On February 4, 2009, President Obama signed into law the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA). This law extends and expands the state children's health insurance program (CHIP).

New Disclosure Requirements

The law amends the Internal Revenue Code, ERISA and the PHSA to require group health plan administrators to disclose information about plan benefits to states upon request when a plan participant or beneficiary is covered under Medicaid or CHIP. This information is intended to allow states to determine eligibility, the cost-effectiveness of providing premium assistance for the purchase of coverage under the group health plan, and to provide supplemental benefits. The Department of Health and Human Services (HHS) and the Department of Labor (DOL) are to establish a working group and develop a model coverage coordination disclosure form for plan administrators to complete. States may not request the model coverage coordination disclosure form until the first plan year that begins after the date on which the form is first issued.

New Special Enrollment Requirements

The law also creates additional special enrollment rights. Group health plans will now be required to permit employees and dependents who are eligible but not enrolled for coverage to enroll upon termination of the employee or dependent's Medicaid or CHIP coverage or if the employee or dependent become eligible for a premium assistance subsidy under Medicaid or CHIP. In both instances, the employee must request coverage under the plan within 60 days after the termination or determination of subsidy eligibility. These new special enrollment rights are effective April 1, 2009.

New Employer Notification Requirement

There are additional new notification requirements for employers that maintain group health plans in states that provide Medicaid or CHIP assistance in the form of premium assistance subsidies. These employers will be required to provide written notices to their employees, informing them of the potential opportunities for premium assistance in the states in which they reside to help pay for health coverage for employees or dependents. The new law directs HHS to develop national and state-specific model notices by February 4, 2010 to enable employers to comply with the notice requirement. Employers may provide these notices along with other plan materials (for example, eligibility notice, open enrollment materials, or when furnishing the SPD). The notice requirement is effective for plan years beginning after the date on which the model notices are first issued.

Premium Assistance

Under CHIPRA, effective April 1, 2009, states are permitted (but not required) to offer a premium assistance subsidy for coverage under certain employer-sponsored health plans to all low-income children (and, in some cases, their parents) who are eligible for the CHIP program. If the low-income child (or the child's parent) elects to receive the subsidy, health coverage for the child is provided through the employer-sponsored health plan instead of being provided through the state's CHIP program.

To be "qualified employer-sponsored coverage" under the law, the group health plan or health insurance coverage must: (i) be creditable coverage for HIPAA purposes; (ii) the employer contribution toward the cost of any premium for the coverage must be at least 40%; and (iii) the coverage must be available to individuals in a manner that would be considered to be a nondiscriminatory group for eligibility purposes under Section 105(h) of the Tax Code. CHIPRA specifically excludes coverage under health flexible spending accounts and high deductible health plans (HDHPs).

The premium assistance available for employer-sponsored insurance can be paid directly to the employer, or the employer can opt-out of receiving payments directly resulting in the state providing premium assistance directly to employees. The amount of premium assistance available is the incremental premium cost difference between coverage for the employee only and coverage for the employee plus the eligible child/children.

Penalties for Non-Compliance

The law provides for civil penalties of up to $100 per day for failure to comply with the new notice and disclosure requirements. Additionally, a violation of the special enrollment rights, notification or disclosure requirements could result in an excise tax under the Code equal to $100 for each day of non-compliance per individual.

Please note that the information contained herein is provided to readers for informational purposes only and you may not rely on this information as legal or any other advice. You should consult with your own legal counsel to ensure compliance with applicable law.