Indemnity policies may be considered third party resources if the policies meet certain criteria. Federal Medicaid regulations at 42 CFR 433.136 define a third party as “any individual, entity, or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a state plan.” This includes private insurance. Section 433.136 also defines private insurer to include “any commercial insurance company offering health or casualty insurance to individuals or groups (including both experience-related insurance contracts and indemnity contracts).” Private insurers are required to comply with the Deficit Reduction Act of 2005 (DRA) and related state enactments.
Indemnity plans may include a variety of insurance policies such as accident, cancer/specified disease, dental, hospital confinement indemnity, hospital confinement sickness indemnity, hospital intensive care, long-term care, short-term disability, specified health event, and vision. An individualized review of the various policy terms would be necessary to determine if they should be considered a third party resource for purposes of Medicaid. If this review determines that the policy provides for payment of health care items and services, the policy is a third party resource and payments would be assigned to the Medicaid agency.
An indemnity policy may be designed to pay a cash benefit to policyholders, unless the policyholder chooses otherwise. The policy may state that these payments may be used to cover medical expenses or living expenses such as rent, child care, or groceries. However, the insurance company may condition payment upon the occurrence of a medical event. Whenever payments are linked to specific medical events, these payments should be considered third party payments. Thus, the state could seek to recover Medicaid payments from the policy benefits.
Where indemnity policies do not qualify as a third party resource, any payments made to a Medicaid beneficiary may be countable as income for Medicaid eligibility purposes.
(FAQ10530)
