The Children's Health Insurance Program Reauthorization Act of 2009 (the act) requires a group health plan subject to the Employee Retirement Income Security Act of 1974 or the Public Health Service Act to provide new special enrollments rights, effective April 1, 2009. In connection with this requirement, the act imposes certain notification and disclosure obligations on employers, but these obligations will not go into effect immediately.

Background

The act reauthorizes and expands the Children's Health Insurance Program (CHIP) and makes it easier for states to provide subsidies for the coverage of children (and in some cases employees) under group health plans. With these changes, more states are likely to make these premium subsidies available.

Consistent with these modifications, the act introduces new special enrollment rules that aim to facilitate a seamless transition to employer-provided group health coverage when certain events occur relating to an individual's CHIP or Medicaid coverage.

Special Enrollment Rights

Beginning April 1, 2009, group health plans will need to expand their list of special enrollment events to include two new events. The right to enroll will need to be available when an employee or dependent child either:

  • loses eligibility for coverage under Medicaid or CHIP; or
  • becomes eligible for premium assistance from Medicaid or CHIP allowing him or her to enroll in a group health plan.

A group health plan must provide a special enrollment period that lasts for 60 days from the employee's or child's loss of coverage or eligibility for premium assistance, as the case may be. This period differs from the 30-day election period required for other special enrollment events.

A state will determine whether an employee or dependent child is eligible to receive a premium subsidy. Such a subsidy will be available only to the extent that the relevant employer group health plan provides coverage that is considered creditable coverage for purposes of HIPAA and only when the employer pays at least 40% of the premium for such coverage. Additionally, the coverage must be available to a reasonable classification of employees within the meaning of the nondiscrimination rules in Internal Revenue Code section 105(h).

The premium subsidy will ordinarily be paid either directly to the group health plan or to the employee. However, a group health plan may opt-out of receiving direct payment and require the employee to make applicable contributions with the state reimbursing the employee.

Notification Obligation

The act requires employers to notify employees of the premium subsidy opportunities that a state makes available. Most employers are likely to base their notice on the model notice(s) to be developed by a statutorily created working group, which will consist of federal and state government representatives and other stakeholders.

The model notice is not due to be issued until February of 2010 and will not apply until the plan year after it is issued.

Disclosure Obligation

States may request information from group health plans for the purpose of determining whether the plan qualifies for the premium subsidy and whether the purchase of such coverage would be cost-effective. Upon receipt of such a request, a group health plan is required to disclose information, such as benefits, premiums, and cost-sharing, to the state.

A model form is to be developed for purposes of collecting this information. The form is scheduled to be finalized no later than August, 2010, and states will not start requesting information until the next plan year.

If you have any questions regarding the CHIP Reauthorization Act, please contact Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com, Clifford J. Schoner at 215.864.8626 or schonerc@ballardspahr.com, or any member of the firm's Employee Benefits and Executive Compensation Group.


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