On February 4, President Obama signed into law the Children's Health Insurance Program Reauthorization Act of 2009, which funds and expands the State Children's Health Insurance Program (SCHIP). This law impacts your employer-sponsored health plans in three ways.
Subsidized Employer-Sponsored Coverage
Instead of providing health coverage directly to qualified families, the new SCHIP law allows a state to subsidize employer-provided coverage (excluding certain plans, such as high-deductible health plans, health FSAs, and plans for which the employer does not cover at least 40 percent of the cost). The state may subsidize the cost of covering the child under the plan or even the cost of employee + child or family coverage, if cost effective. When the state program subsidizes coverage, the state may also have to provide supplemental coverage (on a secondary basis) up to a baseline level.
The new law allows the state to make subsidy payments directly to the employee or to the employer. An employer, however, may elect to opt out of being paid directly by the state -- which may be attractive to employers who are concerned about their ability to administer payment received from another source.
Special Enrollment Periods For Group Health Plans
The SCHIP law also establishes new special enrollment rights for employees and their dependents upon either (1) termination of Medicaid or SCHIP coverage resulting from loss of eligibility; or (2) becoming eligible for premium assistance in the employer's group health plan under a Medicaid or SCHIP program. In order to be entitled to the special enrollment right, the employee must request coverage within 60 days of termination or the date the parent or child is determined to be eligible for assistance. Note that this is a longer enrollment period than the 30 days that applies to other special enrollment rights.
Your plan will have to accommodate these requests beginning April 1, 2009.
New Notification and Disclosure Duties
Your plan will have to provide notice to employees about the premium assistance opportunities available under state law. You will not be required to distribute these notices, however, until the Department of Health & Human Services has issued model forms (which it is required to do within one year).
The administrator of your plan will also be responsible for reporting information that a state needs (1) to determine whether participants in your plan are eligible for premium assistance and (2) to determine the SCHIP program's duty to provide supplemental benefits. Your plan will not be required to provide this information until the Department of Health & Human Services and the Department of Labor have developed model forms.
The new law also establishes penalties of $100 per day per participant or beneficiary for failure to provide the required notices and disclosures.
What To Do Now
Before April 1, 2009, you will need to amend your health plan and your cafeteria plan to accommodate the new special enrollment rights. You should also look at your health plan's coordination of benefit rules to see if they need to be updated to reflect that SCHIP supplemental coverage will pay secondary to your plan.
You will not need to start using the new notice and disclosure forms until the first plan year that follows their availability. Although the Department of Health & Human Services has until February of 2010 to develop the forms, we expect that the Department will push to have these forms out in 2009. Watch for an e-bulletin from Warner once these forms have been released.
If you have any questions about the new law, please contact Norbert F. Kugele or any other member of the Warner Employee Benefits Practice Group.