The Institute for Continuing Legal Education
I. WHAT IS A QUALIFIED MEDICAL CHILD SUPPORT ORDER?
A. A Qualified Medical Child Support Order ("QMCSO") is an order enacted under authority of a 1993 amendment to the federal Employee Retirement Income Security Act of 1974 ("ERISA") § 609, specifically 29 USC § 1169. (1) It orders a medical plan to provide medical benefits to the children of the parties pursuant to a divorce, child custody action, paternity suit, family non-support action, or other state domestic relations action, where financial support of children is involved. (2)
B. A QMCSO is sometimes referred to (incorrectly) as a "kiddie QDRO" in reference to Qualified Domestic Relations Orders. A QMCSO has nothing to do with retirement or pension funds, even though it is governed by ERISA.
II. WHO HAS DEFINED ROLES UNDER A QMCSO?
A. A QMCSO must identify the medical plan providing health care benefits to the children. The medical plan must be a "group health plan" as defined by ERISA § 607(1) and Internal Revenue Code ("IRC") § 213(d). (3)
B. A QMCSO must identify the current employer offering the medical plan.
C. A QMCSO must identify which parent is the employee who is covered under the employer's medical plan. This parent is termed the plan participant.
D. A QMCSO must identify the other parent who is not participating or not eligible to participate in the Medical Plan (non-participant parent). Often, this parent will be the custodial parent. This parent is also the designated recipient of formal notices from the plan to the children.
E. Finally, a QMCSO must identify the children of the parties who are to be covered by the medical plan. The children are referred to as alternate recipients under the QMCSO.
III. WHY SHOULD AN ATTORNEY PREPARE AND HAVE ENTERED A QMCSO INSTEAD OF RELYING ON THE MORE STANDARD SIMPLE LANGUAGE IN A JUDGMENT COVERING HEALTH CARE BENEFITS?
A. The overall purpose of a QMCSO is to allow the parent with the better healthcare coverage to provide his or her superior benefits to the minor children, when these children live with the other parent and are not dependents on his or her personal income tax return. In other words, no longer need parents be restricted to the healthcare coverage of the custodial parent, as that parent is defined by the Internal Revenue Code, by employers, or by the administrators of health care plans.
1. A QMCSO allows the better health care plan to cover the children regardless of whether or not the children live in the insurer's catchment ("geographical service") area.
2. A QMCSO eliminates the requirement of most Health Maintenance Organizations ("HMO"s) and Preferred Provider Organizations ("PPO"s) that a child be a dependent for income tax purposes before they can be enrolled in the HMO or PPO. (4)
B. A QMCSO allows coverage of children regardless of status, including:
1. whether or not the child is adopted and has pre-existing medical illnesses, (5)
2. whether or not the child was born out of wedlock, or
3. whether or not the child is currently covered by Medicaid.
C. A QMCSO protects the children against a unilateral change in health care coverage by the parent who is the plan participant.
1. It prevents the parent who is the plan participant from unilaterally electing a cheaper level of health care coverage under his or her employer's cafeteria plan. A QMCSO provides notice to the other parent on behalf of the children (to the designated recipient on behalf of the alternate recipients).
2. It prevents the plan participant from unilaterally canceling health care coverage altogether for the alternate recipients or from disenrolling them from the medical plan, absent changes affecting all participants with family coverage. 42 USC § 1396g-1(a)(2)(3).
D. A QMCSO ensures enrollment of the alternate recipients.
1. It allows the alternate recipients to be enrolled in a medical plan regardless of enrollment season restrictions. HMOs and PPOs often allow enrollment of new dependents once or twice a year by existing plan participants (newborn babies excepted). A QMCSO overrides these restrictions.
2. If the plan participant fails to enroll the alternate recipients, the other parent or the State Medicaid agency (in Michigan, the Department of Social Services ["MDSS"]) shall enroll the child.
3. The medical plan is prohibited from disenrolling the alternate recipients without written evidence that the children will have comparable health care coverage or that a QMCSO is no longer in effect.
E. A QMCSO provides easier administration of health care benefits and for easier payment of out-of-pocket or unreimbursed health care expenditures.
1. The medical plan through the plan participant's employer can withhold from the plan participant's wages the premiums for health care coverage. (6) In this sense, a QMCSO acts as an Order of Income Withholding ("OIW") requiring the employer to withhold premiums without the right of termination by the plan participant.
2. MDSS can garnish the wages of the plan participant if the alternate recipients are either eligible for or covered by Medicaid.
3. A QMCSO allows for direct payment of insurer expenses to the parent who has paid for them, when payment originates from that source, thus reducing the Friend of the Court involvement in accounting and paying these expenses. Handling unreimbursed medical expenses takes up a considerable amount of time for Friend of the Court offices across the state.
