Recently, the Illinois Department of Labor (DOL) released frequently asked questions and a model form relating to the Illinois Consumer Coverage Disclosure Act (“Act”). The Act, which was passed in this August, requires employers with Illinois employees to notify employees whether their group health plans provide certain “essential health benefits” prescribed under Illinois law (referred to hereinafter as the “Required Disclosure”). The Required Disclosure must be provided to all Illinois employees eligible for employer-sponsored coverage upon hire, annually, and upon request.
Though the Act took effect on August 27, 2021, the Act does not specify when the first Required Disclosure must be provided. Therefore, covered employers may want to provide the Required Disclosure to all Illinois employees and to new hires as soon as practicable.
Covered Employers
The Act applies to all employers (including out-of-state employers) that provide group health insurance to employees in Illinois, regardless of the type of insurance they provide. This includes employers whose group health insurance plan is not regulated by the state of Illinois (i.e., fully insured plans written out of other states) and employers who sponsor self-insured plans.
Potential Preemption: Generally, where a state law interferes with a federal law, the federal law displaces, or “preempts,” the state law. It is arguable that the Illinois Required Notice obligation conflicts with the ERISA, a federal law that dictates the administration of employer-sponsored ERISA plans. The Illinois DOL FAQ seemingly addresses this issue by stating that the Act creates a benefits notice requirement that applies to Illinois employers and does not have any direct impact on employer-provided plans. See the DOL FAQ.
Although the Illinois notice requirement may be preempted by ERISA, it is unclear whether any party will seek to invalidate the requirement in federal court. Therefore, the conservative approach would be for employers to provide the Required Notice in accordance with the Act. Employers may want to discuss this requirement with their legal or ERISA counsel for further guidance.
Required Disclosures
Covered employers must notify employees about which “essential health benefits” are and are not covered by their employer-sponsored group health insurance. “Essential health benefits” are benefits that are required for individual coverage sold in Illinois.
It is important to note that the Act does not require employers to provide coverage for these “essential health benefits” under their group health plans. Rather, the Act requires employers to simply disclose whether their group health plans cover these benefits.
The Illinois DOL has recently provided a model form that employers can use to fulfill their disclosure requirement. The model form includes a list of the essential health benefits and a section under each benefit where employers can indicate whether their plan covers the benefit. To complete the model form, employers should review each of their group health plans to determine which essential health benefits are covered.
Employers are not required to use the model form and can instead provide this information with other enrollment materials, such as the Summary of Benefits and Coverage (SBC) or Summary Plan Description (SPD). However, it is important to note that employers must explicitly state whether the plan covers Illinois essential health benefits, which may not be clearly stated in existing plan documents. Therefore, the easiest and most straightforward method to fulfill the notice requirement is to use the model form provided by the DOL.
Required Recipients: The Required Disclosure must be provided to all employees “gainfully employed” in Illinois. The disclosure must be provided to all employees who are eligible for employer-sponsored coverage, not just those who enroll in coverage.
Employers do not need to provide the disclosure to part-time employees not eligible for coverage, independent contractors, or non-employee COBRA participants.
Timing of Disclosures: Covered employers must provide the required disclosure to Illinois employees at the following times:
- Upon hire;
- Annually; and
- Upon request.
As such, it is recommended employers provide this disclosure during annual open enrollment to all benefits eligible employees, as well as with an Illinois employee’s new hire paperwork.
Method of Disclosure: Covered employers may provide via:
- Email; or
- On a website that employees can regularly access.
Recordkeeping: Employers must maintain records indicating they provided the Required Disclosure for at least 1 year.
Enforcement and Potential Penalties
The Illinois DOL is responsible for enforcing the Act and has the power to conduct inspections to ensure compliance. Upon request by the DOL, employers must demonstrate that each covered employee received the Required Disclosure. If the DOL finds an employer violated the Act, the DOL will provide 30 days for the employer to comply.
If an employer fails to comply within the prescribed 30-day window, the DOL has the power to impose the following penalties:
| Employer Size | Civil Penalties |
| Employers with fewer than 4 employees | 1st Offense: Up to $500 2nd Offense: Up to $1,000 3rd or Subsequent Offense: Up to $3,000 |
| Employers with 4 or more employees | 1st Offense: Up to $1,000 2nd Offense: Up to $3,000 3rd or Subsequent Offense: Up to $5,000 |
The amount of the penalty will be determined based on good faith efforts made by the employer to comply and the gravity of the violation.
Employer Action
Employers with Illinois employees will want to take the following steps:
- Provide the Required Disclosure to all eligible Illinois employees as soon as practicable and annually thereafter;
- Provide the Required Disclosure to Illinois new hires and upon request; and
- Maintain documentation such disclosure was provided for at least 1 year.
Additional Resources
- Illinois DOL: DOL.ConsumerCoverageDisclosure@Illinois.gov; (312)793-2800
- Consumer Coverage Disclosure Act
- Frequently Asked Questions
- Model Required Disclosure
Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved
