With the passage of The American Recovery and Reinvestment Act of 2009 (“ARRA”), H.R. 1 (signed today by the President) and The Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”), H.R. 2 (signed February 4, 2009 by the President), employers who are now burdened with keeping their businesses afloat in these difficult economic times, are faced with meeting new obligations under these bills. Both bills together constitute a new complex set of rules governing health plans. The requirements imposed are enough to discourage many small employers from maintaining these plans so that some employers may feel the need to drop their health care programs for employees altogether.
CHIPRA
The first set of new obligations flow from the H.R. 2 Children’s Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”). Under these new rules, employers with health plans will have the following additional responsibilities:
(1) To provide employees with notice of enrollment rights for their eligible participants and beneficiaries under CHIPRA.
(2) To decide whether they will “opt out” of the premium assistance program whereby the states may make direct payments to the employer for eligible employees and their children. If they opt out, the premium assistance subsidy will be paid directly to the employee.
(3) To provide special enrollment rights in their health plans for employees that lose Medicaid or CHIPRA coverage.
Also, group health plan administrators are required to disclose to states, upon request, information about their group health plans that will enable the state to make a determination about the cost-effectiveness of providing premium assistance for the purchase of coverage under the plan for plan participants and beneficiaries eligible for the program.
There are civil penalties of up to $100 a day for failure to comply with the new notice and disclosure requirements. The effective date for the premium assistance and special enrollment provision is April 1, 2009.
ARRA
There is a second set of new obligations for employers in maintaining their health plans pertaining to the COBRA subsidy instituted by ARRA (HR 1). Under ARRA, individuals who incur an “involuntarily termination from employment” between September 1, 2008 and December 31, 2009 will be entitled to a government subsidy of 65% of the premium, if the individual wants to elect COBRA. These new rules are effective for coverage periods following the date of enactment.
Under these rules, employers will have to identify which former employees are required to receive notice about the subsidy and the new special enrollment right. Only “assistance eligible individuals” (“AEIs”) are entitled to the subsidy. AEIs are those individuals who are eligible for COBRA continuation coverage between September 1, 2008 and December 31, 2009 resulting from their involuntary termination of employment. There are subsidy “phase outs” for AEIs whose federal modified adjusted gross income exceeds $125,000 ($250,000 for joint filers).
Employers will have new notice requirements under the rules as well as reporting requirements. Employers will need to work with vendors and payroll systems to make sure they are able to comply with the new rules. And, of course, to add to this burden, all health plan documents, SPDs, and cafeteria plan documents will have to be amended to comply with the requirements.
Finally, there will also likely be a whole truckload of guidance and regulations needed to interpret and answer questions that practitioners have regarding the implementation of all of the above.