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Section 01: Background The South Carolina Department of Health and Human Services (SCDHHS) is the single state agency responsible for administering the joint state-federal Title XIX Medicaid and Title XXI Children’s Health Insurance Program (CHIP). In this role, SCDHHS finances health benefits coverage for one out of every five South Carolinians, is the single largest insurer of children in the state and covers more births in South Carolina each year than all other health payers combined.1 Accordingly, SCDHHS’ policies set forth financial incentives with significant impact not only in the state’s healthcare industry, but in private employment and other social service delivery systems. Improving the health and well-being of South Carolina’s Medicaid population is the first step in elevating the state’s overall health status. Doing so requires looking beyond access to healthcare coverage and requires policymakers to evaluate other factors that may affect individuals’ ability to improve outcomes for themselves and their family. This includes evaluating policies that incentivize, or disincentivize, independence and prosperity. In January 2018, the Centers for Medicare and Medicaid Services (CMS) issued guidance announcing an additional avenue for states to address social environment issues. The policy allowed Medicaid programs to incentivize community engagement activities among non-elderly, non-pregnant adult Medicaid members who are eligible for Medicaid on a basis other than disability. These programs, executed through section 1115 waivers, were intended to promote better mental, physical, and emotional health, as well as helping families rise out of poverty and attain independence. South Carolina first pursued, and was granted approvals for, section 1115 waivers for the Healthy Connections Community Engagement Initiative in December 2019. SCDHHS paused implementation of the initiative during the COVID-19 federal public health emergency to comply with the Families First Coronavirus Response Act. Then, during the Biden administration, CMS withdrew the approval of the waivers on August 10, 2021, denying SCDHHS the authority to implement this important initiative. This presented working families with an undesirable choice: earn additional income to support their family or lose their healthcare coverage. This waiver application seeks to remedy this situation and support working families in their path to independence. A significant body of medical literature and scholarly research supports the link between health status and employment. This includes: • Unemployment can have a negative impact on both physical and psychological well- being. A meta-analytic study published in the Journal of Applied Psychology found that “unemployed individuals had lower psychological and physical well-being than did their employed counterparts.”2 1 Source: US Census American Community Survey 2017 Data Set S0101 and Milliman SFY 2017-2018 Summer 2016 Medicaid Assistance Forecast 2 McKee-Ryan, F., Song, Z., Wanberg, CR., Kinicki, AJ. Psychological and physical well-being during 4