Department of Labor Issues Model Employer CHIP Notice

As described in Holland & Knight’s May 13, 2009 Labor, Employment and Benefits alert, the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIP) was signed into law on February 4, 2009 by President Obama. One effect of CHIP is new notification requirements imposed on private employer health plans. On February 4, 2010, the Department of Labor issued additional guidance on these notification requirements, including a model form notice for employers.

Under CHIP, states may elect to offer health coverage insurance premium subsidies to eligible children for “qualified employer-sponsored coverage,” which may be provided 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) offered by an employer in a non-discriminatory manner, and for which the employer contribution toward 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 by the state at the end of every month.

Also under CHIP, if an employer offers qualified employer-sponsored coverage in a state that elects to provide premium subsidies, the employer must annually notify employees and participants of the existence of such a program. As of January 22, 2010, 40 states (including Florida) offered such programs. Under the new Department of Labor guidance, employers must provide this notice based on the state in which the covered employee is located regardless of the employer’s location or principal place of business. The initial notice must be provided by the later of: (1) the first day of the first plan year after February 4, 2010; or (2) May 1, 2010. The notice must be provided to all employees, regardless of whether an employee is eligible to participate in the qualified employer-sponsored coverage. The notice may be provided concurrently with other enrollment and related materials.

After the initial notice, employers must provide employees with an annual notice as well. The Department of Labor guidance also includes a form notice that employers may use to fulfill CHIP’s notification requirements, although the guidance explicitly states that employers may alter this model notice to provide additional information and to suit their individual needs.