Drop Baby From Health Plan

[Guest mezmez]

Our Health plan is governed by the 125 rules so the birth of a child is considered a qualifying event. However, if the baby is born and then the employee wants to have the baby covered under the spouse's insurance, is this request consistent with the event? The employee would then drop her child's coverage with us. Obviously it would be a qualifying event on the spouse's side as well. Is this okay to do?

[jsb]

The birth is a qualifying event that ALLOWS the child to be added. It does not require it. If the employee wants to add the child to the spouse's plan, she would simply NOT ADD the child to her own coverage.

If she added, but is now changing her mind, this is another story. There would need to be a qualifying event to allow her to drop the child, such as the child becoming eligible (and being enrolled) under the spouse's plan.

Then there is the ever faithful, "what does your plan document permit?" 125 sets an outside permissible limit for mid-year changes, your particular plan may be much more restrictive.

[Guest mezmez]

Thanks for the quick response. Here's another related ?. Our insurance plan coverage is month to month. Let's say she has the baby August 20th, covers the baby for 11 days in August, and then notifies us the last day of the month that she wants to cancel the coverage because the spouse will cover the child. Since this is still within the 30 day time limit of making an election change, is that permissible? Can she make two different election changes from one qualifying event?

[jsb]

As a HIPAA event, coverage for the baby is retroactive to the date of birth if enrolled within 30 days of birth, so there should be no need for all of the convoluted changes. Generally, a newborn child should be covered automatically under the mother's plan for 30 days so there is time to get all of the enrollment details straight. The only real problem that should occur is if someone misses their 30-day (or 31, or whatever your plans permit) enrollment window.

That said, let's take a whack at the situation. Birth 8/20. Mother enrolls child on her plan before 9/1. Mother's plan would "officially" go into effect on 9/1 (even though it is really retro to DOB). But now mom is in the office on 8/31 to cancel the child from her plan. Unless mom has paid premium for 8/20 - 8/31 you could make the case that her election is not yet in effect. It hasn't gone into effect so why wouldn't she be allowed to change it?

If mom's coverage is in effect, can still do this if she provides documentation of enrollment in dad's plan. 1st eligibility and enrollment under dad's plan could be considered its own distinct 125 event, though the circumstances make it a little goofy. If done within 30 days of birth, coverage under dad's plan should also be effective on DOB.

To be on the safe side, both mom and dad need to read their plan docs to understand what their particular plans permit. It would not be too difficult to construct a scenario by changing a day here or there such that this really gets messed up and the child ends up without any coverage because of some misunderstanding of plan terms. Seek the simplest route that fits within the plan(s) terms, and benefits the employee(s) the most.

We run into a related situation occassionally with new hire employees. Sign up for PPO coverage at new employee orientation in the middle of the month, then come screaming in to change their plan because their spouse read the material and didn't like their choice. As long as the election has not gone into effect (that being either payment for coverage, or the coverage itself becoming effective even though actual payment isn't until the next pay period) we will allow a person to modify their election. So if our person is here on 8/30, we would let them fix their election. But if they are here on 9/3, they need to mark their calendar for annual enrollment or document a new qualifying event under our 125 plan.

Good luck.

[GBurns]

Are you sure that "Our Health plan is governed by the 125 rules " ?

I have never seen such a Plan.

If you are fully insured this would conflict with state insurance laws. Whether fully insured or self-insured, there is compliance with HIPAA, COBRA ,USEERA etc etc etc.

[Guest mezmez]

Thanks for the answer jsb. It makes total sense the way you described it.

GBURNS, sorry for the miscommunication. What I meant to say was that the premiums for the Medical Plan are pre-taxed via our 125 Flex Plan, which meant that any change would have to be governed by a Qualifying Event and consistent with the event.