CHIP Act Creates Special Enrollment Rights and Disclosure Obligations for Group Health Plans

The Children’s Health Insurance Program Reauthorization Act of 2009 (the “Act”), enacted in February, imposes new obligations on employers who sponsor group health plans.  Sponsors of insured and self-insured group health plans will be required to implement some administrative changes as early as April 1, 2009.  

The Act extends and provides funding for the Children’s Health Insurance Program (“CHIP”).  CHIP is a program administered jointly through federal and state governments that provide health insurance coverage to low-income children and expectant mothers who do not qualify for Medicaid, but fall within a specified percentage of the federal poverty level.  

HIPAA Special Enrollment Rights
Beginning April 1, 2009, the Act creates two new HIPAA special enrollment rights for employer-sponsored group health plans.  Special enrollment rights will be triggered when a participant or his or her eligible dependent loses Medicaid/CHIP coverage or becomes eligible for Medicaid/CHIP premium assistance.  When one of the new special enrollment rights is triggered, an eligible employee must be permitted to enroll herself and her dependents in the group health plan within 60 days of the triggering event.  

Action Item:  Group Health Plans must have implemented these special enrollment rules by April 1, 2009.  Plan sponsors should also update any plan documents, SPDs, enrollment materials and notices that describe enrollment eligibility.   

Premium Assistance  
The Act permits states to provide a premium assistance subsidy to individuals who are eligible to participate in a “qualified employer sponsored plan,” rather than enrolling these individuals in the state-sponsored health plan.  A “qualified employer sponsored plan” is a group health plan to which the employer contributes at least 40% of the cost of the coverage, and excludes flexible spending arrangements and high deductible health plans.   

Although the premium assistance provisions of the Act take effect on April 1, 2009, many states have not yet determined whether to offer assistance to pay premiums in employer sponsored plans.  Other states with existing health insurance premium programs, such as North Carolina, must decide whether to amend their programs to comply with the requirements of the Act.  

Action Item:  Since states can choose whether or not to provide premium assistance to individuals in employer-sponsored plans, an employer’s obligations under the Act may vary by state.  An employer operating in a state that has adopted the premium assistance subsidy must decide whether to receive reimbursement from the state or to collect premiums directly from the employee (and have the employee seek reimbursement from the state).  

Notice and Disclosure Requirements  
If a group health plan covers employees residing in a state or states that provide a premium assistance subsidy, the plan administrator will be required to notify employees of their potential eligibility for the subsidy.  The Department of Labor and the Department of Health and Human Services are currently developing model notices. In addition, plan administrators will be required to provide the state(s) with information, upon request, concerning the benefits available under the plan.  The Department of Health and Human Services plans to outline additional details on the disclosure requirements at a later date.  

Action Item: Employers have until the first plan year after the model notice is issued to comply with the notice and disclosure requirements.  DOL and HHS plan to issue the notices by February, 2010, so calendar year plans will likely have until at least January 1, 2011 to comply.