Change in Status - Moved to another state

[Guest jmg]

How is this situated handled by the IRS rules:

An employee has family coverage for her and husband in local HMO plan. Husband moves to another state where there is no HMO coverage. Employee and husband are separated, though not legally separated. Plan on eventually getting a divorce.

Employee wants to drop husband from HMO plan since he no longer lives in service area.

Employer also maintains a PPO plan which covers all states.

Is the employee allowed to drop husband since he is no longer in service area?

Or should the employee be allowed to enroll in the PPO so that there is coverage for the employee and husband?

Thank you.

[papogi]

IRC 125-4 deals with address changes and election changes. In that section, it only states that an address change which affects eligibility for an employee, spouse, or dependent is a status change which allows an election change, as long as consistency rules are adhered to. For instance, a change in residence which does not affect eligibility will not allow you to come onto a plan which you haven't already signed up for. The cost and coverage changes section deals more with the restrictions such as having to elect a similar plan if one is available, and these don't apply in this case. Based on the regs, the employee should have the choice of dropping the husband from coverage entirely, or enrolling him in the PPO. As far as 125 is concerned, it's up to the employee. You'll also have to check the provisions of the underlying plans.

[Guest jmg]

The employee states that her husband moved out of state on September 1, 2002.

Also, husband does not have any new coverage.

My concern is if I allow the employee to drop the coverage then the husband will have no coverage. Also, will not be offered cobra coverage.

No guarantee that the husband even knows that the employee is dropping him.

Since he moved on September 1, 2002 maybe I can deny it based on the fact it is over 30 days.

[papogi]

Since we're talking about an HMO, the husband effectively has no coverage anyway since he is out of the service area. Of course, he could still drive back to the network for services. Check your 125 plan doc. You very well may have a valid reason to deny the request since it is after 30 days.