Starting April 1, group health plans must offer a special enrollment right and coordinate coverage for individuals who are either entering or exiting state health coverage programs. Under the law reauthorizing the State Children’s Health Insurance program (SCHIP), plans and insurers must allow an employee or dependent to enroll under the terms of the plan if: (1) he or she loses SCHIP (or Medicaid) eligibility and asks to be covered under the group plan within 60 days; or (2) he or she becomes eligible for premium assistance under SCHIP or Medicaid to buy group health coverage and asks to be covered within 60 days of that eligibility determination. Plans must meet minimum creditable standards to enable individuals to receive premium support.Employers may have to make group health coverage available to individuals who either lose eligibility for state health coverage programs or become eligible for state subsidies to help pay for employer-provided coverage as a result of recently enacted legislation reauthorizing the State Children’s Health Insurance Program (SCHIP). The current SCHIP law (which provides health insurance to children in families that earn too much money for Medicaid but are still too poor to pay for private insurance) had been scheduled to expire on March 2009.

The SCHIP reauthorization law (Pub. L. 111-3), signed by President Obama on Feb. 4, 2009, amends ERISA and the Internal Revenue Code to coordinate SCHIP- and Medicaid – program coverage with employer-provided coverage. The law not only extended the SCHIP program indefinitely, but also changed SCHIP’s eligibility rules to cover 4 million new lives, bring the number of children covered by that program up to 11 million.

The act gives the states options to provide premium assistance to help low-income parents to enroll their children in employer group health plans if the parent or eligible working child chooses to receive such a subsidy.

To stop an outflow of members from employer plans, states may provide premium assistance to employer plans for employees with SCHIP-eligible dependent children. If a state elects to provide premium subsidies, it may do so only for “qualified employer-sponsored coverage.” That means the self-funded or insured employer coverage meets the following additional requirements:

The coverage must qualify as creditable coverage (that is, it must be equivalent in value to the bench-mark benefit package described in Section 2701 of the Public Health Service Act.)

The employer contribution must be at least 40 percent of the group plan premium (or premium equivalent if the plan is self-funded).

The coverage must be offered to all individuals consistent with nondiscrimination provisions of section 105(h) of the Internal Revenue Code.

The subsidy will amount to the difference between the employee payment for self-only coverage under the plan, and the payment for an employee and dependent, minus any applicable premium cost-sharing applied under the state child health plan. The premium assistance subsidy may be paid by the state either to the employer or to the employee as reimbursement for out-of-pocket costs. Employers may opt out of being paid directly by the state by notifying the state of such opt-out, in which case the employer would withhold the normal employee contribution and the state would reimburse the employee directly to the extent of the subsidy.

The act also provides that SCHIP coverage is secondary to employer-sponsored plans (as Medicaid has always been), or that SCHIP coverage provides supplemental coverage to employer-sponsored plans that cover targeted low-income children.

The act requires employers in states that provide premium assistance for Medicaid or SCHIP to provide each employee a written notice informing the employee of potential opportunities for premium assistance under their health plan. They may use any state-specific model notice developed pursuant to ERISA. Not all states may provide such premium assistance programs. The notice must include information regarding how an employee may contact the state in which he or she resides for additional information regarding potential opportunities for premium assistance, and how to apply for it.

In addition, no later than Feb, 4, 2010, the U.S. Department of Health and Human Services (HHS), in consultation with the directors of state Medicaid agencies and directors of state CHIP agencies, is required to develop national and state-specific model notices and provide them to employers to enable them to provide them to employees on a timely basis – which can be at the same time as the employee first becomes eligible for coverage under the employer’s plan (when the new employee receives enrollment information), and at each open enrollment season, or concurrent with furnishing the employee with a summary plan description (SPD).

Furthermore, the act requires employers to disclose to any state, on request, information about the benefits available under their plans, in sufficient specificity as determined under regulations of the HHS Secretary in consultation with the Secretary of Labor and/or Treasury so the state can: (1) determine whether plan coverage is creditable; (2) study the cost effectiveness of its premium assistance program; and (3) determine how it might provide supplemental benefits under the act.

The act provides for penalties for noncompliance with the notice requirements of $100 per day per employee for failing to provide the required notice to each employee about the subsidy option for staying in the plan, and $100 per day per employee for failing to report required information to the state. However, the reporting and penalty provisions will not take effect until the plan year after the model notice is developed.

Regarding COB, the new SCHIP law makes it clear that when a plan participant is covered by an employer-sponsored health plan and a SCHIP program, the employer-sponsored plan is primary. This is a new development. Previously, there was no federal order of benefit determination rule regarding SCHIP. Medicaid, however, has always been secondary to employer-sponsored coverage.

The new law also establishes two new special enrollment events – losing eligibility and coverage under SCHIP (and Medicaid) programs or eligibility for any SCHIP subsidy. Employers will have to modify their SPDs to add those to the other special enrollment events.

The new notice requirements can impose significant administrative difficulties fir multi-state employers. They will have to provide different notices to their Medicaid- and SCHIP-eligible employees based on the state in which they reside at the time employees first become eligible for health coverage and at each enrollment thereafter. Employers with operations in one state may encounter this problem as well. For example, an employer in New York City probably will have to have separate SCHIP notices for New York, Connecticut and New Jersey, since employees commute to their work from all three states.

This may be mitigated by the fact that the agencies have a year to develop model notices, and the fact that penalties for failure to provide the notices on a timely basis do not commence until the start of the plan year beginning after those model notices become available. If the government works in its usual manner, the penalties won’t start for most employers until Jan. 1, 2011. but if a new efficiency develops, the penalties might start about Jan1, 2010.

Employers probably can determine which of their employees are eligible for SCHIP and/or Medicaid by determining their annual salaries and finding out at what level earnings a person becomes entitled to Medicaid or SCHIP coverage (or the SCHIP subsidy). That way they won’t have to provide notices to every employee – as most employers now do for the annual notices of creditable prescription drug coverage because they can’t (or won’t) figure out which of their employees may have dependents who are Medicaid-eligible. In any case, environmentalists will mourn the death of trees caused by the need to provide another set of complex notices to employees.

Tags:

This entry was posted by Adam V. Russo on Wednesday, May 13th, 2009 at 3:19 pm and is filed under Coordination of Benefits, Summary Plan Description. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.