(a) Upon its approval of a proposal that shall include any allowable amount of federal funds under Title XXI of the Social Security Act (42 U.S.C. Sec. 1397aa et seq.), the department may provide the applicant reimbursement in an amount equal to the amount that the applicant will contribute to implement the program described in its proposal, plus the appropriate and allowable amount of federal funds. Not more than 10 percent of the County Health Initiative Matching Fund and matching federal funds shall be expended in any one fiscal year for administrative costs, including the costs to the state to administer the proposal, unless the department permits the expenditure consistent with the availability of federal matching funds not needed for the purposes described in paragraph (3) of subdivision (a) of Section 15862, or unless the department determines that an expenditure for administrative costs has no impact on available federal funding. The department may audit the expenses incurred by the applicant in implementing its program to ensure that the expenditures comply with the provisions of this chapter. No reimbursement may be made to an applicant that fails to meet its financial participation obligation under this chapter. The state’s reasonable startup costs and ongoing costs for administering the program shall be reimbursed by those entities applying for funding.

(b) Any program approved pursuant to subdivision (e) of Section 15853 that requires any funding not allowable for a federal match under Title XXI of the Social Security Act shall provide the department with the total amount of funds needed to provide that portion of coverage not eligible for federal matching funds, including reasonable startup costs and ongoing costs for administering the program.

(c) Each applicant that is provided funds under this chapter shall submit to the department a plan to limit initial and continuing enrollment in its program in the event the amount of moneys for its program is insufficient to maintain health insurance coverage for those participating in the program.

(d) (1) Notwithstanding any other provision of this chapter, the state shall be held harmless, in accordance with paragraphs (2) and (3), from any federal audit disallowance and interest resulting from payments made to a participating applicant pursuant to this section, for the disallowed claim.

(2) To the extent that a federal audit disallowance and interest results from a claim or claims for which any participating applicant has received reimbursement for services rendered or other activities performed, the department shall recoup from the participating applicant that submitted the disallowed claim, through offsets or by a direct billing, amounts equal to the amount of the disallowance and interest for the disallowed claim. All subsequent claims submitted to the department applicable to any previously disallowed service, activity, or claim may be held in abeyance, with no payment made, until the federal disallowance issue is resolved.

(3) Notwithstanding paragraph (2), to the extent that a federal audit disallowance and interest results from a claim or claims for which the participating applicant has received reimbursement for services rendered or activities performed by an entity under contract with, and on behalf of, the participating applicant, the department shall be held harmless by that particular participating applicant for 100 percent of the amount of the federal audit disallowance and interest for the disallowed claim.

(Added by Stats. 2014, Ch. 31, Sec. 89. (SB 857) Effective June 20, 2014. Section operative July 1, 2014, pursuant to Section 15864.)