Securing Health Insurance Benefits for Children of Divorcing Parents

Most family law attorneys are aware that a Qualified Medical Child Support Order (QMCSO) is used to secure health insurance coverage for children of divorcing parents, however we find that such orders are seldom used. As cumbersome as QMSCOs were to implement, not to mention draft, Congress and the Department of Labor have streamlined the process by creating a two page form called the National Medical Support Notice (NMSN).

This article answers the questions of “What” are National Child Support Notices or QMCSOs, “Why” you would use a QMCSO, “How” you would use a QMCSO, and “When” you would use a QMCSO.

The objective of QMCSOs and NMSNs is to provide health insurance benefits, ensure portability, and allocate cost in cases of divorce, or cases involving unwed parents. Unfortunately, securing health insurance benefits for children of divorcing parents can be overlooked in divorce, with the custodial parent having to contend with health insurance related problems long after the divorce. Problems that may arise include when the noncustodial parent with the health insurance benefits moves out of state, or is in a plan which does not recognize children as beneficiaries if not residing with, or a dependent of, a health insurance policy holder. Therefore, it is always suggested that language be added to the judgment for divorce that if the need arises, the custodial parent reserves the right to implement a National Medical Support Notice, or QMSCO, to maintain health insurance coverage for the children.

QMCSOs were modeled after Qualified Domestic Relations Orders (QDROs), in concept and format, however this is where the similarities end. QMSCOs were created from the Omnibus Reconciliation Act (OBRA) of 1993, which created section 609 of the Employee Retirement Income Security Act of 1974 (ERISA) as an amendment, to allow benefits to be provided to a child of a health insurance plan participant. This act required states to adopt laws to enforce administrative orders for medical child support, to require enforcement between health insurance carriers and employers, and to prohibit health insurance carriers from denying coverage to children that did not reside with the employee, or were born outside of wedlock.

Prior to the passage of OBRA of ‘93, many health insurers did not allow benefits to dependent children that did not reside with the parent who was an employee of the sponsoring company, or participant in a health plan. Although the child support enforcement program was formed in 1975[i], and the Medicare/Medicaid Antifraud and Abuse Amendments of 1977 created a medical support enforcement agency[ii], it wasn’t until the Child Support Enforcement Amendments of 1984 that improvements were mandated in medical support within state and local programs[iii]. Several acts were passed subsequent to 1984 that impacted child support enforcement, but none that emphasized the issue of medical support for children of divorced parents until the passage of OBRA of ’93. Still with the passage of OBRA of ’93[iv], there were more questions then answers, in terms of administration of QMCSOs, procedural matters, qualifications or eligibility issues, and most importantly the consistency between states for purposes of enforcement.

In an effort to unify the implementation and drafting of QMCSOs among and between states, legislation was passed under the Child Support Performance and Incentive Act of 1998 (CSPIA)[v]. The crux of CSPIA was to correct deficiencies by forming the Medical Support Working Group.

To streamline the implementation of QMCSOs, the U.S. Department of Labor issued certain rules[vi], effective January 26, 2001, relating to the provisions of the Child Support Performance and Incentive Act (CSPIA) of 1998, which created the National Medical Support Notice.

The QMCSO and National Medical Support Notice are actually one in the same, or a NMSN can be thought of as being a subset of QMCSOs. A NMSN can be issued by a number of agencies, without being signed by the court whereas a QMCSO normally is a court order instructing the employer, and likewise the health insurer, to provide coverage for named recipient children. In addition, the NMSN was created in response to a number of procedural and enforcement problems encountered by employers, plan administrators, and state child support agencies.

With the creation of National Medical Support Notices greatly simplifying the process of obtaining health insurance for children, not to mention the ease of completing a simple two-page form, it would seem apparent that the prior, more traditional form of a QMCSO has become obsolete.

The NMSN is comprised of a two part form. Part A is to be completed by the employer, and Part B is to be completed by the health plan administrator. The court, attorneys, or issuing child support enforcement agency (CSE), should submit both forms to the employer, who in turn completes Part A, and forwards both forms to the plan administrator for them to complete (Part B). These two forms are then sent back to the court or CSE issuing agency. The plan administrator of a group health care plan must then treat the NMSN as a QMCSO under section 609(a)(5)(c) of ERISA, if it meets the criteria[1].

