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CCH® BENEFITS — 02/09/09

Federal Children’s Health Expansions Include Requirements For Group Health Plans

from Spencer’s Benefits Reports: On February 4, President Barack Obama signed into law H.R. 2, the Children’s Health Insurance Program (CHIP) Reauthorization Act of 2009. The legislation cleared the House on the same day by a vote of 290-135, after the House accepted a technical amendment proposed by the Senate.

The general effective date of the law is April 1, 2009.

Group Health Plan Provisions

In addition to expanding the program to cover an estimated 4 million additional children and raising the cigarette tax by 62 cents per pack, the legislation includes several provisions directly affecting employer-provided group health plans.

The law gives states the option to provide a premium assistance subsidy for qualified employer-sponsored coverage to all targeted low-income children eligible for CHIP who have access to such coverage, if the child (or the child’s parent) voluntarily elects to receive such a subsidy. The law also allows employers to opt out of being paid the subsidy directly, in which event the state would pay the employee.

Under the law, qualified employer-sponsored coverage must include an employer premium contribution of at least 40%. Qualified employer-sponsored coverage does not include health flexible spending arrangements under IRC Sec. 106(c)(2) or a high deductible health plan under IRC Sec. 223(c)(2).

The premium assistance subsidy in general is calculated as the difference between the employee contribution required for employee-only coverage and the employee contribution required for enrollment of the employee and the child in such coverage.

The law also allows a state to elect to offer a similar voluntary premium assistance subsidy for qualified employer-sponsored coverage to all individuals younger than age 19 who are entitled to Medicaid.

In addition, states are required to provide supplemental coverage to qualifying children who are enrolled in employer-sponsored coverage. The supplemental coverage consists of items or services that are not covered, or are only partially covered, under the employer-sponsored coverage.

States also may establish an employer family premium assistance purchasing pool for employers with fewer than 250 employees that have at least one employee who is a pregnant woman eligible for assistance under the state child health care plan.

Opting In And Out Of Employer Coverage

The CHIP expansion requires states to establish a process for permitting the parent of a targeted low-income child receiving a premium assistance subsidy to disenroll the child from the employer-sponsored coverage and enroll the child in the state child health plan.

The law also amends the Internal Revenue Code, ERISA, and the Public Health Service Act to require a group health plan to permit an employee who is eligible, but not enrolled, for coverage under the plan to enroll if either of the following conditions is met:

(1) the employee or dependent covered under Medicaid or CHIP has coverage terminated as a result of loss of eligibility, and the employee requests coverage under the group health plan within 60 days after such termination; or

(2) the employee or dependent becomes eligible for Medicaid or CHIP assistance if the employee requests coverage within 60 days after the eligibility determination date.

Model Disclosure Form

Finally, the law establishes a Medicaid, CHIP, and Employer-Sponsored Coverage Coordination Working Group to develop a model coverage disclosure form for group health plan administrators to complete in order for a state to determine the availability and cost-effectiveness of the employer coverage for family members eligible for the premium assistance subsidy.

At a minimum, the disclosure form will require the following pieces of information:

• a determination of whether the employee is eligible for coverage under the group health plan;
• the name and contact information of the plan administrator of the group health plan;
• the benefits offered under the plan; and
• the premiums and cost sharing required under the plan.

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