News Briefings - Pension & Benefits

The following article was taken from the 10/12/08 issue of Pension & Benefits Week.

10/6/08 -- "Michelle's Law" extends health coverage for dependent students

BY unanimous consent on September 25, 2008, the Senate passed "Michelle's Law" (H.R. 2851), which will provide for the extension of existing health insurance coverage to dependant college students for up to one year in the event of a medically necessary leave of absence. Previously, the House had passed the bill on July 30, 2008 by voice vote, and so Michelle's Law is now poised to be signed into law.

Background. Dependents who are covered by a group health plan based on their enrollment in a post-secondary institution (i.e., college students covered under their parents' health plan in accordance with the plan's terms for dependent coverage) may lose eligibility for continued coverage if they take a leave of absence from school. Before Michelle's Law, neither the Code nor ERISA prevented a group health plan from terminating coverage where a dependent's leave of absence was for medical reasons.

New law. Michelle's Law (named in memory of a college student whose experience inspired this Act) prohibits group health plans from discontinuing coverage of college students who take a medically necessary leave of absence. Specifically, a group health plan is not allowed to terminate coverage of a "dependent child" under the plan due to a "medically necessary leave of absence" before the earlier of:

(1) the date that is one year after the first day of the medically necessary leave of absence; or

(2) the date on which the coverage would otherwise terminate under the plan's terms. (Code Sec. 9813(b)(1))

Thus, the continuity of health coverage is ensured for students, who because of a serious illness or injury, can no longer maintain student status, thus allowing the student to continue coverage on their parents' insurance plan for the duration of the plan year.

During a medically necessary leave of absence, a dependent child whose coverage is continued as described above, must be entitled to the same benefits during the medically necessary leave of absence, as if the child had continued to be a covered student at the institution of higher education, and was not on a medically necessary leave of absence. (Code Sec. 9813(d))

If a dependent child's coverage changes (as described in item (B), below) during a medically necessary leave of absence, the child is still entitled to continued coverage for the remainder of the period of the medically necessary leave of absence, in the same manner as the coverage would have applied if the changed coverage had been the previous coverage, as long as:

(A) the dependent child of a participant or beneficiary is in a period of coverage under the group health plan, pursuant to the child's medically necessary leave of absence;

(B) the manner in which the participant or beneficiary is covered under the plan changes, whether through a change in health insurance coverage or health insurance issuer, a change between health insurance coverage and self-insured coverage, or otherwise; and

(C) the coverage as so changed continues to provide coverage of beneficiaries as dependent children. (Code Sec. 9813(e))

Physician certification requirement. A group health plan is required to maintain coverage as described above only if the plan, or the issuer of health insurance coverage offered in connection with the plan, has received written certification by the dependent child's treating physician stating that the child is (1) suffering from a serious illness or injury, and (2) that the leave of absence (or other change of enrollment, see below) is medically necessary. (Code Sec. 9813(b)(3))

"Dependent child" defined. For purposes of these rules, a "dependent child" is a group health plan beneficiary who:

(a) is a dependent child of a plan participant or beneficiary, under the plan's terms; and

(b) was enrolled in the plan, based on being a student at a post-secondary educational institution (as described below), immediately before the first day of the medically necessary leave of absence involved. (Code Sec. 9813(b)(2))

"Medically necessary leave of absence" defined. For these purposes, a "medically necessary leave of absence" means, with respect to a dependent child in connection with a group health plan, either: (1) the child's leave of absence from a post-secondary educational institution (including an institution of higher education as defined in section 102 of the Higher Education Act of 1965 (20 USC 1001)), or (2) "any other change in enrollment" of the child at the institution, that:

(i) begins while the child is suffering from a serious illness or injury;

(ii) is medically necessary (see physician certification requirement, above); and

(iii) causes the child to lose student status for purposes of coverage, under the terms of the plan or coverage. (Code Sec. 9813(a))

RIA observation: Neither the Act nor the Committee Report describes what "any other change in enrollment" might be.

Notice requirement. As part of any notice regarding a requirement for certification of student status for coverage under a group health plan, the plan must include a description of the rules (above) requiring continued coverage during medically necessary leaves of absence. The description must be in language that is understandable to the typical plan participant. (Code Sec. 9813(c)) ERISA. Changes similar to the Code amendments (above) have been made to the parallel ERISA provisions. (ERISA § 714)<

Effective date. For plan years beginning on or after the date that is one year after the date of enactment, for medically necessary leaves of absence beginning during those plan years.

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