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ARTICLE:
Protecting Children's Health Insurance
Benefits in a Divorce
by RONALD
R. TWEEL & WILLIAM
C. SCOTT, IV
In almost every
divorce involving children, the domestic relations practitioner
is confronted with three main issues regarding medical insurance:
1) which party is to provide insurance coverage for the children,
2) how does one guarantee that the children remain covered
once that insurance takes effect, and, 3) how does one ensure
that the appropriate parent is reimbursed for out-of-pocket
medical expenses which are later paid by the insurance company.
All three issues represent a significant challenge to the
domestic relations practitioner — a challenge which cannot
be ignored or left to chance due to the vital importance insurance
plays in the continued care of the children of divorcing couples.
The issue of which party is to provide medical
insurance for the children of divorcing couples is most evident
in cases where the custodial spouse does not have medical
insurance available either because he or she is not working
or is employed in a position where health insurance is not
provided as a benefit. This issue is commonly addressed by
negotiating which spouse is to provide the insurance and including
a provision in the separation agreement (and ultimately the
decree of divorce itself). Of course, in a litigated case,
the practitioner may ask the court to include such a provision
in its order. Va. Code Ann. § 20-60.3(7).
There is generally no problem if the provider/payor
spouse complies with the separation agreement and/or order
by providing the insurance. However, what happens when the
obligated party does not comply? The options are limited.
The practitioner can utilize the contempt powers of the court
to force compliance of the insurance coverage; however, often
it takes a considerable amount of time to procure a hearing
and, even then, there is nothing the court can do to actually
insure the children should the spouse continue to be noncompliant.
All the while, the children remain uninsured. The other option
is for the party seeking insurance coverage to provide the
insurance themselves. At best, this is costly for the party;
at worst, the insurance is unobtainable.
Likewise, guaranteeing that the children are
not removed from insurance coverage by the noncustodial spouse
or the insurance company is difficult when coverage is provided
by agreement or court order. Often, a noncustodial parent
will cease paying for insurance coverage. By the time the
custodial parent learns that the coverage has lapsed it is
too late. An uninsured accident or illness can cost thousands
of dollars and spell financial ruin for the parent. While
court action can punish the noncompliant spouse, often the
damage is done.
Finally, the health insurance issue which, in
our experience, causes the most conflict between parties after
the divorce is reimbursement for out-of-pocket expenses. It
is common for the custodial parent to be required to pay a
portion of the health care costs at the time the service is
received. Later, the health insurance carrier reimburses these
costs to the insured but not to the parent who actually paid
the expense. Negotiating an agreement which provides that
the noncustodial parent is to reimburse the custodial parent
for these costs does not guarantee compliance and it can be
time consuming and expensive for the custodial parent to pursue
reimbursement. Often, custodial parents resign themselves
to the belief that it just is not worth pursuing. They give
up and the tension between the parties mounts.
There exists a far more certain and efficient
way to handle these issues. In 1993, Congress amended the
Employee Retirement Income Security Act of 1974 ("ERISA"),
29 U.S.C.S. §§ 1001-1461, which amendment carved
out a second exception to the rule that orders emanating from
state courts are preempted to the extent they relate to an
ERISA plan. Most domestic relations practitioners know that
the first exception to ERISA allowed state courts to divide
retirement plans by entering a Qualified Domestic Relations
Order (QDRO). Such QDRO's are now used extensively by practitioners.
This second exception to ERISA is the Qualified Medical Child
Support Order ("QMCSO"), which works much like a
QDRO and allows state courts to order insurance plans to provide
health insurance to the children of divorcing parties.
QMCSOs are a very valuable tool for the domestic
relations practitioner because they allow courts to direct
private health insurance plans to enroll the children of divorced
spouses in the plan, as opposed to ordering one of the parties
to do so. No longer are attorneys faced with the uncertainty
as to whether a payor spouse will comply with an order to
enroll his or her children in their health plan. The plan
itself must do so if an appropriate QMCSO is entered by the
court. After the children are covered, they cannot be removed
from coverage. The QMCSO can even provide for reimbursement
of out-of-pocket expenses directly to the custodial parent
who is not the one providing the insurance.
The problem with QMCSOs is that the majority
of domestic relations lawyers are either unfamiliar with or
not using them. One indication of this is the computer search
we performed on West Law which revealed only one case in which
a QMCSO was even mentioned in an opinion. This really does
not make sense as QMCSOs are very easy to draft and they offer
a much higher level of protection to children than negotiated
agreements or court orders.
