legislation, by 
providing greater access to health care coverage.

Executive Order 13132

    Executive Order 13132 on federalism applies to policies that have 
federalism implications, defined as ``regulations, legislative comments 
or proposed legislation, and other policy statements or actions that 
have substantial direct effects on the States, or on the distributions 
of power and responsibilities among the various levels of government.'' 
These regulations do not have federalism implications for State or 
local governments as defined in the Executive Order.

List of Subjects

45 CFR Part 302

    Child support, Grant programs/social programs, Reporting and 
recordkeeping requirements.

45 CFR Parts 303 and 304

    Child support, Grant programs/social programs, Reporting and 
recordkeeping requirements.

45 CFR Part 305

    Child support, Grant programs/social programs, Accounting.

45 CFR Part 308

    Auditing, Child support, Grant programs/social programs, Reporting 
and recordkeeping requirements.

(Catalog of Federal Domestic Assistance Programs No. 93.563, Child 
Support Enforcement Program)

    Dated: September 6, 2007.
Daniel C. Schneider,
Acting Assistant Secretary for Children and Families.
    Approved: March 28, 2008.
Michael O. Leavitt,
Secretary, Department of Health and Human Services.

    Editorial Note: This document was received at the Office of the 
Federal Register on July 8, 2008.


0
For the reasons discussed above, title 45 CFR chapter III is amended as 
follows:

PART 302--STATE PLAN REQUIREMENTS

0
1. The authority citation for part 302 continues to read as follows:

     Authority: 42 U.S.C. 651 through 658, 660, 664, 666, 667, 1302, 
1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), 1396(k).


0
2. In Sec.  302.56 revise paragraph (c)(3) to read as follows:


Sec.  302.56  Guidelines for setting child support awards.

* * * * *
    (c) * * *
    (3) Address how the parents will provide for the child(ren)'s 
health care needs through health insurance coverage and/or through cash 
medical support in accordance with Sec.  303.31 of this chapter.
* * * * *

PART 303--STANDARDS FOR PROGRAM OPERATIONS

0
3. The authority citation for part 303 continues to read as follows:

     Authority: 42 U.S.C. 651 through 658, 660, 663, 664, 666, 667, 
1302, 1396a(a)(25), 1396b(d)(2), 1396b(o), 1396b(p), and 1396k.


Sec.  303.7  [Amended]

0
4. Amend Sec.  303.7 by inserting in paragraph (c)(7)(iii) ``Sec.  
303.32,'' after ``303.31,''.


Sec.  303.11  [Amended]

0
5. Section 303.11 is amended by:
0
a. Amending paragraph (b)(10) by inserting ``or under Sec.  
302.33(a)(1)(ii) when cooperation with the IV-D agency is not required 
of the recipient of services,'' after ``Sec.  302.33(a)(1)(i) or 
(iii),''.
0
b. Amending paragraph (b)(11) by inserting ``or under Sec.  
302.33(a)(1)(ii) when cooperation with the IV-D agency is not required 
of the recipient of services,'' after ``Sec.  302.33(a)(1)(i) or 
(iii),''.

0
6. Revise Sec.  303.31 to read as follows:


Sec.  303.31  Securing and enforcing medical support obligations.

    (a) For purposes of this section:
    (1) Cash medical support means an amount ordered to be paid toward 
the cost of health insurance provided by a public entity or by another 
parent through employment or otherwise, or for other medical costs not 
covered by insurance.
    (2) Health insurance includes fee for service, health maintenance 
organization, preferred provider organization, and other types of 
coverage which is available to either parent, under which medical 
services could be provided to the dependent child(ren).
    (3) Cash medical support or the cost of private health insurance is 
considered reasonable in cost if the cost to the parent responsible for 
providing medical support does not exceed five percent of his or her 
gross income or, at State option, a reasonable alternative income-based 
numeric standard defined in State law, regulations or court rule having 
the force of law or State child support guidelines adopted in 
accordance with Sec.  302.56(c) of this chapter. In applying the five 
percent or alternative State standard for the cost of private health 
insurance, the cost is the cost of adding the child(ren) to the 
existing coverage or the difference between self-only and family 
coverage.
    (b) The State IV-D agency must:
    (1) Petition the court or administrative authority to include 
private health insurance that is accessible to the child(ren), as 
defined by the State, and is available to the parent responsible for 
providing medical support at reasonable cost, as defined under 
paragraph (a)(3) of this section, in new or modified court or 
administrative orders for support;
    (2) If private health insurance described in paragraph (b)(1) of 
this section is not available at the time the order is entered or 
modified, petition to include cash medical support in new or modified 
orders until such time as health insurance, that is accessible and 
reasonable in cost as defined under paragraph (a)(3) of this section, 
becomes available. In appropriate cases, as defined by the State, cash 
medical support may be sought in addition to health insurance coverage.
    (3) Establish written criteria to identify orders that do not 
address the health care needs of children based on--
    (i) Evidence that private health insurance may be available to 
either parent at reasonable cost, as defined under paragraph (a)(3) of 
this section; and
    (ii) Facts, as defined by State law, regulation, procedure, or 
other directive,

