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Children's Health Insurance Bill Creates New Special Enrollment Rights Effective APRIL 1, 2009

March 6, 2009

By Thomas I. Kramer

BENEFITS NOTEBOOK 

Last month, in the e-mail that transmitted our eAlert about the new continuation coverage rules in the American Recovery and Reinvestment Act, we noted that Congress had recently enacted another new law – the Children’s Health Insurance Program Reauthorization Act of 2009. That new law, known as CHIP, expands and subsidizes states’ children’s health insurance programs.

CHIP facilitates states expanding coverage by permitting states to subsidize the premiums for coverage under employer-sponsored plans, other than high-deductible plans and health FSAs, as either a reimbursement to the qualifying employee or a direct payment to the employer (unless the employer chooses not to receive direct payments). CHIP applies to public or governmental health plans as well as private, insured as well as self-insured. On different effective dates, explained below, CHIP requires employers’ health plans to take the following actions:
 
  • Offer special enrollment to employees and their spouses, domestic partners and dependents who either lose CHIP assistance or Medicaid coverage or become eligible for CHIP assistance or Medicaid coverage.
     
  • Give states information about the plan’s coverage, to permit states to decide whether to subsidize eligible individuals’ premiums for coverage under the plan.
     
  • Notify participants of the potential availability of state CHIP assistance for coverage.

New Special Enrollment Rights
As a quick refresher, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires most employer-sponsored health plans to permit “special enrollment” of certain employees and their eligible spouses, domestic partners and dependents when the employee, spouse, domestic partner or dependent loses other health coverage or when the employee acquires a spouse or dependent through marriage, birth, adoption or placement for adoption, if the employee timely requests special enrollment.

Effective April 1, 2009, health plans subject to HIPAA must offer two additional special enrollment opportunities:
 
  • If an employee, spouse, domestic partner or dependent loses eligibility for state CHIP assistance or Medicaid coverage and the employee requests enrollment in the plan within 60 days after the termination of eligibility.
     
  • If an employee, spouse, domestic partner or dependent becomes eligible for state CHIP assistance or Medicaid coverage and the employee requests enrollment in the plan within 60 days after eligibility is determined.

Please note that the 60-day period within which employees may request special enrollment pursuant to CHIP is different from the 30-day period that applies to other HIPAA special enrollments. It appears that the enrollment must be effective no later than the first day of the month beginning on or after the date the plan receives the special enrollment request.

Notice of Special Enrollment Rights
CHIP doesn’t explicitly require plans to give notice of the new special enrollment rights, but plan administrators’ fiduciary duties may require them to do so even before the new rules take effect next month. The notice might be an amendment to the existing plan booklet or summary plan description, or it might be a freestanding notice or summary of material modifications.

Plan administrators will want to consult the plan’s insurers, advisors and attorneys regarding the form, content and distribution of any notice. The following is not legal advice, but is a generic sample notice administrators might use as a starting point to prepare their own notices:
 
Effective April 1, 2009, the Children’s Health Insurance Program Reauthorization Act added two special enrollment opportunities. If you or your spouse, domestic partner or dependent lose eligibility for state CHIP assistance or Medicaid coverage, or become eligible for state CHIP assistance or Medicaid coverage, and you request, in writing to the plan administrator, enrollment in the plan for yourself or your spouse, domestic partner or dependent within 60 days after the loss of coverage or determination of eligibility, you may be able to enroll yourself and your spouse, domestic partner and dependents in the plan.

Information for States about Plan Coverage
CHIP also requires group health plan administrators to provide information to states, on request, about plan participants or beneficiaries who are covered by Medicaid or CHIP to allow states to decide whether to offer those individuals assistance paying for their coverage under the plan. Within the next year, the Departments of Labor and Health & Human Services are to prepare a model “coverage coordination disclosure form” that administrators may complete to respond to such requests for information. Administrators will be required to respond to such requests starting with the first plan year that begins after the date the model form is first issued. There is a penalty of up to $100 per participant per day for failure to provide required information.

Notice to Participants about Premium Assistance
Employers who maintain group health plans that cover employees who live in states that offer CHIP premium assistance must notify employees of the potential availability of premium assistance. This notice may be provided when other notices about the plan are provided to employees. Within the next year, the DOL and DHHS are to prepare national and state-specific model notices. Employers must then distribute the notice with plan material beginning with the plan year following the date the model notice is first issued. The penalty of up to $100 per participant per day applies to failure to comply with this notice requirement, when it takes effect.

Employer Action Steps
We suggest that employers take the following steps:
 
  • Consult with their insurers, advisors and attorneys about the required addition of the two special enrollment opportunities, effective April 1, 2009.
     
  • Prepare and circulate a notice to participants informing them of the two additional special enrollment events, before April 1, 2009, if possible.
     
  • Amend plan documents and summary plan descriptions to include the new special enrollment rules.

Please feel free to contact us if you have questions or comments about these new rules or any other labor, employment and benefits issues. 
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