New special enrollment rights, together with notice and disclosure requirements for employers, are among the provisions in the Children’s Health Insurance Program (CHIP) Reauthorization Act of 2009, signed into law by President Obama on February 4, 2009. CHIP is the federal program that gives matching funds to states in order to provide Health insurance to low income families with children. The Reauthorization Act expands the program, but is also including new special enrollment rights and notice and disclosure requirements for employers.
The law creates special enrollment rights for employees and their dependents who are “eligible but not enrolled for coverage” under an employer’s group health plan in two situations: The employee’s or dependent’s Medicaid or CHIP coverage is terminated as a result of loss of eligibility, or the employee or dependent becomes eligible for a subsidy (see next paragraph) under Medicaid or CHIP. An employee exercising one of these special enrollment rights must do so within 60 days of Medicaid/CHIP termination or becoming subsidy-eligible. (Note that this special enrollment rights period is twice as long as that under the HIPAA special enrollment rights situations.) These special enrollment rights became effective April 1, 2009.
States can provide health care coverage directly to CHIP-eligible individuals, but the law also allows them the option of paying a premium assistance subsidy so that low-income employees can cover CHIP-eligible children under an employer group plan. The subsidy can be provided to the employee as a reimbursement for premiums paid to the group plan, or to the employer sponsoring the plan. Employers can opt out of receiving the subsidy payment, in which case it will be paid to the employee. The subsidy can only be offered for what the law refers to as “qualified employer-sponsored coverage” — a plan for which the employer contributes at least 40% of the cost, and not including health care flexible spending accounts and high deductible health plans.
In states that provide a premium assistance subsidy, employers will be required to give employees notice of the potential opportunity for the subsidy. Such a notice will need to be provided when notifying the employee of plan eligibility, when open enrollment materials are distributed, or when providing the summary plan description (SPD). The Department of Health and Human Services (HHS) is to develop a model notice by February 4, 2010; this notice requirement will become effective for employers beginning with the plan year after issuance of the HHS model notice.
The law also creates a disclosure requirement for group health plans. The purpose of disclosure will be to help states determine eligibility for the subsidy and its cost-effectiveness. HHS and the Department of Labor (DOL) will form a working group to develop a model disclosure form, and employers will be required to disclose information upon request beginning with the plan year following issuance of the model disclosure form.
The law provides for penalties of up to $100 a day for failure to comply with either the notice or disclosure requirements.
So what should employers be doing now to get up to speed on this new law?
- Identify all states where employees reside and determine whether the state provides a premium assistance subsidy.
- Review health plan documents and amend them as necessary to provide for the new special enrollment rights. As noted above, employees are able to exercise these special enrollment rights effective April 1, 2009.
- Review any health insurance contracts’ coordination of benefits (COB) provisions, because states will be the secondary payer for services provided under employer group health plans for which a premium assistance subsidy is provided.
- Stay alert to developments from the DOL and HHS concerning this law, and be prepared to take compliance steps as soon as the model notice and disclosure forms are released.