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New requirements on group health plans starting April 1
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Employers have probably been inundated with information about the new COBRA rules recently enacted as part of the stimulus package. But some may not be aware of the Children's Health Insurance Program (CHIP) Reauthorization Act (CHIPRA), which was signed into law February 4. In addition to expanding CHIP, the Act imposes new notice and disclosure obligations on sponsors of group health plans and requires them to offer two new special enrollment rights, effective April 1, 2009. This article provides a synopsis of the Children's Health Insurance Program Reauthorization Act with special attention to its impact on group health plans.
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Background
The State Children's Health Insurance Program (SCHIP) was created in 1997, with an expiration date of March 31, 2009. SCHIP is a federal and state partnership designed to provide health insurance to children whose parents earn too much to qualify for Medicaid but not enough to purchase private coverage. With the reauthorization, the program is now called CHIP, and its new expiration date is December 31, 2013.
Premium-assistance subsidy
A central feature of the Children's Health Insurance Program Reauthorization Act is that it authorizes states (at their option) to offer a premium-assistance subsidy for low-income children who are eligible for coverage under a qualified employer-sponsored group health plan. The subsidy is provided from CHIP funds, and it's up to each individual state to determine whether offering the subsidy is cost-effective. In other words, each state must decide whether it is more cost-effective to have low-income children enrolled in a group health plan or to maintain them in the state's program.
The amount of the subsidy is the difference between the cost of single coverage and family coverage to the employee minus "any applicable premium cost-sharing applied under the State child health plan." The state can pay the subsidy to the employer or to the parent of the qualifying child. Employers also can opt out of payment from the state, in which event they would withhold the full amount of the premium from the employee's wages and the state would pay the subsidy directly to the employee.
A "qualified" employer-sponsored plan is a group health plan or insurance coverage that qualifies as "creditable coverage" under the Health Insurance Portability and Accountability Act (HIPAA) and for which an employer pays at least 40 percent of the premium. It doesn't include health flexible spending accounts or high-deductible health plans. Upon request, group health plans must provide information about the plan's features to the state so the state can determine whether offering the premium-assistance subsidy will be cost-effective.
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New HIPAA special enrollment rights
So how does all this affect an employer's plan? States must decide whether to offer a premium-assistance subsidy. Employer's should check with their state government to see if their state is going to offer a subsidy. In the meantime, the new HIPAA "special enrollment events" take effect April 1 and apply when:
- an employee or dependent who is covered under Medicaid or CHIP loses coverage after becoming ineligible, and the employee requests coverage under the employer-sponsored group health plan; and
- an employee or dependent becomes eligible for the premium-assistance subsidy under the state's CHIP program (if the state chooses to provide it), and the employee requests coverage under the group health plan.
The employee or dependent has 60 daysfrom the date of the event to request enrollment in the plan.
Disclosure obligations
As employers can probably guess, they are required to provide a written notice to all employees who are potentially eligible for the premium-assistance subsidy if their state choses to offer one. Federal regulators must provide model notices (tailored to each state) by February 4, 2010. The notice must be provided to employees beginning with the first plan year after the initial model notice is issued by regulators. Failure to comply with the notice requirement can result in penalties of up to $100 a day per violation.
That's all well and good with respect to the special enrollment rights tied to the premium-assistance subsidy since it may be some time before states chose whether to offer a subsidy. But what about the other new special enrollment event -- the loss of coverage under CHIP or Medicaid? It's possible for that right to be triggered even before the subsidy issue is resolved at the state level. There's no guidance yet from regulators on employer's obligations to communicate the availability of that special enrollment right.
While waiting on guidance from regulators, employers might want to post a notice, either on their company's internal website or on the bulletin board where other employee notices are posted. It should state that employees covered by Medicaid and/or those who have a child covered by CHIP should contact the HR department if their coverage is terminated after becoming ineligible. That way, employees who might have occasion to take advantage of the new special enrollment right will know to seek further information, but employers (hopefully) won't get the flood of e-mails and phone calls that often come after a companywide e-mail is distributed.
Should a child be covered under both the employer-sponsored plan and CHIP, the Children's Health Insurance Program Reauthorization Act requires that the employer's plan be maintained as the primary coverage. This coordination of benefits already applies to plans covering individuals also receiving benefits under Medicaid.
Plan amendments
Group health plans should be amended to reflect the new special enrollment rights effective April 1, 2009. Your plan's coordination of benefits provisions might also need to be amended to specify that plan coverage is primary to CHIP. Also, employers should check their cafeteria plan to see whether they allow for midyear election changes in connection with any HIPAA special enrollment event. If it does, amendments won't be necessary to allow employees to pay their share of premiums on a pretax basis. On the other hand, if a company's cafeteria plan describes the HIPAA special enrollment events, it will need to be amended to include the new ones. Employers will also want to revise their HIPAA special enrollment notices to include the two new events.
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Bottom line
Stay tuned for guidance and clarification from federal regulators. The first open enrollment period following the enactment of the legislation (not to mention the COBRA provisions enacted as part of the stimulus package) should be interesting, to say the least. Employers should seriously consider having their open enrollment materials vetted by an experienced benefits practitioner.
Sara Hauptfuehrer is Of Counsel with Steptoe & Johnson PLLC in Clarksburg. She can be reached at (304) 624-8195.
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Copyright 2009 M. Lee Smith Publishers LLC.WEST VIRGINIA EMPLOYMENTLAW LETTER . WEST VIRGINIA EMPLOYMENT LAW LETTER should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only. Anyone needing specific legal advice should consult an attorney. The State Bar of West Virginia does not certify specialists in the law, and we do not claim certification in any listed area. For further information about the content of any article in this newsletter, please contact any of the editors.
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