Federal Rules for Children's Coverage | Plan Provisions and Taxation

Until the passage of the Omnibus Budget Reconciliation Act of 1993 (OBRA '93), provisions regarding eligibility were determined by the employer, provider underwriting practices, and/or any applicable state laws. OBRA '93 brought the federal government into the picture with a series of rules designed to better guarantee that benefits are available to children. Some of these rules pertain to eligibility.

Coverage for Adopted Children
One rule is in the form of an amendment to ERISA. If a work-related group medical expense plan provides coverage for dependent children of participants or beneficiaries, it must provide benefits for adopted children or children placed for adoption under the same terms and conditions that apply to natural children. For purposes of this change, a child is defined as a person under the age of 18 at the time of adoption or placement for adoption. Placement for adoption occurs at the time in the adoption process when the plan participant or beneficiary assumes and retains the legal duty for the total or partial support of a child to be adopted.

In addition to providing coverage, a plan cannot restrict benefits because of a preexisting condition at the time coverage is effective as long as the adoption or placement for adoption occurs while the parent is eligible for plan participation.

Medical Child Support Orders
Two other rules have as their goal the shifting of Medicaid cost from the government to the private sector by requiring employer-provided benefit plans to pick up more of the cost of providing medical expense benefits to the children of divorced and separated parents. The first of these rules amended ERISA by requiring employer-sponsored medical expense plans to recognize qualified medical child support orders by providing benefits for a participant's children in accordance with the requirements of such an order.

The act defines a medical child support order as a court judgment, decree, or order that (1) provides for child support with respect to the child of a group plan participant or provides benefit coverage to such a child, is ordered under state domestic relations law, and relates to benefits under the plan or (2) enforces a state medical support law enacted under the new Medicaid rules discussed below. The support order then becomes qualified if two additional requirements are met. First, the order must create or recognize the right of the child to receive benefits to which the plan participant or other beneficiary is entitled under a group plan. Second, the order must include such information as the name and last known mailing address of the plan participant and the child, a reasonable description of the coverage to be provided the period for which coverage must be provided and each plan to which the order applies. However, a qualified order cannot require a plan to offer any benefit that is not already available under the plan unless the benefits are necessary to meet the requirements of a state medical child support law established under the Social Security Act.

When a plan administrator receives a medical child support order, the administrator must promptly notify the participant and each child named under the order and inform them of the plan's procedure for determining if the order is a qualified medical child support order. Under the act, all group plans must establish reasonable written procedures for determining whether these orders are qualified.

Changes in Medicaid Rules
Under the final rule that is discussed, states were encouraged (under threat of losing some Medicaid reimbursement) to adopt a series of laws relating to medical child support. One of these laws prohibits plan administrators from denying enrollment of a child under a parent's insurance plan on the grounds that (1) the child was born out of wedlock, (2) the child is not claimed as a dependent on the parent's federal income tax return, or (3) the child does not reside with the parent or in the insurer's service area. In addition, a second law provides that if a court orders a parent to provide medical support, the parent's plan must enroll the child without regard to any enrollment restrictions. If the parent fails to enroll the child, enrollment can be made by the child's other parent or by the state Medicaid agency. The employer is required to withhold from the parent's compensation any payments that the parent must make toward the cost of coverage.