- The Benefits Game: Cafeteria and Health & Welfare Plan Edition
- March 5, 2009 | Authors: Sarah Lockwood Church; Paul A. Kasicky; Kristen Belz Ornato
- Law Firm: Thorp Reed & Armstrong, LLP - Pittsburgh Office
New SCHIP Law Results in Plan Amendments and a New Disclosure Requirement
The new Children’s Health Insurance Program Reauthorization Act, which funds and expands the State Children’s Health Insurance Program (SCHIP), was signed into law by President Obama on February 4th. This new law impacts employer-sponsored group health plans.
Under SCHIP, the state has the option to provide a premium assistance subsidy for “qualified employer sponsored coverage” to all low-income children eligible for CHIP who (1) have access to employer-sponsored coverage and (2) elect, through a parent or guardian, to accept the subsidy. For purposes of SCHIP, “qualified employer-sponsored coverage” includes employer provided coverage where the employer pays at least 40% of the total premium for coverage. It does not include health flexible spending arrangements or a high deductible health plan.
SCHIP amends the Internal Revenue Code, ERISA and the Public Health Service Act to create new special enrollment rights for employees and their dependents covered by employer sponsored group health plans. These new special enrollment rights arise upon: (1) the termination of Medicaid or SCHIP coverage for an employee or his dependent resulting from loss of eligibility; or (2) an employee or his dependent becoming eligible for premium assistance in an employer’s group health plan under a Medicaid or SCHIP program.
In order to be entitled to the new special enrollment rights, an employee must request coverage within 60 days of the date that the coverage is terminated or the date the parent or child is determined to be eligible for the subsidy. This will have to be carefully followed for purposes of plan administration, since it is a larger enrollment period than the 30 days that apply to the other special enrollment periods. Plan documents and Summary Plan Descriptions will have to be amended in order to provide for the new (special enrollment rights) which are effective beginning April 1, 2009.
Finally, the new law imposes several new disclosure requirements. Employers in states that elect to provide the premium subsidy are required to provide written notice to their employees, informing them of the potential opportunity for premium assistance. The new law directs the government to develop model notices by February 4, 2010, and the notices must be provided in the first plan year after the date the model notices are issued, which would likely fall in 2011.
In addition, group health plan administrators will be required to provide information to states upon their request when a plan participant or beneficiary is covered under SCHIP or Medicaid. The exact form and nature of these information requests are being finalized by the government.
REMINDER: If you provide any health and welfare benefits to your employees on a pre-tax basis (i.e. you offer them the choice between cash and a pre-tax benefit, or several pre-tax benefits), the Internal Revenue Code requires that you have a written §125 Plan (Cafeteria Plan) in place.