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Defining Eligibility: Start With Plan Terms

Posted in Plan Administration, Welfare Plans

One of the quirks about PPACA is that the measure of "affordability" of coverage is based on the value of single (or "employee only") coverage.  A qualifying plan has to make coverage available to dependents, but it can exclude spouses as dependents.  And don’t forget that outside of PPACA, there are ERISA rues, IRS rules and sometimes state rules that define "dependent" or "spouse" for various purposes.  So as we get closer to the 2014 deadline, plan sponsors should be reviewing their welfare plans to make sure they have these terms properly and consistently defined so that they make coverage available to those they intend to offer it to, and exclude those intended to be excluded.

Of course, PPACA is not the only consideration for clarifying these terms.  What constitutes a "spouse" or "dependent" can vary.  For example, in Maryland, the state is getting ready to eliminate coverage for "domestic partners" because as of January 1, 2013, same-sex marriage became legal in that state.  That means that there would no longer be a need to carve out coverage for same-sex partners who could not marry.  In sum, now that everyone can get married under state law, the term "spouse" now has no differentiation between same-sex or opposite-sex couples.  Continuing to provide coverage to same-sex domestic partners would also now discriminate against opposite-sex couples who chose not to marry because eligibility of benefits would be based on sexual orientation (specifically being in a same-sex relationship gets you benefits without the legal commitment of marriage).

And it is not just major medical plans that should be reviewed.  Cafeteria plans have their own set of eligibility rules and definitions.  Some plan sponsors may want to consider excluding coverage for claims incurred by spouses not covered by the major medical plan.  They don’t have to, but remember that the rules for eligibility in a cafeteria plan define certain benefits the plan MAY provide, not MUST provide.  It is up to the plan sponsor to define who is actually eligible.  The same holds true for the definition of employee eligibility for "full time" or "part time" employees.  PPACA has penalties for not providing coverage to employees who work 30 or more hours per week, but it is up to the plan sponsor to make sure the definitions in the plan match the desired eligibility requirements.  Your plan terms control the operation of your plan, not PPACA.

So, when you are looking at who you want to cover, start with your definitions and see how your plans defined "full time," "eligible employee,’ "spouse" and "dependent."  These terms will dictate who can participate in your plan.  Once you decide who you want to let in, make sure your plan correctly identifies them.  And if you need help sorting out eligibility terms, make sure to contact your attorneys at Fox Rothschild.