The Children's Health Insurance Program Reauthorization Act of 2009: What It Means for Private Employer Health Plans
The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA), signed into law on February 4, 2009, by President Obama, reauthorizes and strengthens the State Children’s Health Insurance Program (SCHIP). While the majority of CHIPRA will be administered directly by state governments, CHIPRA does include provisions that affect private employer health insurance plans, including new (1) special enrollment provisions, (2) required notifications to employees and participants, and (3) disclosure requirements with respect to state agencies.
SCHIP was established as part of the Balanced Budget Act of 1997 and provided federal matching funds to states in order to provide health insurance coverage to uninsured, low-income children who did not qualify for regular Medicaid coverage. States could use the funds to provide coverage for such children either through a SCHIP-financed Medicaid expansion program, a separate child health program, or a combination of the two. States could also use up to 10 percent of the funds on SCHIP administration costs, child health outreach initiatives and health services initiatives for children of any income level.
Federal funds covered between 65 percent and 85 percent of each state’s SCHIP costs, but, unlike Medicaid under which states may draw an unlimited amount of funds as necessary, SCHIP funds were capped at a maximum amount for each state. The amount of SCHIP funds granted to each state was determined using a statutory formula based on the state’s share of uninsured, low-income children. States had three years to spend their allotted SCHIP funds; unspent funds were forfeited and sent to other states for their use, providing an incentive for states to use allotted funds in their entirety.
The 110th Congress passed two bills to continue SCHIP funding for fiscal years 2008 through 2012, but both were vetoed by President Bush. Congress was unable to override these vetoes. The Medicare, Medicaid and SCHIP Extension Act of 2007 was enacted December 29, 2007, and extended SCHIP funding through March 31, 2009.
2009 Reauthorization of and Changes to SCHIP
On February 4, 2009, President Obama signed CHIPRA into law. CHIPRA, which strengthens and reauthorizes SCHIP (renamed CHIP) through September 30, 2013, is financed largely by a nearly $0.62 per package tax increase on cigarettes. By 2013, CHIPRA is expected to extend coverage to 4.1 million children who would otherwise be uninsured.
CHIPRA makes a number of changes to SCHIP, the majority of which went into effect April 1, 2009. As compared to SCHIP, CHIPRA:
- expands eligibility levels and simplifies enrollment procedures (including proof of eligibility and nationality requirements)
- makes major changes to the formula used to determine the amount of CHIP funding a state will receive, which will now be based largely on each state’s actual use of and need for funds
- requires states to spend their allotted funds in two (rather than three) years before funds will be forfeited and re-allocated to other states
- provides additional flexibility on states’ ability to set income eligibility levels for the program
- permits states to provide coverage to pregnant women under CHIP
- permits states to eliminate the five-year waiting period previously imposed under SCHIP on legal immigrant pregnant women and children and enroll them in Medicaid and/or CHIP immediately (illegal immigrants remain ineligible for all programs)
- provides bonuses to states if (1) actual enrollment in CHIP exceeds target levels (and creates a contingency fund to pay for such coverage), and (2) states implement certain eligibility simplification initiatives
- eliminates adult coverage that was previously provided under SCHIP
- provides $100 million for outreach grant funding and enhanced funding for translation and interpretation services
- requires that CHIP include dental coverage and permits states to use CHIP funds to provide supplemental dental coverage to privately insured eligible children
- provides for the development of new child-specific health quality measures and the creation of a new electronic medical record system for children
Requirements for Private Employer Plans
The vast majority of CHIP will be administered directly by state governments. However, CHIPRA does place requirements on private employer health coverage plans. First, the plan must provide for two new special enrollment opportunities. Second, CHIPRA allows states to elect to subsidize health coverage insurance premiums for employer-provided group health coverage for eligible children. If a state elects to subsidize such premiums, CHIPRA requires private employer plan sponsors to provide notification to employees and participants about such a program and to provide certain disclosures to state agencies upon their request.
New Enrollment Provisions
Effective April 1, 2009, CHIPRA required private employer group health plans to permit non-enrolled employees and dependents that are eligible for coverage to enroll in the plan outside the normal open enrollment period in two circumstances:
- if the coverage of the employee or dependent under Medicaid or CHIPRA is terminated as a result of loss of eligibility
- if the employee or dependent becomes eligible for Medicaid or CHIPRA premium assistance subsidy
In each case, the employee must request coverage under the private group health plan within 60 days of such an event.
Notification of Premium Subsidies
Under CHIPRA, states may elect to offer health coverage insurance premium subsidies to eligible children for “qualified employer-sponsored coverage,” which may be provided either via reimbursements to the employee or as a direct payment to the employer. “Qualified employer-sponsored coverage” is defined as a group health plan or insurance program (whether fully insured or self-insured) that is offered by an employer in a non-discriminatory manner and for which the employer contribution towards the premium is at least 40 percent. Health Flexible Spending Accounts and high-deductible health plan benefits are specifically excluded. “Qualified employer sponsored coverage” must also permit children to “opt-out” of the plan by moving back into direct coverage with the state at the end of every month.
If an employer offers “qualified employer-sponsored coverage” in a state that elects to provide premium subsidies, the employer must notify employees and participants of the existence of such a program. CHIPRA requires the Secretary of Health and Human Services (the “Secretary”) to develop model notices on or prior to February 4, 2010. Effective for plan years following February 4, 2010, plan sponsors must then use these model notices and provide notification to employees.
Coordination of Information Requirement
Additionally, if an employer offers “qualified employer-sponsored coverage” in a state that elects to provide premium subsidies, the plan sponsor must disclose to the state, upon its request, sufficiently specific information about the benefits available under the plan so that the state may assess the cost-effectiveness of electing to provide the premium subsidy. Within 60 days of the enactment of CHIPRA, the Secretary is charged with establishing a working group to develop model coverage coordination materials for plan administrators to provide such information.
Failure to Comply
CHIPRA imposes a $100 per participant per day fine for failure to comply with the new notice and disclosure requirements.
- Private employers needed to include the special enrollment provisions in their plans effective as of April 1, 2009.
- Notifications to employees and participants regarding premium subsidiary programs will be required for plans with participants in states that elect to provide such subsidiaries for plan years after February 4, 2010.
- Coordination requirements for plans with participants in states that elect to provide such subsidiaries will be in effect once the Secretary’s working group has issued additional guidance and/or coverage coordination materials.