The responsibility of the employer depends in large part on the benefits afforded to the employee participant. For instance, if family coverage is not available to the employee, extended benefits under a QMCSO or NMSN may not be possible. An employer need not provide benefits over and above what normally would be afforded to the employee. If the employer does not have health insurance that provides for vision or dental care, such benefits cannot be provided to children under a NMSN.

The employee does not need to maintain health insurance for himself or herself, but only be eligible for coverage or have access to coverage. Coverage then must begin at the earliest possible time. Drafting QMCSOs or NMSNs differ from drafting other types of orders since the benefits to be provided, or the extent of coverage, may change throughout time until the child, or each of the children covered, reaches the age of majority.

The National Medical Support Notice is considered to be a Qualified Medical Child Support Order (QMCSO) and by law a QMCSO requires an employer to permit the employee to enroll any child, who is otherwise eligible for health insurance coverage, without regard to enrollment period restrictions. Within 40 business days from the date the NMSN was issued, the health plan administrator must complete Part B and return a copy of it to the employer. With regard to insurance premiums, the premiums should be sent directly to the health insurance provider, not the child support agency.

For those cases where one or both of the parents have access to health care coverage, the cost is generally deducted from the parent’s child support obligation, based on the income used in determining the overall child support obligation. Another approach may be to average the costs of the health insurance coverage for the children and deduct one-half of such amount from the child support payor’s obligation. It is vitally important to check with the state’s child support guidelines to determine how the premiums are treated in relation to the overall child support obligation. The examples and illustrations used in this article assume that the employee spouse, with access to healthcare coverage, is also responsible for health care premium payments. Other costs associated with a child’s medical expense may also include co-payments, deductibles, prescriptions and counseling, as well as out-of-pocket expenses for those benefits not covered by insurance.

Keep in mind that the health care coverage being obtained for children need not only be in cases of divorce, but single parents with an absentee noncustodial parent, or children in foster care.

Should the noncustodial parent experience a change in employment, the existing order must be sent back to the CSE and a new one issued. These are but a few of the issues and contingencies that should be addressed in the settlement agreement or divorce judgment. The NMSN is an easy to use form for providing health care coverage, however, for those contingencies that cannot possibly be considered within the scope of a form order, the attorney for the nonparticipant spouse has an obligation to fashion the settlement agreement or judgment in such a way as to clearly define:

· Address possible sanctions or potential costs that the employee participant spouse may incur for noncompliance;

· Clearly state which party is responsible for co-payments, deductibles, or extraordinary expenses not covered by the insurance;

· Suggest that the employee participant spouse notify the custodial parent, within a certain time period, in the event of termination of employment; and

· To remind the parties that the child, or children, are to receive a summary of benefits, or Summary Plan Description, as well as benefit identification cards.

Once the divorce judgment is entered, or any judgment relating to child support as may be the case with unwed parents, a copy of the judgment should be forwarded to the state’s child support enforcement agency. It is suggested, as well, to emphasize that the judgment contains a provision for the implementation of a NMSN or QMCSO, since presumably most agencies are accustomed to only receiving child support orders. The CSE agency will then forward a NMSN to the employer with instructions to forward Part B on to the plan administrator. The employer then notifies the employee (obligor) that their dependents are covered at which time they will have 15 days to contest the Order/Notice. However, the dependents of the employee should remain covered under the designated health care plan until such time as the issues are resolved.

Lastly, the federal government, as well as the military[vii], will accept a “Medical Support Notice,” and perhaps the title “National Medical Support Notice,” but will not have to abide by the same rules or regulations as do employers in the private sector.

[i] The creation of Title IV-D of the Social Security Act was signed into law on January 4, 1975, as part of the Social Services Amendments of 1974; see also 42 U.S.C. §651.

[ii] P.L. 95-142.

[iii] P.L. 98-378, see also 45 C.F.R. §302.56(c)(3) which requires a state’s child support guidelines to provide health insurance for children.

[iv] P.L. 103-66.

[v] P.L. 105-200.

[vi] 29 C.F.R. Part 2590.

[vii] Military medical support notices are sent to DMDC Support Office, Attn: CA99, 400 Gigling Road, Seaside, CA 939550-6771. Military dependents must also obtain a DEERS Identification Card, as part of the Defense Enrollment and Eligibility Report System, to obtain health care benefits.