[[Page 42442]]

and review and adjustment requirements under Sec.  303.8(d) of this 
part, which are sufficient to warrant modification of the existing 
support order to address the health care needs of children in 
accordance with paragraph (b)(1) of this section.
    (4) Petition the court or administrative authority to modify 
support orders, in accordance with State child support guidelines, for 
cases identified in paragraph (b)(3) of this section to include private 
health insurance and/or cash medical support in accordance with 
paragraphs (b)(1) and (b)(2) of this section.
    (5) Periodically communicate with the Medicaid agency to determine 
whether there have been lapses in health insurance coverage for 
Medicaid applicants and recipients.
    (c) The IV-D agency shall inform an individual who is eligible for 
services under Sec.  302.33 of this chapter that medical support 
services will be provided and shall provide the services specified in 
paragraph (b) of this section.


Sec.  303.32  [Amended]

0
7. Amend Sec.  303.32 by inserting in paragraph (a) the words ``and, at 
State option, custodial parents'', after the words ``noncustodial 
parents'' and by inserting in paragraph (c)(6) the words ``and, at 
State option, custodial parent's'' after the words ``noncustodial 
parent's.''

PART 304--FEDERAL FINANCIAL PARTICIPATION

0
8. The authority citation for part 304 continues to read as follows:

     Authority: 42 U.S.C. 651 through 655, 657, 1302, 1396a(a)(25), 
1396b(d)(2), 1396b(o), 1396b(p), and 1396k.


Sec.  304.20  [Amended]

0
9. Amend Sec.  304.20(b)(11) by removing ``Sec. Sec.  303.30 and 
303.31'' and adding ``Sec. Sec.  303.30, 303.31, and 303.32'' in its 
place.


Sec.  304.23  [Amended]

0
10. Amend Sec.  304.23(g) by removing ``Sec. Sec.  303.30 and 303.31 of 
this chapter'' and adding ``section 1912(a)(2) of the Act''.

PART 305--PROGRAM PERFORMANCE MEASURES, STANDARDS, FINANCIAL 
INCENTIVES, AND PENALTIES

0
11. The authority citation for part 305 is revised to read as follows:

    Authority: 42 U.S.C. 609(a)(8), 652(a)(4) and (g), 658A and 
1302.


Sec.  305.63  [Amended]

0
11a. Amend Sec.  305.63(c)(5) by adding ``and Sec.  302.32'' after 
``under Sec.  303.31''.

PART 308--ANNUAL STATE SELF-ASSESSMENT REVIEW AND REPORT

0
12. The authority citation for part 308 continues to read as follows:

    Authority: 42 U.S.C. 654(15)(A) and 1302.


Sec.  308.2  [Amended]

0
13. In Sec.  308.2 revise paragraph (e) to read as follows:


Sec.  308.2  Required program compliance criteria.

* * * * *
    (e) Securing and enforcing medical support orders. A State must 
have and use procedures required under this paragraph in at least 75 
percent of the cases reviewed. A State must:
    (1) Determine whether support orders established or modified during 
the review period include medical support in accordance with Sec.  
303.31(b) of this chapter.
    (2) If reasonable in cost and accessible private health insurance 
was available and required in the order, but not obtained, determine 
whether the National Medical Support Notice was used to enforce the 
order in accordance with requirements in Sec.  303.32 of this chapter.
    (3) Determine whether the State transferred notice of the health 
care provision, using the National Medical Support Notice required 
under Sec.  303.32 of this chapter, to a new employer when a 
noncustodial parent, or at State option a custodial parent, was ordered 
to provide health insurance coverage and changed employment.
* * * * *

[FR Doc. E8-15771 Filed 7-18-08; 8:45 am]
BILLING CODE 4184-01-P