New Notice, Disclosure and Special
Enrollment Rights in CHIPRA

On February 4, 2009, President Obama signed legislation reauthorizing the State Children's Health Insurance Program ("CHIP" (formerly "SCHIP")) in the form of the Children's Health Insurance Program Reauthorization Act of 2009 ("CHIPRA").  Under CHIP, which originally was created by the Balanced Budget Act of 1997, states may receive federal matching funds in order to provide subsidies to insure low-income children who are ineligible for Medicaid but who cannot afford private insurance.  CHIPRA requires that group health plans provide special enrollment rights for children who lose Medicaid or CHIP coverage, as well as for participants or dependents who become eligible for a subsidy under Medicaid or CHIP.  In addition, CHIPRA imposes new notice and disclosure requirements on group health plans.  Failure to comply with the new notice and disclosure obligations under CHIPRA will result in penalties on the Employer of up to $100 per participant, per day.

EXPANSION OF SPECIAL ENROLLMENT RIGHTS

Effective April 1, 2009, group health plans must permit employees and their eligible dependents to enroll in the plan if they:

• Lose Medicaid or CHIP coverage; or
  
  
• Become eligible to participate in a Medicaid or CHIP premium assistance program.

Individuals gaining or losing Medicaid or CHIP coverage will have 60 days from the date of loss of coverage or the date of eligibility in order to request special enrollment in the group health plan.

NEW NOTICE REQUIREMENT

If a state adopts a premium assistance program under CHIP or a medical assistance program under Medicaid, each employer maintaining a group health plan in that state is required to give participants notice about the program, either in the plan's enrollment materials or the summary plan description.  This notice requirement becomes effective in the first plan year beginning after model notices are developed and issued by the Department of Labor and the Department of Health and Human Services (this could be as late as January 1, 2011 for calendar year plans).

NEW DISCLOSURE REQUIREMENT

Upon request, plan administrators must disclose to a state information sufficient to permit the state to determine the cost-effectiveness of providing medical or child health assistance through premium assistance for the purchase of coverage under the group health plan.  This disclosure requirement becomes effective in the first plan year beginning after model disclosure forms are issued by the Department of Labor and the Department of Health and Human Services working group.

ACTION ITEMS

Group health plan sponsors should take the following steps to comply with the new requirements under CHIPRA:

• Revise HIPAA special enrollment notices and/or special enrollment provisions in summary plan descriptions to include an explanation of the CHIPRA special enrollment rights and 60-day enrollment window;
• Review group health plan documents and cafeteria plan documents to determine whether amendments are necessary for special enrollment rights and coordination of coverage;
• Begin distributing new model notice to employees in the first plan year after model notices are issued;
• Begin using model disclosure form for reporting to states in the first plan year after model disclosure is issued.

Attorneys in our employee benefits group will continue monitoring developments in the CHIPRA requirements and are available to answer any questions you may have.

Sherman & Howard has prepared this advisory to provide general information on recent legal development that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.

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© 2009 Sherman & Howard L.L.C.                                           February 26, 2009