On August 5, 2026, the Indiana Family and Social Services Administration (FSSA) published its Healthy Indiana Plan (HIP) 3.0 1115 Waiver Application draft for public comment. The 1115 Waiver Application proposes to operationalize the policies and directives placed upon the Medicaid program under Indiana Senate Enrolled Act 2 (2025) and Senate Enrolled Act 1 (2026) as well as the federal Working Families Tax Cuts Act (WFTCA).

This proposed five-year waiver would:

• Transition coverage for the Medicaid expansion population to a standalone Section 1115 demonstration program.
• Implement member cost-sharing through copayments.
• Reward healthy behaviors with incentives that reduce copayments for members who complete preventive care and other healthy activities.
• Establish “enrollment controls” to limit participation in the program in accordance with available funding.

The HIP program would continue to be administered via a managed care delivery system.

Stated Goals of the Demonstration

1. Promote value-based decision-making, personal health responsibility, and disease prevention to achieve better health outcomes.
2. Improve health care access, appropriate utilization, and health outcomes among HIP members.
3. Assure State fiscal responsibility and efficient management of the program.
4. Develop program policies to encourage providers to collect copayments and continue providing high-quality care to Medicaid members.

Proposed Program Design

Coverage Authority Changes & Transition of Non-Expansion HIP Members to Hoosier HealthWise

The expansion population consists of non-disabled adults between the ages of 19-64 with a household income up to 138% of the Federal Poverty Level (FPL) who are not otherwise eligible for Medicaid. The current HIP 2.0 design covers this population through both the Medicaid State Plan and the existing 1115 HIP demonstration waiver.

Moving forward, the agency proposes removing the State Plan authority for coverage of the expansion population to maintain maximum flexibility in policy and program administration, including the ability to limit enrollment due to fiscal constraints.  

Non-expansion HIP members would retain State Plan coverage authority, but these members would transition to the existing Hoosier HealthWise managed care program.  This includes:

• Pregnant women with incomes up to 133% of FPL who are enrolled in HIP at the time they become pregnant;
• Former foster youth who aged out in another state; and
• Adult Transitional Medical Assistance beneficiaries.

The existing 1115 waiver will remain intact for individuals covered under the current Serious Mental Illness (SMI) / Substance Use Disorder (SUD) demonstration authority.

Changes to Cost-Sharing & Reduced Copayments for Healthy Behaviors

The existing HIP 2.0 program benefit design is structured around a commercial insurance premium-style Personal Wellness and Responsibility (POWER) account.¹ The HIP 3.0 redesign moves away from the POWER account structure in favor of a traditional copayment schedule outlined in the table below.

HIP 3.0 members who complete at least three healthy behaviors for preventive care services or chronic disease management (or a combination thereof) will receive the incentive of reduced copayments for the remainder of the benefit period and for the following benefit period. Examples of qualifying preventive services include:

• Annual wellness exams
• Cancer and mental health screenings
• Vaccinations
• Dental exams

Members with a chronic disease may also choose from condition-specific services such as foot or eye examinations for individuals with diabetes and blood pressure or cholesterol testing for individuals with cardiovascular disease.

Importantly, services provided by federally qualified health centers, community behavioral health clinics, and rural health centers would not be subject to copayments.

Implementation Timeline

Indiana requests to begin implementation of HIP 3.0 on October 1, 2027, so the program is fully operational for the 2028 plan year. The state seeks to implement copayments “as soon as practicable” given requirements to do so under existing state law.

Looking Ahead

By moving away from the POWER account construct, HIP 3.0 reduces administrative complexity and program administration costs while championing preventive health care and chronic condition management. However, upon implementation, both HIP members and health care providers will need to prepare for point-of-service copayment collection to resume.

While not specifically outlined in the 1115 Waiver Application, community engagement requirements, more commonly known as work requirements, will remain a feature of the HIP 3.0 program as required by state and federal law. These requirements will be implemented on January 1, 2027, in advance of any transition to a redesigned HIP 3.0.

In its draft application, the agency points to continued pressures on the funding mechanisms for the HIP program, including declining year-over-year cigarette tax revenue and limitations imposed by the WFTCA on provider-related taxes including Indiana’s Hospital Assessment Fee (HAF). Stakeholders should closely monitor this fiscal climate, particularly if the requested authority to limit enrollment is approved in the new 1115 demonstration waiver.

The 30-day public comment period for the 1115 Waiver Application closes on September 4, 2026. Federal law requires the agency to summarize and address public comments in the final draft of the application submitted to the Centers for Medicare and Medicaid Services (CMS), which the agency plans to do before the end of 2026.

Ready to Prepare for HIP 3.0?

HIP 3.0 will reshape cost-sharing, coverage authority, and enrollment for Indiana's Medicaid expansion population. Employers, health systems, providers, and managed care organizations should assess the operational and financial impact now and consider submitting comments before the September 4, 2026 deadline.

Ice Miller's Health Care practice helps clients navigate Medicaid waiver changes, cost-sharing compliance, and CMS engagement. Contact our Health Care team to understand how HIP 3.0 could affect your organization and to develop a proactive response strategy.

^{[1] POWER account contributions and other forms of HIP cost-sharing have been paused since the beginning of the public health emergency in March 2020 due to federal requirements and subsequent litigation.}  

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.