Q&A: Group Plan Special Enrollment

When does a special enrollment apply to employees in your group health plan?  We’ve answered one of the more common questions heard from clients below.

Question

Our employee has been covered on his spouse’s employer health plan. She recently lost her job and health care coverage. Does this qualify as a midyear election change, meaning our employee can elect coverage for himself and his family, even though he did not previously have coverage from us?

Answer

HIPAA special enrollment rights would likely be triggered in this scenario. HIPAA special enrollment rights apply when an individual (employee, spouse, or dependent) is covered under another health plan at the time the employer’s coverage was offered to them and the other coverage is exhausted, terminated as a result of loss of eligibility, or employer contributions to the other coverage cease. HIPAA special enrollment rights also apply in other circumstances unrelated to this scenario, such as birth of a child, marriage, adoption or placement for adoption, and loss of eligibility under Medicaid or CHIP, or gaining eligibility for a state premium assistance subsidy under the plan from Medicaid or CHIP.

Employers or insurance carriers may also require employees, in writing and at the time of declining coverage under the group health plan, to indicate that they are declining coverage for themselves or their dependents because they have other health coverage as a condition of eligibility for a special enrollment right. If this condition is implemented (as it is not required), then if an employee fails to provide this information in writing the plan is not required to provide special enrollment to the employee or their spouse or dependent(s). This condition and the consequences of failing to indicate the reason coverage was declined must be clearly communicated to the employee at the time of initial eligibility and at each open enrollment, and should be included in plan materials.

An employee generally has 30 days (unless the plan allows for a longer period) after a special enrollment right is triggered to request enrollment in an employer’s plan. In this case, because the employee’s spouse’s plan is a group health plan subject to HIPAA’s portability provisions, then the spouse’s loss of eligibility for, and involuntary termination of, her group health plan coverage will trigger a HIPAA special enrollment right for the employee and his family under your group health plan. If your plan required the employee to indicate in writing that he declined coverage due to having coverage under another plan, then you should check to ensure this requirement was met.

When HIPAA special enrollment rights are triggered, § 1.125-4(b)(1) of the IRS permitted election change regulations allow an employee to make a new election that corresponds with special enrollment rights in order to make pretax contributions for benefits elected. This and other permitted election changes are voluntary on the part of the employer and must be adopted in the employer’s written cafeteria plan document to be available to employees.

Another of the permitted election changes (§ 1.125-4(c)(2)(iii)) applicable to this scenario is available when an employee or an employee’s spouse or tax dependent experiences a change in employment status, such as losing a job and, therefore, losing eligibility under the applicable plan. In your case, the employee and his family were enrolled in the spouse’s group health coverage. Since the spouse lost eligibility when her employment terminated, so long as your cafeteria plan has adopted this change in status event for midyear changes, the entire family would be eligible to enroll in your company’s group health plan and make pretax contributions for benefits elected.