ErisaALERT
March 2009
Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) and American Recovery and Reinvestment Act of 2009 (ARRA)
The Act
CHIPRA provides that a group health plan is required to permit an employee who is eligible, but not enrolled, for coverage under the terms of the plan to enroll for coverage under the plan if
- The employee is covered under a Medicaid or State child health plan and coverage is terminated as a result of loss of eligibility for the Medicaid or State child health plan and the employee requests coverage under the group health plan within 60 days of coverage loss; or
- The employee becomes eligible for premium assistance under a Medicaid plan or a State child health plan with respect to the group health plan, and the employee requests such coverage within 60 days after the employee is determined to be eligible for such assistance.
This special enrollment right must also be extended to a dependent of an employee if the dependent is eligible, but not enrolled, for coverage under the terms of the group health plan and the dependent satisfies the conditions for special enrollment.
Employers that maintain a group health plan in states that provide assistance must provide employees with a written notice of the availability of premium assistance programs under Medicaid or State child health plans. In addition, the administrator of a group health plan must provide information upon request of a State regarding the benefits available under the plan with respect to a participant or beneficiary who is covered under a Medicaid or State child health plan.
ARRA increased the income limit to qualify for State child health plans from 200% of the Federal poverty level to 300% of the Federal poverty level. (In the 48 contiguous states, a family of four can earn up to $66,150 and be eligible for State child health plans; there are different levels for Alaska and Hawaii).
What it means to Plan Sponsors
To oversimplify, CHIPRA does two things:
- It adds another special enrollment opportunity and
- Requires additional disclosures and administrative procedures in states where premium subsidies are offered or will be offered.
Let’s take a closer look at some of the specific requirements and their practical implications.
Effective Date
The effective date is April 1, 2009.
Bottom line: Group health plans must offer special enrollment rights to eligible employees effective April 1, 2009! The increase in the qualifying income level means that more children will be eligible for coverage. Plan documents may have to be amended to reflect this new special enrollment feature. As a practical note, the plan documents that I have reviewed to date do not require an amendment while an SMM will be required for the SPD.
The Notice
Not later than 1 year after enactment the various government agencies (Health and Human Services, State Medicaid Agencies, State CHIP agencies) will develop State specific model notices. The initial annual notice must be provided to employees beginning with the first plan year that begins after the model notices are issued. The notice will include information regarding how an employee can contact the State in which the employee resides for additional information regarding potential opportunities for premium assistance and how to apply for the premium assistance.
Bottom line: While it is true that the various government agencies will be preparing State specific model notices no later than February 9, 2010, the bottom line is that group health plans must offer the special enrollment right effective April 1, 2009. Many employers have already prepared or are in the process of preparing announcements for employees before the 2010 statutory notice date. It is important to keep in mind that if you amend your plan document, you will have to prepare a Summary of Material Modifications (SMM); the SMM could take the place of any notice you are preparing depending on the information you intend to communicate now. That said, should you prepare an announcement now, you may want to include this link (http://www.insurekidsnow.gov/) in your employee communication.
Prospectively, the Act provides that group health plans have the option to provide the CHIPRA notice with new hire or open enrollment materials or concurrent with providing the summary plan description.
Reporting Requirements
Upon request, group health administrators must disclose information to the State “in sufficient specificity” as determined under yet to be issued regulations. The purpose of the reporting is to permit the State to make a determination of cost effectiveness of the State providing medical or child health assistance through premium assistance for the purchase of the group health coverage and in order for the State to provide supplemental benefits as required under CHIPRA.
Bottom line: At a minimum, Plan sponsors and or group health administrators will have to develop status codes or tracking mechanisms to identify CHIPRA eligible participants and dependents.
Premium Assistance
CHIPRA provides that a State may elect to offer a premium assistance subsidy for qualified employer coverage to all targeted low income children eligible for health assistance under the plan.
Qualified employer coverage means a group health plan or health insurance coverage offered through an employer that qualifies as creditable coverage and for which the employer contribution toward the premium is at least 40% and that is offered in a nondiscriminatory manner for purposes of IRC§105(h). Health care flexible spending arrangements and high deductible health plans are excluded from the definition of qualified employer coverage.
A State may provide a premium assistance subsidy either as reimbursement to an employee for out of pocket expenditures or directly to the employer. An employer may opt-out of being directly paid a premium assistance subsidy by notifying the State of the opt-out.
The State will be a secondary payor for any items or services provided under the qualified employer coverage for which the State provides child health assistance under the State child health plans.
Medicaid has been amended similarly.
Bottom line: If you haven’t already done so,familiarize yourself with the various State CHIP programs that affect you as well as familiarize yourself with pertinent Medicaid provisions. Decide if you will opt out of any State offered premium assistance subsidies.
Penalties for noncompliance
CHIPRA provides for penalties of up to $100 per day for failure to comply with the notice and disclosure requirements.
What should you do now?
- Review your plan documents and determine if an amendment is necessary. If yes, prepare the amendment; prepare and distribute a SMM.
- Prepare employee communication material describing the program or utilize the SMM noted above.
- Alert your technology department that additional reporting will be required at some point in the future.
- Work with your insurance provider/administrator and develop a process for employees who choose to either enroll or opt out of the employer’s group health plan.
- Determine if you coordination of benefit rules need to be modified.
- Decide if you will update your summary plan description with the CHIPRA information or include the required notices in enrollment packages or perhaps both.
- Update the list of material in the new hire packet and open enrollment material to include the notice when it becomes available.
- Decide whether to opt out of any State premium assistance subsidies.
Note: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plans. For more information on this ErisaALERT, contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.
To comply with Circular 230 issued by the IRS, we hereby inform you that any tax advice contained in this communication (including attachments and/or enclosures, if any) is not intended or written to be used for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code, or (ii) promoting, marketing or recommending to one or more taxpayers any transaction or matter addressed herein.
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ErisaALERT 2009-2
