New CHIP Notice Requirement for Employers

February 17, 2010

Employers that maintain group health plans in states that provide premium assistance for the purchase of group health plan coverage under a Medicaid or Children's Health Insurance Program ("CHIP") now have a new notice obligation. The vast majority of states provide this premium assistance, so most employers are impacted.

If you are one of these employers, you must provide a notice to your employees informing them of possible premium assistance opportunities in the states in which they reside ("CHIP Notice"). The initial CHIP Notices must be provided by calendar year plans by January 1, 2011 (for others, the deadline is the later of (1) the first day of the first plan year that begins on or after February 4, 2010; or (2) May 1, 2010). Following the initial notice, the CHIP Notices must be provided annually before the start of each plan year.

To assist employers in complying with the new notice requirements, the U.S. Department of Labor ("DOL") has posted a model of the CHIP Notice on its website at http://www.dol.gov/ebsa/compliance_assistance.html#section2.

Which employers are subject to the CHIP Notice requirement?

Employers that maintain group health plans in the following states are currently subject to the CHIP Notice requirements:*

Alabama

Nevada

Alaska

New Hampshire

Arizona

New Jersey

Arkansas

New Mexico

California

New York

Colorado

North Carolina

Florida

North Dakota

Georgia

Oklahoma

Idaho

Oregon

Indiana

Pennsylvania

Iowa

Rhode Island

Kansas

South Carolina

Kentucky

Texas

Louisiana

Utah

Maine

Vermont

Massachusetts

Virginia

Minnesota

Washington

Missouri

West Virginia

Montana

Wisconsin

Nebraska

Wyoming

To whom must the CHIP Notice be provided?

Employers must provide the CHIP Notice to each employee (regardless of the employee's enrollment status) who resides in a covered state. The state in which the employee resides may or may not be the same as the state in which the employer, the employer's principal place of business, the health plan, its insurer, or other service providers are located. Even if the employer is located in a non-covered state, if it has employees residing in a covered state, it must provide the CHIP Notice.

How should the CHIP Notice be provided?

The CHIP Notice must be provided in writing and in a manner designed to be understood by the average employee. It may be provided by first-class mail or electronically (subject to satisfaction of the electronic disclosure requirements). The CHIP Notice must be provided automatically and free of charge.

Employers may combine the CHIP Notice with other materials (e.g., enrollment packets or summary plan description) to reduce administrative costs. If the CHIP Notice is combined with other materials, (1) such materials must be provided no later than the required distribution date for the CHIP Notice, (2) such materials must be provided to all employees entitled to receive the CHIP Notice, and (3) the CHIP Notice must appear separately and in a manner which ensures that an employee could reasonably be expected to appreciate its signficance. Many employers will find it easiest to distribute the CHIP Notice as part of their fall 2010 open enrollment mailings.

What information should be included in the CHIP Notice?

The DOL's model CHIP Notice is designed as a template for use by employers who maintain group health plans in multiple states. Thus, employers may use the model CHIP Notice as a national notice to fulfill their employer notice disclosure obligation. An employer without multi-state issues may modify the model CHIP Notice to provide more state specific information.

Employers should periodically check each covered state's web site and compliance assistance materials to determine whether other disclosures are appropriate (in addition to the general/model CHIP Notice). The DOL expects to update its web site with other compliance information on an annual basis, so employers should also periodically check the DOL's web site.

If you are an employer, you should take steps over the next few months to determine whether you are subject to the new CHIP Notice requirements and make plans to comply.

*List is current as of January 22, 2010. The U.S. Department of Labor expects to update its web site with the list of states that offer premium assistance programs.

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