March 30, 2009

Children’s Health Insurance Program Reauthorization Act Imposes New Group Health Plan Enrollment Rights and Obligations on Employers

President Obama signed the Children’s Health Insurance Program Reauthorization Act of 2009 into law on February 4, 2009 (the “Act”). The Act expands the availability of health care assistance for children and some adults and imposes on employers new obligations designed to coordinate employer group health plan coverage with the assistance available under Medicaid or the State Children’s Health Insurance Program (“CHIP”). The new requirements that affect employers include special enrollment rights for employer group health plans, employer notice requirements and employer coordination with state premium assistance programs.

Special Enrollment Rights Effective April 1, 2009. The Act requires employers to offer an employee a special mid-year right to enroll in a group health plan within 60 days of the employee’s (or an eligible dependent’s) loss of eligibility for Medicaid or CHIP. Similarly, employers must permit employees to enroll in group health plan coverage for themselves (or an eligible dependent) within 60 days of becoming eligible for Medicaid or CHIP assistance. Employees or dependents who fail to notify the employer of their election to enroll in the plan within the 60-day period must wait for the next open enrollment period to join. These new rights, which are applicable to both insured and self-insured group health plans, are effective April 1, 2009.

Employers must include notification of these new rights in enrollment materials for new employees on and after April 1, 2009. While not affirmatively required by the statute, employers also should consider sending a special notification of these new rights to existing plan participants. In addition, information regarding these new rights will need to be added to open enrollment materials and summary plan descriptions. Finally, employers should review their health plan documents and contracts, as well as their flexible benefit plan documents, to determine if any amendments are necessary to permit these new election rights.

New Employer Notices Regarding State Premium Assistance. The Act also requires employers with employees in states participating in the CHIP program to send special notices to employees regarding the availability of state premium assistance opportunities under CHIP. This notice will not be required for the current plan year. The Department of Labor, working in conjunction with the Department of Health and Human Services, must first publish a model employer notice. This employer notice requirement will become effective for the first plan year after the model notice is issued; under the Act, the deadline for the regulatory agencies to publish the model notice is February 2010.

Employer Coordination with State Premium Assistance Programs. The Act permits states to provide premium assistance subsidies to an eligible individual enrolled in an employer’s group health plan. In order to facilitate this provision, states may choose to pay the employee’s share of the premium directly to an employer’s group health plan, unless the employer “opts out” of the direct payment system. In addition, states are authorized to request detailed information from employers regarding their group health plans, beginning with plan years after a model employer disclosure notice is issued by the Department of Health and Human Services.

Penalty for Non-Compliance. Employers may be assessed penalties of $100 a day for failure to comply with the notice and disclosure requirements of the Act. The $100 penalty applies for each violation per participant or beneficiary.