President Obama signed the Children’s Health Insurance Reauthorization Act of 2009 (the “Act”) into law on February 4, 2009. The Act expands the Children’s Health Insurance Program (CHIP) and, among other items, authorizes states to provide premium subsidies for group health plan coverage for eligible individuals (generally low-income children and families). The premium assistance program imposes new special enrollment, notice and disclosure obligations on employer group health plans.
Premium Assistance Program
Effective April 1, 2009, states may provide premium subsidies for “qualified employer coverage” in lieu of providing health coverage through the CHIP program.
Qualified employer coverage is:
- coverage for which at least 40% of the cost is paid by the employer;
- “creditable coverage” as defined under the HIPAA; and
- available to a reasonable classification of employees (as determined in accordance with IRS rules).
High-deductible health plans and fl exible spending accounts (FSAs) are not qualified employer coverage.
Subsidies may be provided as reimbursements to the employee or through direct payments to the employer, though employers may opt out of receiving direct payments.
The Act creates new special enrollment rights for employees and dependents who are eligible but not enrolled in an employer group health plan. Group health plans must permit enrollment upon: (1) termination of Medicaid or CHIP coverage due to loss of eligibility; or (2) becoming eligible for premium assistance through CHIP for the employer’s group health plan. Employees must request special enrollment within 60 days of the occurrence of one of these events. Plan administrators should note that this 60-day enrollment period is a departure from the existing special enrollment rules for loss of other coverage or acquisition of a dependent, under which employees have only 30 days to request special enrollment.
The new special enrollment rights are effective as of April 1, 2009. Plan documents and SPDs that describe special enrollment rights may need to be updated to refl ect these new rights.
Employers in states that have adopted premium assistance programs must provide written notice of the program to their employees. This notice may be included in the summary plan description or in other plan information, such as enrollment materials. The Act directs the Departments of Labor (DOL) and Health and Human Services (HHS) to develop a model notice by February 4, 2010. Employers are not required to furnish this notice until after the model notice is issued.
Plan administrators whose plans cover Medicaid or CHIP eligible individuals will be required to disclose to the state, upon request, information about the plan, including details about benefits, premiums and cost-sharing. The disclosures are intended to assist the state in planning the premium assistance program and in determining whether the plan coverage constitutes qualified employer coverage. The Act directs HHS and DOL to develop a model disclosure form within eighteen months. States may not request this disclosure until the first plan year that begins after the model disclosure form is issued.
Penalties for Noncompliance
The Act provides civil penalties of up to $100 a day for failure to comply with the new notice and disclosure requirements.