Employee Benefits Alert
The Children’s Health Insurance Program Reauthorization Act of 2009 (the “CHIP Act”) was recently signed into law. Generally, CHIP is a shared federal and state program that provides coverage to low income children and pregnant women. States may design their own CHIP programs within certain federal parameters. The CHIP Act expands and extends coverage through 2013. Of significance for employers, the CHIP Act (1) requires that employer-sponsored group health plans provide special enrollment rights to employees and dependents, (2) establishes a new premium assistance program for individuals enrolled in an employer-sponsored plan, and (3) imposes new notice and disclosure requirements on employers and plan administrators.
Special Enrollment Rights
Health and cafeteria plan documents will need to be amended by April 1, 2009 to reflect new special enrollment rights. Beginning April 1, group health plans will be required to permit employees and dependents who are eligible for coverage, but who have not enrolled, the right to elect coverage during the plan year if the employee’s or dependent’s Medicaid or CHIP coverage terminates because the individual ceased to be eligible. Enrollment during the plan year must also be permitted if an eligible employee or dependent becomes eligible for a CHIP premium assistance subsidy during the plan year. The eligible employee must request coverage within 60 days of the termination of Medicaid or CHIP coverage, or becoming eligible for the premium subsidy. The usual enrollment period under ERISA for special enrollment rights is 30 days, so the new 60-day enrollment period may create additional administrative burdens on plan administrators and HR personnel.
Premium Assistance Program
Effective April 1, 2009, states may elect to provide premium assistance subsidies to eligible, low-income children under a qualified employer-sponsored group health plan by reimbursing the employer, or the employee, for the difference in cost between the state plan and the employer’s plan. A “qualified employer-sponsored group health plan” is an insured or self-funded group health plan offered by an employer to a reasonable classification of employees (as defined in Code Section 105(h)), that qualifies as creditable coverage under HIPAA, and where the employer provides at least 40% of the cost of coverage. Specifically excluded from this definition are high deductible health plans and health flexible spending arrangements. An employer may elect not to receive direct premium payments from the state, but even if the employer makes such an election, the employer must still permit eligible employees to enroll themselves and eligible family members in the plan and permit the employees to pay for such coverage through payroll deductions. In addition, an employee may elect to disenroll his or her child from coverage under the group health plan at any time and enroll that child in CHIP.
Employers will need to decide if they want to elect out of receiving direct state premium payments, as well as how to administer an employee’s request to disenroll a child from coverage. Changing coverage under the employer’s group health plan may require revising a cafeteria plan election as well. However, an employer is not required to take any action until a state adopts a premium assistance program.
Employee Notice Requirements
Employers must provide a new notice to employees in states that offer premium assistance subsidies. The notice must be in writing and may be provided in one of the following ways: (1) in materials provided to employees when they first become eligible for the employer’s plan, (2) with materials provided to employees during open enrollment, or (3) in the plan’s summary plan description. The notice must provide the employee with information on the state’s premium subsidy assistance program and the benefits that may be available to them under CHIP. The DOL is required to provide a model notice by February 4, 2010 and employers are required to comply with the notice requirements beginning with the first plan year after the model notice is issued. The DOL may assess a $100 per person per day penalty for failure to provide this notice. Until the model notices are issued, employers will need to decide what information to provide to employees, if any, about the state programs.
Disclosure to the States
Employers will be required to disclose information about the benefits available under their group health plans to a state upon request. Only those group health plans that have participants or beneficiaries covered by Medicaid or CHIP are subject to this disclosure requirement. The information provided must be specific enough for the state to determine the cost effectiveness of providing a premium assistance program and, at a minimum, must include which employees are covered, which benefits are provided, the premiums and cost sharing requirements, and contact information for the plan administrator. HHS and DOL will develop a model coverage disclosure form that employers will be required to use. The form is not expected to be issued until 2010. A state may not request plan information before the first plan year after the date on which the model form is issued. The DOL may assess a penalty against employers of up to $100 per day per plan participant for failure to timely provide the requested information to a state.
Miller & Chevalier lawyers are available to provide additional information or assist with implementation of these provisions, which may be particularly valuable given the upcoming deadline for drafting and executing plan amendments.
For more information, please contact any of the following lawyers:
Gary Quintiere, email@example.com, 202-626-1491