Children's Health Insurance Program Reauthorization Act of 2009 ("SCHIP")

President Obama signed into law the SCHIP Act which extends the State Children.s Health Insurance Program

established under the Social Security Act (CHIP). The new Act permits employers to subsidize premiums for employerprovided

group health coverage for eligible children and families. The Act also amends the Employee Retirement Income

Security Act of 1974 (ERISA) to provide for special enrollment rights, and called for new notice requirements to states

who choose to provide the subsidy along with penalties for non-compliance. To date, Pennsylvania has not adopted the

subsidy portion of the Act, but employers do have a responsibility to notify their employees of the special

enrollment rights addressed in the Act. A draft disclosure is attached for your use.

EFFECTIVE April 1, 2009 . Special Enrollment RightsBeginning April 1, 2009, employers who sponsor group health plans must permit employees and dependents

who are eligible but not enrolled to enroll in their group health plan under two circumstances: 1) the

employee.s or dependent.s Medicaid or CHIP coverage is terminated as a result of a loss in eligibility; and 2)

the employee or dependent becomes eligible for a subsidy (if their state chooses to offer the subsidy) under

Medicaid or CHIP.

The employee or their dependent must request coverage within 60 days after the employee or dependent is

terminated from, or determined to be eligible for the assistance with the subsidy.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) currently provides a special

enrollment period to those who have lost coverage and have had a family event such as birth or marriage. The

HIPAA special enrollment right extends for a 30-day period to request coverage due to a change in status.

Premium Assistance Subsidies

The Act also provides for premium assistance subsidies to low-income employees at the election of each state

(PA has not made an election at this date). Employees who wish to change their single coverage to family

coverage in order to cover a CHIP or Medicaid eligible dependent may do so and be provided a subsidy. The

subsidy will make up the difference between the employee contribution required for single coverage and the

employee contribution required for coverage of the employee and a child.

The subsidy can be provided as either a reimbursement to the employee or a direct payment to their employer.

The employer may also opt-out of receiving the direct payment and may require that the employee be

reimbursed.

A state may only offer subsidies for .qualified employer-sponsored coverage. which includes group health

plans for which the employer contributes at least 40% towards the cost of the coverage, but the rules exclude

flexible spending accounts and high deductible health plans.

Notice to Employees

Model notices that address the subsidy that states may offer are being developed by the Department of Labor

and the Department of Health and Human Services and expected to be published by February 4, 2010. Group

health plans will be required to provide notice to employees upon enrollment, or in their Summary Plan

Description.

Disclosure to States

Plan Administrators will be required to disclose information about their plans to states upon request to help

states determine the cost-effectiveness of providing the subsidy.

As your employee benefit plan compliance consultants, we will notify you if and when Pennsylvania adopts

the subsidy portion of the Act. For now, you should update your employees with regard to their Special

Enrollment Rights under the Act by either updating your Summary Plan Description (.SPD.) or providing

notice through a Summary of Material Modification (.SMM.) to be attached to your SPD and distributed to

employees.

Notice obligations with regard to the subsidy portion of the Act are not required until a model notice and

disclosure form is issued by the Department of Labor and the Department of Health and Human Services.

As always, please contact your account manager should you have questions regarding compliance.