Benefits Compliance

CHIP Notice: Employers Must Notify Employees Annually of Possible Premium Assistance from Children’s Health Insurance Program (CHIP)

If you sponsor a calendar-year group health plan, don’t forget to send all eligible employees a CHIP Notice before January 1, 2012. Noncompliance could result in a penalty from the Department of Labor (DOL) of $100 per day per non-notified employee. The CHIP Notice must be sent annually – not just to plan participants but also to each employee who is or might become eligible for employer group health benefits. (See further clarification below.) The CHIP Notice informs eligible employees of their possible right to receive financial assistance through Medicaid and the Children’s Health Insurance Program (CHIP) to pay for premiums for health coverage under the employer’s plan, if such assistance is currently available in the states in which employees reside. You can include this annual notice as part of your Open Enrollment packet. The DOL provides a model notice, which it updates periodically (most recently as of July 31, 2011). The current model notice is at: http://www.dol.gov/ebsa/chipmodelnotice.doc.

What’s in the Model Notice?
The model notice includes contact information for the Medicaid and/or CHIP programs in each state that provides premium assistance (38 states as of July 31, 2011). Employers can provide the entire 3-page model notice to all employees, or may instead wish to shorten the notice and provide state-specific information only for those states in which employees reside. The model notice is short and easy to understand. It starts out: “If you are eligible for health coverage from your employer, but are unable to afford the premiums, some States have premium assistance programs that can help pay for coverage.”

Background
The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) was enacted on February 4, 2009, and reauthorized the federally-mandated State Children’s Health Insurance Program (SCHIP) which is partially funded under state law. CHIPRA not only imposed an annual notice requirement on employers who sponsor group health plans, it also required plans to offer a 60-day “special enrollment” period (rather than the prior 30-day period under HIPAA) for employees and/or dependent children who either lose coverage under, or become eligible for group health premium assistance under, a Medicaid plan or a state CHIP plan.

Who Gets the CHIP Notice?
The law itself actually says the employer must send the Notice to “each employee” but it goes on to say the annual notice may be provided when notifying an employee of health plan eligibility, concurrent with materials provided at open enrollment, or concurrent with furnishing the summary plan description, and these circumstances apply only to eligible employees. Additionally, the Notice itself applies only to employees who are or become eligible for employer health coverage. So, it seems logical to send the CHIP Notice only to employees who are eligible for employer health coverage. Employers who prefer to err on the side of caution may wish to also notify employees who could become eligible even if the employee is not currently eligible to enroll.

Who Must Send the CHIP Notice?
The law requires that the CHIP Notice be sent by each employer that maintains a group health plan in a State that provides premium assistance under a State Medicaid plan, the Social Security Act, or a State child health plan. This notice requirement applies even if the employer’s location or principal place of business is not in one of the states listed in the model notice. If your plan is insured and your carrier sent the CHIP Notice out with other open enrollment materials (usually not the case), or if your plan is self-funded and your TPA sent the CHIP Notice, you are not required to send it out again to plan participants. However, you should send it to other eligible employees who did not receive the CHIP notice from the carrier or TPA because they are not plan participants, but who do reside in states that offer premium assistance.

Distributing the Notice
The CHIP Notice may be mailed to eligible employees by first-class mail or distributed electronically in compliance with the DOL’s electronic notice distribution rules. These rules generally allow electronic distribution without prior consent to employees who have work-related computer access to the employer’s electronic information system; but require affirmative prior consent from employees with no work-related computer access.

The CHIP Notice may be included with open enrollment materials or sent separately. If it is not sent before the first day of your plan year, it should be sent as soon as possible thereafter, to avoid potential penalties from the DOL of $100 per day per employee who should be sent a notice and is not.

Action Plan

  1. Review the Model Notice to confirm that you have employees in one or more of the 38 states listed in the Notice.
  2. If so, check with your carrier (for insured plans) or your TPA (for self-funded plans) to see if they will notify plan participants or eligible employees before the beginning of the upcoming plan year. If they will, decide whether you will also send the CHIP notice to other employees.
  3. If you will be sending the Notice (whether to all employees or only to eligible employees), decide if you will send the entire Model Notice, or will only include information about those states in which your employees reside.
  4. Send the notice to all (or all eligible) employees, either by first-class mail or electronically. If you do not send it before the beginning of the plan year, send the notice as soon as possible after that date to avoid potential penalties of $100 per day per affected employee.