Authority for Qualified Medical Child Support
Orders is found in Chapter 18 of ERISA, Subchapter 1, Subtitle
(B), part 6, which is entitled "Continuation Coverage
and Additional Standards for Group Health Plans." 29
U.S.C.S. §1169. As stated above, QMCSOs order group health
care plans to enroll the children of divorced parties as "alternate
recipients" of the plan and to provide them with the
benefits of the plan. The term "Medical Child Support
Order" is defined as "any judgment, decree, or order
(including approval of a settlement agreement) which--(i)
provides for child support with respect to a child of a participant
under a group health care plan or provides for health benefit
coverage to such a child, is made pursuant to a State Domestic
Relations law (including a community property law), and relates
to benefits under such plan, . . . if such judgment or decree
or order (I) is issued by a court of competent jurisdiction
or (II) is issued through an administrative process established
under State law and has the force and effect of law under
applicable state law." 29 U.S.C.S §1169 (a)(2)(B).
Therefore, it is first necessary for the practitioner to secure
a Medical Child Support Order from a court of competent jurisdiction
before the Plan Administrator can make the determination that
the order "qualifies" and is, therefore, a Qualified
Medical Child Support Order. Once again, this procedure is
very similar to that used in the QDRO process.
The statute defines the term "Qualified
Medical Child Support Order" as a "Medical Child
Support Order--(i) which creates or recognizes the existence
of an alternate recipient's right to, or assigns to an alternate
recipient the right to, receive benefits for which a participant
or beneficiary is eligible under a group health plan, and
(ii) with respect to which the requirement of paragraphs (iii)
and (iv) are met. 29 U.S.C.S. §1169 (a)(2)(A). The "participant
or beneficiary" of which the Code speaks is, of course,
the parent who is covered under the health care plan. The
requirements of paragraphs (iii) and (iv) are as follows:
paragraph (iii) requires certain information to be included
in the order, including:
(A) The name and last known mailing address (if any) of
the participant and the name and mailing address of each
alternate recipient covered by the order, except that, to
the extent provided in the order, the name and mailing address
of an official of a state or a political subdivision thereof
may be substituted for the mailing address of any such alternate
recipient,
(B) a reasonable description of the type of coverage to
be provided to each such alternate recipient, or the manner
in which such type of coverage is to be determined, and
(C) the period to which such order applies.
29 U.S.C.S. §1169 (a)(iii). Paragraph (iv) places a
restriction on new types or forms of benefits and states:
A medical child support order meets the requirements of
this paragraph only if such order does not require a plan
to provide any type or form of benefit, or any option, not
otherwise provided under the plan, . . .
29 U.S.C.S. §1169 (a)(iv).
It is not necessary for the practitioner to
draft two orders; rather, one order should be drafted which
meets the requirements of both a Medical Child Support Order
and a Qualified Medical Child Support Order. The form provided
in the appendix to this article is designed to make it easier
for the practitioner to satisfy all of the above-enumerated
requirements. However, an understanding of these requirements
is certainly helpful when tailoring the order to fit a particular
case. The bottom line is that all ERISA group health plans
are subject to QMCSOs. So long as the order contains the required
information and is issued by a court of competent jurisdiction
pursuant to state domestic relations law, the health plan
must enroll the children and provide benefits. It is not even
necessary that the judgment, decree or order contain the above
required information so long as the separation agreement contains
these provisions and that agreement has been ratified and
incorporated into the decree of the court. (NOTE: The QMCSO
may be included in a separate order or included in the final
decree of divorce.)
Some important things to remember about QMCSOs
are as follows:
a. Federal law permits a QMCSO to continue in effect until
the alternate recipient actually graduates from college.
However, under Virginia law, courts cannot order child support
beyond the child's 18th birthday unless that child is a
full-time high school student, not self-supporting and is
still living in the home of the party seeking support, with
the maximum time period being the child's 19th birthday.
Va. Code Ann. § 20-124.2(C). While the parties may
negotiate coverage through the completion of the child's
college degree, it would be reversible error for the court
to do so outside of any agreement between the parties. Ultimately,
the maximum time period under which a child can be covered
pursuant to a QMCSO is dictated by the terms of the plan.
