Election Changes

[Guest Looser]

Employee has a dependent child on his health insurance. The child is over 19 and is covered only why she is a full-time student. The child was a full-time student in during the first term of 2001. In the second term of 2001 the child dropped below full-time status. The child registered for the first term in 2002 but, due to the child’s academic performance in the last term of 2001, was placed on academic dismissal. The dependent child appealed and lost; this process took the better part of January 2002. Per the University, the dependant is treated as though he/she was never a student of any classification for the first term of 2002.

The plan year is the calendar year. OE was in November of 2001. The employee elected family coverage for 2001 and 2002. The employee now wants to change the election to employee & spouse. Since the change in status actually occurred when the dependant stopped being a full-time student in the spring of 2001, can the change in election be made now?

[Sandra Pearce]

Read the Plan Document for the 125 Plan regarding changes. Most plans are written to accept changes prospectively after notification of the family status change by the employee (although some do require that notice to be in a certain number of days after the change in family status). In our plan notice today that the child was ineligible in our health plan would allow us to make the change effective 4/1/2002.

[Guest Looser]

Yes, our plan does allow this within 30 days of the status change. The problem is that the status change happened in 2001. The University does not consider the dependent child to have ever been a student during any part of 2002. When the employee elected the benefit the dependent child was not eligible, nor is the child eligible today. Per the plan doc, absent a status change, the election cannot change. Are there any provisions for “error” or “mistake” that I am missing? Could we say that the employee was mistaken when he elected dependant coverage because he didn’t have any eligible dependants?

Ahhhh!!!

Thanks so much for the previous reply, and any help that you can give me.

[Sandra Pearce]

Does the employee have some documentation of the child registering for Spring 2002 and then getting the "dismissal?" Or maybe the response to the appeal. I could see using either of those as documentation of loss of coverage.

[mroberts]

You should be able to make the change as long as you have the documentation of the events. The university probably issued a letter indicating that the student will not be considered a full-time student due to academic inadequacies. The employee would then have 30 days from the date of the letter to elect the change.

Also, I'm sure just explaining this to the carrier will correct everything. If you were talking about making a change in flex plan deductions, it's one thing. Removing a dependent child from the medical plan who no longer satisfies the definition of eligible dependent is another thing. Coming from a carrier, we would have no problem accepting this change even without documentation.

[PhilB]

I have a somewhat related situation. An employee elected family status but did not cover a dependent who was away at college because "the child has insurance through the school". I suspect the "insurance" might really be free health services, but in any event, the employee now wants to add this child to his family coverage because the child will be home for the summer. The premium isn't an issue because the employee is already paying the family rate. However, I can't find any rule that would allow this dependent to be added based on a status change. Anyone know differently?

[Sandra Pearce]

There are colleges that have low cost health insurance available to the students, and these coverages are not limited to care at a school clinic. It is possible that the child has lost coverage due to eligibility for coverage (not in school for the summer). I would ask the parent to provide documentation of the prior coverage and loss of coverage.

[PhilB]

The dependent wouldn't be newly eligible (he could have been enrolled before) and the lose of coverage was not through another employer, so I'm still not certain if this would qualify in any way as a status change allowing the employee to enroll the dependent.

[papogi]

The coverage doesn't have to be from another employer. A child losing coverage under a state-sponsored plan, for instance, has lost coverage, and a parent could then add the child to their group coverage at work. If the student had actual coverage through the school, and this has now ceased, the student should be allowed on the employee's plan.

[GBurns]

Maybe I am missing something.

There is no change being made to the employee's election of coverage or status. The employee already elected family coverage, is already paying for it, the employee just wants to add a dependent not change the coverage.

I do not see where this is even a section 125 issue, it seems to be an insurer issue.

[Sandra Pearce]

If there is no additional cost for this additional dependent, it is an eligibility issue only for the health plan.

[papogi]

Agreed. Since this employee's election is already family, there will be no change. In hindsight, the root of PhilB's recent question was whether a loss of free health services constitutes a loss of coverage under HIPAA, since we don't need to be concerned with 125. With this in mind, the following posts make sense. Perhaps it should have been originally posted on another board.

[PhilB]

So, you're saying that if the premium payment is unaffected, the employee could add any number of additional dependents without this being a section 125 issue?

[papogi]

Yes, because no change is being made to the 125 election. If the underlying plan allows the dependent on either through HIPAA or a loose late enrollment provision, the dependent is basically on the 125 by default if the employee already has family coverage. The 125 plan is not a benefit plan, it's simply a pre-tax funding issue, and the election remains unchanged with the addition of a dependent under these circumstances. Section 125 is better seen as a "benefit funding mechanism", not a "plan." The underlying plan will always dictate whether or not a dependent can be added or not. Section 125 will only dictate how that dependent is paid for.

Assume the employee had single coverage. Also assume that you have a 125 which does not allow any mid-year changes. In this case, the dependent in question could come onto the underlying plan through HIPAA's loss of coverage provisions, but any additional payroll deductions associated with the added dependent will need to be taken post-tax.