The Division of Medical Services determines the cost effectiveness of health plans using the following methodology:

1. (1)

   1. (A) The Medicaid client furnishes information on the health plan to the division.

   2. (B) This information must include:

      1. (i) The effective date of the policy;
      2. (ii) Exclusions to enrollment;
      3. (iii) The covered services under the policy;
      4. (iv) Riders and exclusions of covered services; and
      5. (v) Premiums paid by the policy owners;

2. (2) Using the Medicaid Management Information System (MMIS), the division obtains the total twelve-month estimated average inflation-adjusted Medicaid costs for persons comparable to the client with respect to:

   1. (A) Age;
   2. (B) Sex; and
   3. (C) Category data; and

3. (3)

   1. (A) The division:

      1. (i) Determines, if historical data is available, or estimates, if historical data is unavailable, the total twelve-month Medicaid expenditures for covered services (estimated average Medicaid cost);
      2. (ii) Identifies equivalent services covered by the private insurance;
      3. (iii) Identifies the premium cost;
      4. (iv) Determines the cost of any covered services for which the private insurance does not provide equivalent coverage;
      5. (v) Estimates the cost of coinsurance and deductibles up to the Medicaid allowable amounts; and
      6. (vi) Determines the administrative cost to Medicaid for processing the health plan information by determining the average increase in cost per client for at least a twelve-month period.

   2. (B)

      1. (i) The division determines the cost of HIPP by adding the amounts identified in subdivisions (a)(3)(A)(iii) – (vi) of this section and compares that cost to the estimated average Medicaid costs.
      2. (ii) If the cost of the HIPP case is less than the estimated average Medicaid costs, the health plan is cost effective.
      3. (iii) If the cost of the HIPP case is equal to or greater than the estimated average Medicaid costs, the health plan is not cost effective.