The drafting attorney should contact the plan administrator
and obtain a copy of the plan description in order to insure
no violation of the plan occurs.
b. The QMCSO should define the costs of the child's health
insurance coverage. This will allow the court to address
who is responsible for the premium payment. The law is unclear
as to whether a family premium covers the child or a single
premium covers the child. However, if this is defined in
the QMCSO, then there should be no confusion.
c. The statute states that the order meets the requirements
only "if such order does not require a plan to provide
any type or form of benefit, or any option, not otherwise
provided under the plan." 29 U.S.C.S. §1169 (a)
(iv). While this language seems clear, it is actually uncertain
whether an alternate recipient may choose benefits which
are not exactly the same as the benefits chosen by the participant.
It is our opinion that the alternate recipient cannot choose
benefits which differ from those chosen by the participant.
The only exception may be when a child lives outside of
a service area of an HMO in which the participant is enrolled.
The child may be able to enroll in another HMO or in another
plan available to participants who live outside of the service
area. Once again, if the QMCSO addresses this issue, this
may not be a problem. Ultimately, the plan administrator
will make the final determination as to whether or not the
order violates the plan; however, the more specific the
order, the less chance there is for confusion.
d. If you are dealing with a plan which will not consider
the alternate recipient to be a "dependent" within
the meaning of the plan's eligibility requirements and,
therefore, will not allow the child to be covered, the QMCSO
will override this and require the health insurance provider
to cover the child regardless. This is also the case when
one is dealing with a plan that has specific enrollment
period requirements. It is possible that the QMCSO may order
the health insurance provider to cover a child immediately,
as opposed to waiting for the next enrollment period.
e. The procedure which the plan administrator must follow
to determine the Medical Child Support Order's qualified
status is as follows: The plan administrator is required
to notify the participant and each alternate recipient of
the receipt of that order and the plan's specific procedures
for determining the qualified status. The plan administrator
then has a "reasonable period" of time to determine
whether the Medical Child Support Order qualifies and to
then notify the participant and the alternate recipient
of such determination. In administering QMCSOs, the plan
administrator is a fiduciary and, therefore, subject to
general good-faith ERISA standards in determining, processing,
and administering QMCSOs. Civil actions may be brought by
a state or a state agency to enforce compliance with QMCSOs.
f. Once children are covered under the health plan, they
cannot be removed either by the noncustodial parent or by
the plan unless the employee terminates his employment.
It is unclear whether a QMCSO can require a noncustodial
parent's employer to cover the child under its group health
care plan and require the non-employee custodial parent
to pay for the coverage after the employee terminates his
employment; however, once again, the child likely has the
same COBRA rights as the participant.
g. Benefit payments for reimbursement pursuant to a QMCSO
are paid directly to the alternate recipient or the alternate
recipient's custodial parent. The QMCSO should define to
whom these benefits are to be paid. Therefore, a big advantage
to a QMCSO is that it is not necessary for the custodial
parent to pursue the noncustodial parent for reimbursement
of these benefit payments.
We have demonstrated that QMCSOs are a very
valuable tool for the domestic relations practitioner as they
offer far more protection to children than the traditional
way of requiring the parent to cover the children on their
health insurance policies. However, Virginia State law does
not require entry of QMCSOs. How then, do practitioners convince
the attorney for the non-custodial parent to execute a Medical
Child Support Order? One must explain the benefits of a QMCSO
and demonstrate that those benefits outweigh any negative
impact of the order. For example, the practitioner can explain
that a QMCSO will limit future conflict between the parties.
An example of this is the requirement that reimbursements
be paid directly to the custodial parent. That is, the noncustodial
parent will not feel that the custodial parent is "hassling"
him or her for reimbursement of expenses. QMCSO's really take
it out of the hands of the parties and place the responsibility
for reimbursements directly upon the shoulders of the insurance
plan. Clearly, this would limit animosity between the parties.
Further, the QMCSO can provide that the payment of the insurance
be deducted directly from the non-custodial parent's paycheck.
This again will reduce conflict between the parties because
the payments will be timely made. The health care plan will
also have to keep the alternate recipient informed of all
aspects of the plan, to provide a plan summary, and to notify
of any changes in the plan, all of which make it easier for
the non-custodial parent in that he or she does not have to
constantly call the plan in order to receive answers to questions.
In fact, the custodial parent will not have to turn to the
non-custodial parent every time he or she has a problem with
insurance because he or she will have direct access to the
health care plan itself.
This new tool allows practitioners to assure
clients that the children will remain covered under the designated
health insurance plan regardless of the action or inactions
of the parents and will also allow direct reimbursement from
the insurance provider to the parent who paid the medical
expense. Also, there is really no downside for either parent
and counsel for both should agree to the entry of a QMCSO
for the benefit of the children.
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