The Department of Labor (DOL) has released a compliance guide to help employers understand ERISA's requirements regarding qualified medical child support orders (QMCSOs). Loosely defined, QMCSOs are judgments, decrees, or orders that require a group health plan to provide coverage to a participant's child (referred to as “alternative recipient”). QMCSOs usually require the plan of a child's non-custodial parent to provide coverage to the child, even if the child fails to meet the plan’s eligibility criteria.The new DOL guide responds to general questions regarding QMCSOs and National Medical Support Notices (NMSNs). (NMSNs are orders issued by state agencies to secure children’s health coverage. )

The following highlights have been drawn from the DOL compliance guide:

COBRA Rights. The DOL guide noted a question that surfaces with some frequency: does a child who is covered by a group plan pursuant to a QMCSO have continuation rights under the plan? The guide indicates that yes, such a child is a qualified beneficiary with the right to elect COBRA continuation coverage as long as the plan is subject to COBRA and the child loses coverage as a result of a COBRA qualifying event.

Employee Not Enrolled in Plan. Questions often arise about whether an order may require an eligible, but non-covered employee to become covered under the employer’s group health plan in order to enroll the child. The guide indicates that if a QMSCO requires the child to be covered and the plan requires the employee to be enrolled before a dependent can be enrolled, then yes, the employer can force the employee to become covered as well. The guide further notes that if the employee has not yet satisfied the plan's generally-applicable waiting period, and a bona fide QMCSO has been received by the plan sponsor, the employer must "have procedures in place so that the child will begin receiving benefits upon the employee's satisfaction of the waiting period." (The rules for National Medical Support Notices include similar requirements.)

Employee Enrolled in Different Coverage Option. If a plan provides that dependents must be enrolled in the same coverage and options as the participant, then an alternate recipient under a QMCSO must also be enrolled in the same coverage and options as the participant. However, if a QMCSO specifies that an alternate recipient is to receive a particular level of coverage or option under the plan and the participant has not selected the particular coverage or option, then the plan may be required to change the participant's enrollment to the extent necessary to provide the specified coverage or option to the alternate recipient.

DOL Publishes QMCSO Compliance Guide

Willis Benefits Alert is produced by Willis’ National Benefits Resource Department. The information contained in this publication is not intended to represent legal advice and has been prepared solely for educational purposes. Please

consult your attorney regarding issues raised in this publication. Willis publications appear on the internet at: www.focusonbenefits.com Copyright © 2003 Willis

August 20, 2003

(Cont’d from page 1)

Selection of Coverage Options. According to the guide, if the plan offers more than one type of coverage (e.g., HMO and fee-for-service options), the order should make clear which option should be provided or what factors govern the choice of health care option chosen for the child. If the order is unclear, the plan's procedures may direct the administrator to contact the submitting party or provide other selection methods similar to those established under the rules for National Medical Support Notices. (Those rules allow plans to enroll alternate recipients in a "default option" if the state agency does not select an option within a specified period of time.) If the plan has no such procedures, the administrator may have to reject the order. (Sample language to address this aspect of compliance is included below.)

Pre-Existing Conditions. Perhaps the most surprising answer relates to preexisting condition exclusions (PCEs) under HIPAA. According to the guide, a plan may impose its generally-applicable PCE provisions on alternate recipients (reducing the PCE for any prior creditable coverage). Interestingly, the guide also states that the time taken by a plan administrator to review an order and determine whether it is a QMCSO would not count as “break in coverage” time under the 63-day break-in-coverage rule (which disallows credit against the new plan’s PCE for prior creditable coverage that has been lost for 63 days or more). It is also the DOL's view that if a child was previously covered under a plan and was disenrolled by the parent-employee in anticipation of an event such as a divorce or separation, then the time between the child's disenrollment and the plan administrator's determination that an order is a QMCSO would not count as part of the 63-day break-in-coverage period.

Willis offers additional details about QMCSOs, as well as a sample employer policy, in Chapter 7 of the Willis Compliance Manual. Please contact your Willis representative for access to the Compliance Manual.

As described above, the following is sample language that when incorporated into a plan sponsor’s QMCSO procedures, should help address the DOL’s “default coverage” rule:

"The Issuing Agency must select from one of the plan's available options. If theissuing agency does not reply within 20 business days of the date this response is returned, the child(ren), and the participant if necessary, will be enrolled in the plan's default option of ________________."

Willis Benefits Alert is produced by Willis’ National Benefits Resource Department. The information contained in this publication is not intended to represent legal advice and has been prepared solely for educational purposes. Please

consult your attorney regarding issues raised in this publication. Willis publications appear on the internet at: www.focusonbenefits.com Copyright © 2003 Willis

August 20, 2003

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