S.J. v. Division of Medical Assistance and Health Services, etc., A-5714-10T1, A-5803-10T2 and A-5804-10T1; Appellate Division; opinion by Harris, J.A.D.; decided and approved for publication June 13, 2012. Before Judges Fuentes, Graves and J.N. Harris. On appeal from the Department of Human Services, Division of Medical Assistance and Health Services. DDS No. 45-2-6607 [18 pp.]

Appellants S.J., R.H. and C.B. were precluded from receiving health-care benefits by the Division of Medical Assistance and Health Services’ closure to new applicants of the State Children’s Health Insurance Program (SCHIP), which operated under the NJ FamilyCare rubric. Although once eligible for NJ FamilyCare benefits as part of a program funded and administered by AFDC-related Medicaid, appellants lost their eligibility due to increased income. They appeal the division’s determinations that, after losing their AFDC-related Medicaid eligibility, they became new applicants for purposes of the SCHIP, and that under N.J.A.C. 10:78-3.4(b), which barred new enrollees after Feb. 28, 2010, they were precluded from receiving health-care benefits under the SCHIP. They contend that the division was obliged to transfer their entitlement and continue their health-care benefits under the auspices of the SCHIP within the NJ FamilyCare program.

Held: The director of the Division of Medical Assistance and Health Services’ determination that appellants did not automatically transfer from one NJ FamilyCare plan to another when their entitlement to AFDC-related Medicaid health-care benefits ended because of increased income, and that they therefore were new applicants for SCHIP benefits, and thus were precluded from enrolling by the closure of the SCHIP, is affirmed as a reasonable interpretation of the applicable regulations.

The panel says the division is the single state agency for receipt of federal funds under Title XIX (Medicaid) and Title XXI (the State Children’s Health Insurance Program (SCHIP)) of the Social Security Act. N.J.A.C. 10:49-1.3.7 broadly defines “NJ FamilyCare” as “the health insurance coverage program administered by [the division] under the provisions of Title XIX and Title XXI of the Social Security Act.” However, N.J.S.A. 30:4J-11 defines “NJ FamilyCare” by reference to the SCHIP program only. The panel says that notwithstanding semantic overlaps, the statutory and regulatory framework clearly contemplates separate programmatic attributes for the programs underwritten by Title XIX and Title XXI.

AFDC-related Medicaid benefits are available if applicants meet the gross income standards in N.J.A.C. 10:69-10.3(b). Eligibility for SCHIP benefits is set out in N.J.A.C. 10:78.

Appellants do not challenge the agency’s action in closing the SCHIP to new applicants, which was done in response to economic conditions and fiscal constraints that affected New Jersey and many other jurisdictions. Rather, they argue that the agency’s interpretation that they became new applicants after being determined ineligible for AFDC-related Medicaid health-care benefits (NJ FamilyCare-Plan A) is an erroneous interpretation of the regulations because they should have been automatically transferred into another NJ FamilyCare plan when their entitlement to participate in NJ FamilyCare-Plan A ended.

The panel says there is no support for this equitable theory in either the statutes or regulations that govern NJ FamilyCare and its beneficiaries.

The panel says it is reasonably conceivable that appellants’ receipt of AFDC-related Medicaid health-care benefits were part of the same overall program (NJ FamilyCare) as that of the SCHIP benefits, and therefore they should be transferred from one to the other without being considered new applicants. However, the administrative framework treats AFDC-related Medicaid and SCHIP as two distinct programs, each with its own application and eligibility requirements. The panel says it cannot say that the agency’s decision to treat former AFDC-related Medicaid beneficiaries as new applicants to the SCHIP was arbitrary or capricious.

Although the regulations use the term “NJ FamilyCare” loosely to refer to both an umbrella program as a whole, as well as the specific SCHIP, the two segments of NJ FamilyCare do not share funding sources, eligibility rules or income standards. Moreover, the regulations governing each program’s recertification process refer specifically to determining continuing eligibility for benefits under separate, specific chapters. No regulation indicates that a beneficiary of one program is entitled to an automatic transfer to another on a change in circumstances.

The panel says the only relevant provision discussing what happens when a beneficiary is deemed ineligible for benefits is N.J.A.C. 10:69-5.2(b), which says that all cases determined ineligible for AFDC-Medicaid shall be screened for eligibility under all other program options and that referrals will be coordinated to ensure continuous benefits, as applicable. This provisions makes clear that a beneficiary is not automatically eligible for every health-care benefits program under the NJ FamilyCare umbrella when admitted to one program and that when appellants sought to be transferred from AFDC-related Medicaid to SCHIP, the SCHIP no longer existed for them because of the closure directive.

Acknowledging that appellants have proposed a workable interpretation of the applicable regulations, the panel says its role does not allow it to substitute its wisdom for the agency’s. It is constrained to affirm the director’s determinations.

For appellants: S.J. — Lisa C. Fennell (Northeast New Jersey Legal Services); R.H. and C.B. — Stanley G. Sheats (Northeast New Jersey Legal Services). For respondents: Division of Medical Assistance — Jennifer Heger, Deputy Attorney General (Jeffrey S. Chiesa, Attorney General; Melissa H. Raksa, Assistant Attorney General, of counsel); Jennifer Velez, Commissioner, Department of Human Services ­— Molly Moynihan, Deputy Attorney General (Jeffrey S. Chiesa, Attorney General; Melissa H. Raksa, Assistant Attorney General, of counsel).