New Illinois State Law Imposes Disclosure Requirements on Group Health Plans

On August 27, 2021, Illinois passed the Consumer Coverage Disclosure Act (“CCDA”), which became effective immediately.  The CCDA requires employers that sponsor group health plans with employees in Illinois to disclose a comparison of the plan’s coverage to certain “Essential Health Benefits” required by Illinois state law.  Specifically, the law requires employers to disclose the comparison to all employees eligible for the group health plan.  The required Essential Health Benefits are listed on the Illinois Department of Insurance’s website.

The CCDA broadly applies, regardless of the employer’s size or its location, to fully insured and self-funded group health plans.  Additionally, the Illinois Department of Labor (“IDOL”) has taken the position that the CCDA also applies to ERISA-covered self-funded group health plans.  Employers that haven’t complied yet may receive a notice from the IDOL giving the employer 30 days to comply or, possibly, be liable for penalties.

Covered Employers

The CCDA applies to any entity for whom employees are “gainfully employed” in Illinois.  There is no minimum number of employees needed for the law to apply.  As a result, it appears to apply to all employers that have employees who reside in Illinois.

Required Disclosures

The CCDA requires an employer to provide to all eligible employees a written list of the Essential Health Benefits required by Illinois state law, and a statement as to whether each benefit is included under the employer’s group health plan.  Employers may disclose this information by emailing the information to employees, or by posting the information on a website that employees can regularly access.

Miller Johnson Insight:  The CCDA doesn’t specify that the disclosure must be made to eligible employees in Illinois only.  However, it appears that the disclosure is only required to be made to eligible employees who reside in Illinois because the disclosure would be irrelevant to employees who reside in other states.  Additional clarification on this issue from the IDOL would be helpful.

Template Disclosure Form

The IDOL recently published a template disclosure form that employers can use to provide the required benefit comparison.  The template disclosure form is available as a download file here.

Timing of Disclosures

Employers must provide this disclosure to eligible employees upon hire, each year thereafter, and upon request.  As a result, the annual open enrollment period is a good time for employers to provide the disclosure for purposes of the annual disclosure requirement.  Employers must keep documentation that each employee received the required information for one year.

Penalties for Noncompliance

The IDOL has authority to enforce the CCDA.  The IDOL may request documentation demonstrating that the employer met its disclosure requirements.  Upon finding a violation, the IDOL may issue a notice giving the employer 30 days to comply.  A failure to meet the disclosure requirements may result in a penalty based on whether the employer has fewer than four employees, or four or more employees.  Employers with four or more employees face a maximum penalty of $1,000 for the first offense, up to $3,000 for the second offense, and up to $5,000 for a third or any subsequent offense (the penalty amounts for employers with fewer than four employees are $500, $1,000, and $3,000, respectively).

It is unclear whether each offense under the CCDA occurs on a per-employee basis, or on some other basis, such as the penalty applying each time the employer fails to satisfy the disclosure requirement (e.g., per-employee for each newly hired employee, per-year for the annual distribution requirement, or upon an employee’s request).  Again, additional clarification on this issue from the IDOL would be helpful.

The IDOL has discretion to determine the exact amount of the penalty based upon the facts and circumstances.  As a result, the penalties may be mitigated based on good faith efforts to comply and the nature of the violation.  Finally, an employer may apply for and obtain judicial review of any order by the IDOL.

ERISA Preemption

It is unclear whether ERISA preempts the CCDA.  As mentioned above, the IDOL released guidance stating that the new law applies to ERISA-covered self-funded group health plans.  However, until the issue is litigated, the application of ERISA preemption to this state law is uncertain.  Employers that sponsor ERISA-covered self-funded group health plans with eligible employees in Illinois may choose to comply with the CCDA’s requirements until there is more certainty on this issue.

If you have any questions about the CCDA, please contact the authors or another one of the Miller Johnson employee benefits attorneys.