On Feb. 4, 2009, President Obama signed the State Children's Health Insurance Program Reauthorization Act (the "Act"), which funds and expands SCHIP through fiscal year 2013. The Act amends certain provisions of ERISA to provide new special enrollment rights for eligible employees and dependents as well as new notice and disclosure obligations for employers that sponsor group health plans ("GHPs").
- Special Enrollment Periods for Group Health Plans
Effective April 1, 2009, GHPs, Code Section 125 cafeteria plans, as well as insurers offering group health coverage in connection with a GHP, must permit employees who are eligible but not enrolled in coverage to enroll themselves and their dependents in coverage under the terms of the plan upon either: (1) termination of Medicaid or SCHIP coverage resulting from loss of eligibility, or (2) becoming eligible for a premium assistance subsidy in the employer's GHP under a Medicaid or SCHIP program. In order to be entitled to these special enrollment rights, the employee must request coverage within 60 days of the event. Note that while the current special enrollment election period is 30 days, the Act provides a 60-day election period for these new special enrollment rights.
- New Participant Notification Requirement
For employers with GHPs in states that provide premium assistance under SCHIP, employers must provide written notice to employees informing them of currently available premium assistance opportunities in their state. The Act provides that the Department of Labor (the "DOL") and the Department of Health and Human Services have until Feb. 4, 2010, to provide a model notice for employers to satisfy this new notice requirement. Employers will be required to distribute these notices to their employees beginning with the first plan year after the date on which the model notice is issued. The notice may be provided: (1) with materials provided to the employee when he or she first becomes eligible under the GHP; (2) with materials provided to the employee during the open enrollment process; or (3) as part of the plan's summary plan description. The DOL may assess up to a $100 per day civil penalty against the employer for failing to meet this notification requirement.
- New State Disclosure Requirement
Additionally, health plan administrators must disclose information about benefits, premiums and cost-sharing required under GHPs to states, upon request, when a plan participant or beneficiary is covered under the state Medicaid or SCHIP program. This information is intended to allow states to determine whether GHP coverage is available and the cost-effectiveness of the state providing assistance through a premium assistance program. A model disclosure form will be developed by a working group composed of various state and federal agencies in cooperation with employers, plan sponsors and administrators, with a delivery date to Congress for adoption no later than Aug. 4, 2010. This model form will apply to requests made by states beginning with the first plan year after the date on which the model form is adopted.
- Premium Assistance
Under the Act, a state may elect to offer a premium assistance subsidy for coverage under a GHP or group health insurance coverage in connection with a GHP (except health flexible spending arrangements, high deductible health plans purchased in conjunction with a health savings account or GHPs for which the employer contribution toward any premium is less than 40 percent), instead of providing health coverage directly to low-income children and their families. The state may provide the premium assistance subsidy either directly to the employer or as a reimbursement to an employee for out-of-pocket expenditures. The employer, however, may opt-out of direct payment and, in such event, the employee will pay the total amount of the required employee contribution for enrollment in the GHP or health insurance coverage, and the state will pay the premium assistance directly to the employee. In any case, the state is the secondary payor for any items or services provided under the GHP or health insurance coverage.
- Action Items
Although notice requirements are delayed pending issuance of model notices by the DOL, employers, insurers and plan administrators will need to take immediate action to ensure they have procedures in place on April 1 to accommodate requests for special enrollment under the new Act. Employers should also take steps to review their plan documents and summary plan descriptions to determine what modifications will be necessary to comply with the Act.