Health Insurance Portability and Accountability Act (HIPAA) Special Enrollment Rights provide the ability to add an individual to a group health plan without regard to prior health history when certain events occur (i.e. loss of coverage, marriage, birth, adoption, placement for adoption).
A health plan is an employee welfare benefit plan that provides medical care to employees and their dependents. It must be established by an employer. And it must comply with HIPAAs portability provisions. These rules apply to fully insured health plans and self-funded health plans that will include health care flexible spending accounts and health reimbursement arrangements.
Non-excepted Benefit: The benefit must satisfy the HIPAA portability rules. The “Portability” of HIPAA was initiated to ensure that, under certain circumstances, an employee who otherwise had not enrolled could enroll themselves or a newly eligible dependent in the employer’s group health insurance without being impaired by underwriting and potential pre-existing limitations.
What changes can I make to the non-excepted benefit and when will the change be effective?
In the case of a birth or adoption, under HIPAA Special Enrollment Rights, an employee may add this newly eligible child to their non-excepted Health Care flexible spending account (HCFSA) and group health insurance plan retroactive to the date of the birth. HIPAA stipulates that this addition must be done within a minimum of 30 days of the event (birth or adoption).
Excepted Benefit: The benefit does not need to comply with HIPAA portability requirements.
Excepted HCFSA must meet two conditions to qualify for excepted status:
- Availability: HCFSA participants must also have other group health plan coverage available to them during the plan year from the employer.
- Maximum Benefit Condition: HCFSA annual election cannot exceed two times the employee’s salary reduction for the plan year, or if greater, the amount of the employee’s salary reduction election for the HCFSA, plus $500. So in a nutshell, if an employer wants to contribute more than $500 it must be a matching contribution to satisfy this rule.
What changes can I make to the excepted benefit and when will the change be effective?
For the more common excepted HCFSA, the employee also has 30 days to enroll the child; however in this case the effective date is not retroactive to the date of the event like it is with the group health insurance plan. It is the date that the election change form is signed by the employee or the date of the event, whichever is later. As with the medical plan change in dependents, the employee has 30 days to notify the employer or the TPA of the change.
The HCFSA participant that wants to be able to claim expenses associated with the birth of the child with dollars from the increase to the election change should complete their Change of Election form prior to the birth of the child. If they complete the Change of Election form for an excepted Health FSA after the birth of the child, the expenses associated with the birth cannot be reimbursed from any of the increase to the HCFSA because that plan segment will only reimburse services that occurs effective after the birth of the child.
The Bottom Line
Group health plans and non-excepted HCFSA changes made within 30 days as a result of HIPAA Special Enrollment rights are retroactive to the date of birth of the child. However, if the employee has an excepted HCFSA and wants to be able to claim the expenses from the birth from the increase to the HCFSA election, they will need to complete the Change of Election form, prior to the birth of the child. If the employee completes the Change of Election form on an excepted HCFSA after the birth of the child, the expenses related to the birth will not be reimbursable from the increased election because that plan segment is effective for services that occur after the birth of the child.