Volume 18, Number 6
DOMESTIC RELATIONS LAW
A National Blanket of Health Care Coverage
Making QMCSOs and COBRA Work
By Carlton D. Stansbury
Health insurance is critical to protecting a divorcing spouse and child. Congress has provided two federal safeguards: Qualified Medical Child Support Orders (QMCSO) and the consolidated Omnibus Budget Reconciliation Act of 1985. (Although created under COBRA, these federal rights were transferred to the ERISA statute in 1988. They are still regarded as COBRA rights.)
QMCSO. A Qualified Medical Child Support Order creates or recognizes a child's right to receive health care benefits for which a parent is eligible under a group health plan. The child of an employee becomes an "alternative recipient" for health benefits and the administration of benefits. Thus, the child becomes both a beneficiary and a plan participant. This allows the child to have independent rights and remedies under ERISA.
A QMCSO allows a child, parent, or legal custodian to work directly with a health insurance provider for benefits and payments. Each is entitled to an insurance card, a list of providers, and an explanation of benefits and procedures directly from the plan administrator. This can be invaluable when a nonemployee seeks direct and ready access to the insurance company regarding health care or payment issues. More important, a child may choose a plan or options that best suit his or her needs. The insurance company, in turn, can reimburse directly any expenses paid by the child, custodial parent, or legal guardian.
QMCSOs were made possible by an amendment to ERISA, the same legislation that created Qualified Domestic Relations Orders (QDROs). ERISA gives state courts the power to order QMCSOs and QDROs. Thus, the two provisions are similar. An "alternate recipient" in a QMCSO is analogous to an "alternate payee" in a QDRO. A QMCSO begins as a Medical Child Support Order (MCSO) until it is "qualified." The MCSO can be any judgment, decree, or order (including the approval of a settlement agreement and a notice as a result of an administrative proceeding) issued by a court of competent jurisdiction pursuant to a state domestic relations law.
The MCSO must specifically provide health coverage for the child of a participant enrolled in a group plan. After it is issued, the MCSO is sent to the plan administrator for qualification. Qualification procedures are similar to those for a Domestic Relations Order (DRO).
The MCSO must contain the name and last known mailing address of the participant and the name and mailing address of each child covered by the order; a reasonable description of the coverage to be provided under the plan or the manner in which such coverage is to be determined; the period to which the order applies; and each plan to which the order applies. Like a DRO, the MCSO cannot require the plan to provide any type or form of benefit or option not otherwise provided under the plan.
When drafting a MCSO, working closely with the plan administrator will help maximize benefits allowed under the order, make qualification go smoothly, and ensure a complete and accurate description of the available coverage. If the employee is eligible for a number of different benefit options or plans, ask the plan administrator whether the child is limited to those selected by the employee or whether he or she has additional options.
A MCSO may cover medical, vision, dental, prescription drugs, or employee assistance benefits provided to the employee under a group plan. If allowed by the plan administrator, include a provision in the MCSO that allows immediate notice if the plan is changed by the employee, the employer, or the plan administrator, or if the employee is no longer eligible for the plan because he or she has quit or canceled the insurance.
The issue of who pays for insurance or any increase in the cost due to options selected by the child is not required to be part of the MCSO. However, addressing costs up front in the order may limit future problems. It is also a good idea to address who pays for uninsured costs, deductibles, coinsurance, and costs incurred if plan requirements are not followed. Unlike a retirement asset, which is subject to division at divorce, several QMCSOs may exist during the child's minority. This is because employees change jobs or benefits, employers change benefits or plans, and plans change benefits. Another reason to work with a plan administrator is to provide language that limits, to the degree possible, the ongoing need for revised QMCSOs.
Other health mandates. Congress has passed other federal laws requiring states to enact laws to protect a child's health insurance. These laws relate to enrollment and disenrollment issues, dependency requirements, residency, notifications, claims procedures, reimbursements, and scope of coverage.
A working knowledge of your state law is important in drafting a complete and effective MCSO. A working knowledge of federal and state law and insurance benefits can impress the plan administrator and make MCSO drafting and qualification easier.
COBRA. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires employers with group health plans to offer continuing health insurance to employees, their spouses, and their dependents for up to 36 months.
COBRA applies only to employers that provide group health benefits to more than 20 employees working on a typical business day. COBRA requires strict compliance by employers and beneficiaries. The coverage provided under COBRA is the same as that provided under the group health plan. The definition of "group health plan" is technical and covers a large number of plans. But COBRA does not apply to church plans or some government plans.
COBRA goes into effect upon a "qualifying" event and requires an individual to be a beneficiary of a group health plan on the day before the qualifying event. Such events include death of the covered employee; the employment termination of a covered employee (voluntary or involuntary), or the reduction of a covered employee's hours to the point at which he or she is no longer eligible for coverage; the divorce or legal separation of a covered employee; and a dependent child's no longer being dependent.
If a beneficiary fails to elect coverage during an "election period," coverage is lost forever. The election period expires 60 days after the individual would lose coverage as a result of the qualifying event or 60 days after the individual is notified of his or her right to elect COBRA as a result of a qualifying event.
Once COBRA is elected, coverage is provided from the date the coverage would otherwise be lost. A beneficiary who waives the election can revoke it if the revocation is within the election period. In that situation, coverage may lapse for a time between the qualifying event and the waiver revocation. COBRA coverage cannot last longer than 36 months.
A plan administrator generally is required to provide notice of a qualifying event, except in the case of a divorce, legal separation, or a dependent ceasing to be a dependent. The covered employee or beneficiary is responsible for notifying the administrator of the qualifying event within 60 days of the divorce, legal separation, or cessation of dependency status.
If neither party informs the plan administrator, rights could be permanently lost. To protect the nonemployee spouse and children, provide language in the agreement assigning responsibility for notifying the plan administrator. If no agreement has been reached, inform the nonemployee spouse of his or her rights and the notice deadlines.
The beneficiary electing COBRA coverage may be required to pay up to 102 percent of the premium. The beneficiary will pay the entire expense, including the employer's share of the premium. Although premiums can be monthly, failure to make timely payments can result in a termination of benefits.
Some states have enacted provisions similar to COBRA for smaller employers. These laws may differ from COBRA, for example, in length and scope of coverage or costs. It is important for a family law practitioner to become familiar with state laws relating to coverage at the conclusion of a divorce or legal separation.
Working together. A QMCSO should not be confused with COBRA law. A QMCSO is not limited to a specific number of months. It may be used regardless of the number of employees as long as the definition of group health plan is satisfied. COBRA rights must be exercised within specific time frames, but QMCSOs may be used any time a court action exists. Because the child, as an alternate recipient, has the same rights and remedies as a participant, a QMCSO should address COBRA continuation coverage and conversion rights upon the QMCSO's termination.
Carlton D. Stansbury practices with Burbach & Stansbury S.C. in Milwaukee, Wisconsin.
This article is an abridged and edited version of one that originally appeared on page 19 of Family Advocate, Spring 2001 (23:4).