Thursday, January 31, 2019 - Bret McKitrick, JD

Typically, employers sponsoring group health plans provide employees and their dependents an opportunity to enroll in the health plan when they are first eligible (and, in certain instances, after completing a waiting period). Most employers also provide annual enrollment periods for employees (and dependents) who are eligible for the plan but did not enroll during an initial or prior annual enrollment period. Large employers complying with the “play or pay” rules under the Affordable Care Act know that this annual open enrollment opportunity satisfies the requirement to provide a chance to participate in the plan at least once per year.

Health Insurance Portability and Accountability Act (HIPAA) rules require group health plans to provide special enrollment opportunities to certain employees, dependents, and Consolidated Omnibus Budget Reconciliation Act (COBRA) qualified beneficiaries — but only upon the occurrence and notification of specific situations:

• Loss of eligibility for group health coverage or health insurance coverage;
• Becoming eligible for state premium assistance subsidy; OR
• Gaining a new spouse or dependent by marriage, birth, adoption, or placement for adoption.

None of this of course, is news to any employer plan sponsor. Neither is the fact that plans must notify eligible employees of their special enrollment rights at or before the time the employees are given the opportunity to enroll, typically in the Summary Plan Descriptions or other enrollment materials. What is less obvious is an often poorly-explained detail about the requirement of what an employee or dependent must have experienced prior to losing other coverage.

Individuals who lose their coverage

Group health plans must offer otherwise eligible employees and dependents an opportunity to enroll during the year outside of annual open enrollment periods when certain losses of coverage occur. This means that an individual who loses coverage under another group health plan, health insurance, Medicaid or state CHIP insurance will be permitted to enroll mid-year. The loss of coverage must be for reasons of ineligibility, suspension of employer contributions or the exhaustion of the COBRA coverage period.

The other requirement that an individual must meet in order to qualify for a special enrollment opportunity is that they must have “had other coverage” at the time the group-sponsored plan was last offered — either upon hire or during last open enrollment period. Frankly, many employers and employees miss the “had coverage” requirement, and are confused about special enrollment as a result. We’ll explore this in more detail and look at a couple of examples.

The “had coverage” rule

It’s important to note that a special enrollment right might still exist even if the employee or dependent did not have coverage when the employer plan was first offered — as long as they had coverage when they declined to be covered during a prior enrollment opportunity.  Here’s an example: Let’s assume that Betty and her husband Barney are eligible but not enrolled in the group health plan offered by Betty’s employer. When Betty was hired and initially offered coverage, neither Betty nor Barney had other coverage, but still declined to enroll in the employer’s plan. A few years later, Barney gets a job and the couple both enroll under Barney’s employer’s plan.  At the next open enrollment opportunity, Betty declines coverage under her employer’s plan because they both have coverage under Barney’s employer’s plan. A few months later, Barney gets  fired and loses eligibility in his employer’s plan. Thus, a special enrollment opportunity of loss of eligibility is created for both Betty and Barney under her employer’s plan because they were enrolled in the lost coverage at the time of her last open enrollment opportunity.

Let’s consider a less obvious scenario. Fred enrolled in coverage for himself and his wife, Wilma, when he was initially eligible. Later, he decides to drop coverage because Wilma gets a job with a better health plan. If Wilma loses her job and is no longer eligible for coverage under her plan, will they be afforded a special enrollment opportunity under Fred’s plan?  While the regulations do not specifically address this scenario, all signs point to special enrollment rights allowing Fred and Wilma to enroll back into Fred’s employer’s plan. The reason is that at the time coverage was dropped, Fred and Wilma both enrolled in another group-sponsored health plan. Case law and subsequent guidance has shown that the having the other coverage at the time coverage is dropped is synonymous with having coverage at the time an offer of coverage is declined.

What should employers do?

Being aware of these situations is most important, along with making sure special enrollment rights are communicated. As a condition of receiving special enrollment rights for loss of other coverage, some employers require employees to provide a written statement when declining coverage for themselves or their dependents, indicating whether the reason for declining coverage is having other coverage, often in the form of a check box asserting this statement.  While many employers do not require such a statement, HIPAA special enrollment rules do permit employers to enforce that condition. The law does mandate that such a requirement to provide the written statement (and the consequences of failing to do so) be clearly communicated at the time of enrollment. Contact us if you have any questions about special enrollment or other employee benefits issues.