The Children’s Health Insurance Program Reauthorization Act of 2009 (the “Act”) creates new special enrollment rights, requires employers to provide a new notice to employees, and requires employers to disclose certain health plan information to states. This update provides an overview of these requirements.
Medicaid and children’s health insurance program (“CHIP”) special enrollment rights. Effective April 1, 2009, the Act creates new special enrollment events for group health plans:
- Loss of coverage due to loss of eligibility for Medicaid or CHIP. An employer group health plan (that is not an excepted benefit, as discussed below) must permit special enrollment if an eligible employee or dependent loses coverage under Medicaid or CHIP due to a loss of eligibility (rather than non-payment).
- Eligibility for premium assistance under Medicaid or CHIP. An employer group health plan (that is not an excepted benefit) must permit special enrollment if an eligible employee or dependent becomes eligible for government premium assistance under Medicaid or CHIP.
Special Enrollment Deadline. The deadline to request special enrollment for these new events is longer than the deadline most group health plans permit for other special enrollment events. For existing special enrollment events (i.e., marriage, birth, adoption, placement for adoption and loss of other specified coverage) the special enrollee has at least 30 days after the event to request special enrollment. For the new special enrollment events, special enrollees must request enrollment not later than 60 days after the loss of Medicaid or CHIP coverage or not later than 60 days of the determination of eligibility for Medicaid or CHIP premium assistance.
Notice to employees of state assistance programs. The Act also requires each employer “that maintains a group health plan in a State” that provides medical assistance under Medicaid or CHIP to provide “each employee” written notice of state Medicaid and CHIP premium assistance programs. It is not clear what it means to “maintain” a group health plan in a state. However, we know that the notices to employees must inform them of premium assistance available in the state in which they reside. The Secretary of Health and Human Services and the Secretary of Labor will issue model state specific and national notices by February 4, 2010. Employers must distribute the notices beginning the first plan year after the model notices are issued (i.e., beginning January 1, 2011 for calendar year plans if the model notices are issued in 2010). The notices may be distributed concurrently with the plan’s summary plan description, open enrollment information or with any separate plan eligibility rules.
Disclosure to states. Upon the request of a state, employers will also be required to disclose to the state information about group health plan benefits available to employees or dependents who are covered under Medicaid or CHIP. States will use this information to determine whether the state will provide premium assistance to the employee or dependent to maintain employer coverage, instead of providing coverage through Medicare or CHIP (employers can opt out of direct payment from a state). A model coverage coordination disclosure form will be created by the Department of Health and Human Services and the Department of Labor. The form applies for state requests beginning with the first plan year after it is issued. For calendar year plans, we may see this form used as early as January 1, 2010 or as late as January 1, 2011, depending on when the model form is issued.
Penalties. Employers may be fined $100 per day for failure to comply with the employee notice requirement or failure to disclose required information to the state. Each violation with respect to a single participant or beneficiary will be treated as a separate violation. Thus, the penalties for failure to comply can be significant.
Group health plans to which special enrollment rules apply. The Act did not change the rules about which group health plans are subject to HIPAA special enrollment rules. As always, special enrollment applies to all employer group health plans except for certain excepted benefits. The most common excepted benefits are health FSAs (if the employer also offers major medical coverage and does not contribute too much to each employee’s health FSA) and certain limited scope dental and vision benefits.
Action items. Employers should do the following in light of the new rules:
- Prepare a summary of material modifications (SMM) or restate the summary plan description (SPD) to include the new special enrollment events.
- Begin offering special enrollment as a result of the new events effective April 1, 2009.
- Update the special enrollment rights notice that is provided prior to or at the time of enrollment.
- Decide whether to retain the 30 or 31-day deadline that most group health plans have for existing special enrollment events or whether to make the deadline uniform (60 days) for all special enrollment events.
- Wait to comply with the employee notice rules until the model notices are issued.
- Disclose plan information to states upon request.
- Decide whether to opt out of direct payment from Medicaid or CHIP and instead require employees to pay all required employee contributions and then the employee can seek reimbursement from Medicaid or CHIP.
- Wait and see if guidance is issued on the Act’s requirement for states to establish a process to permit a parent-employee of a child receiving premium assistance to disenroll the child from employer coverage and enroll the child in CHIP coverage (this is not consistent with Code § 125 for pre-tax coverage).