Eligible for HIPP

[Chaz]

Employer maintains a self-insured health plan. An employee enrolls herself in health plan through the employer's cafeteria plan but does not enroll her dependents.

Employee (still working) becomes eligible for Medicaid (don't ask). Under the employee's state's HIPP program, the state will pick up the tab for the employee's and her dependent's coverage under the plan. The state has sent a letter requesting that the plan put the individuals on the plan effective July 1. Since the plan runs on a calendar year, this would be in effect a mid-year election change.

Leaving ERISA preemption issues aside (which I think exist, but the employer doesn't mind complying), is the change problematic under Section 125? The two most relevant events permitting an election change don't seem to apply: It's not a QMCSO because it's not related to a divorce, separation, etc. and it doesn't fit in the Medicare/Medicaid exception because that exception only permits you to DROP coverage upon being eligible for Medicaid (and vice versa). Here, the employee is staying on the plan and the dependents are being added.

Any thoughts on this are appreciated.

[Chaz]

Does anyone have any insight on this?

[Chaz]

Bueller? Bueller?

[Guest Stuartt]

I'll give it a shot.

The 125 plan and the health plan are two separate plans. While the employee may not be able to make changes to the 125 election mid-year, no such prohibition applies to the health care plan.

There may be some basis in the health care plan to allow this participation with the state reimbursing the employer for the costs incurred. This does not involve Section 125.