F. In theory, a QMCSO allows coverage of the alternate recipients regardless of where they live with respect to the plan participant and with respect to his or her employer and medical plan. More specifically, changes to the Social Security Act consonant with the 1993 addition of § 609 to ERISA, mandate that a Michigan HMO or PPO must cover a child and provide full benefits to him or her even if he or she lives in California with the non-participant parent! 42 USC §§ 1396(a)(60), 1396g-1. This particular Congressional mandate will be a major logistical headache for HMO's and PPO's that provide for non-emergency coverage only within specific catchment areas. In the short term, plan administrators may not approve a QMCSO with this language because of the logistical difficulty involved for the medical plan. (7)
1. HMOs and PPOs have provisions providing for emergency health care treatment outside of their catchment areas. Whether a non-participant parent in California (as in the example) will be able to obtain full payment for non-emergency health care treatment from a Michigan HMO or PPO is an open question despite the clear Congressional mandate.
G. A QMCSO may extend health care benefits beyond the standard statutory language providing coverage as long as the medical plan allows the alternate recipients to be covered. (8) Section 609 of ERISA does not define "child." Arguably therefore, an adult child could be covered by a QMCSO. For administrative reasons, plan administrator's need a specific date for termination of the QMCSO with respect to each alternative recipient. The entire QMCSO would then terminate when the last child turns 19 1/2.
H. A QMCSO can address future changes and transitions in medical coverage.
1. Changes in the medical plan's organizational structure or insurer (e.g., from HMO to PPO to indemnity),
2. Changes in the plan participant's employer, (9)
3. Changes in the medical plan's benefits, and
4. Transitions between a QMCSO and COBRA (10) continuation coverage.
I. A QMCSO can provide better coverage than under COBRA.
1. While COBRA coverage is dependent upon timely election and existing health care coverage at the time of the "COBRA event," e.g., divorce, a QMCSO allows coverage to begin even outside of the plan's enrollment periods and even if the plan participant fails to enroll the children.
2. COBRA coverage extends for 36 months; QMCSO coverage extends for years, even perhaps after the children reach majority.
3. While COBRA coverage may not be available where the employer provides only an HMO and the children live outside the HMO's catchment area, QMCSO coverage is supposed to cover the children regardless of where they live.
4. While COBRA does not allow direct reimbursement of expenditures to the non-participant parent, a QMCSO does.
5. And while COBRA coverage must be paid for by the non-participant parent, QMCSO coverage is paid for by the employer offering the medical plan.
IV. WHEN AND WHERE SHOULD A QMCSO BE USED
A. The timing of a QMCSO may be either before judgment or after judgment.
1. The plan administrator should be consulted before the QMCSO is presented to a circuit court for entry.
a. This prevents the embarrassment, expense, and annoyance of returning to the circuit court twice or even three times to iron out QMCSO language in order to obtain the medical plan's agreement to enact it. (11)
b. There will be confusion among employers as to the effect and appropriate language for a particular QMCSO, just as when QDROs were beginning to be entered by Michigan courts.
c. Despite clear federal legislation (even without currently available federal regulations), plan administrators may refuse to permit a QMCSO to contain language allowing, for example, the non-participant parent to choose a health care plan for the alternate recipients that is different from that of the plan participant. (12)
d. "Negotiating" with a plan administrator means explaining the purpose and provisions of a QMCSO and then persuading him or her to approve the appropriate language.
B. OBRA '93 (the law enacting ERISA § 609) requires Michigan to adopt laws related to a QMCSO or risk losing Medicaid funding from the federal government. 42 USC §§ 1396a(60), 1396(g-1). Michigan has yet to enact this legislation. (13)
V. HOW DOES A PRACTICING ATTORNEY DRAFT AND IMPLEMENT A QMCSO
A. Begin with a model QMCSO.
1. Consult versions in a future supplement to QDROs, EDROs & Retirement Benefits: A Guide for Michigan Practitioners, Nancy Keppelman and Katherine B. Soper, eds. (ICLE 1994, Supp. 1995). This includes a version drafted by the principal author of this outline, Todd W. Grant.
2. Also consult Gary A. Shulman, Qualified Medical Child Support Order Handbook (Wiley Law Publications 1993).
3. With the passage of time, large employers and medical plans may have model language to suggest. Ask the plan administrator to forward an accepted QMCSO with the personal identifying information redacted.
B. Decide whether the language will include all the provisions of ERISA § 609, so as to put the plan on notice as to the changes it will have to make in covering the alternate recipients; or whether the order will be short and brief, perhaps sweeping under the rug any controversial requirement and reserving them for later argument.
1. Because of the unfamiliarity even large employers and medical plans have with a QMCSO, the author's recommend a longer, more complete QMCSO. Divorce litigation ensures that the problem "left under the rug," so to speak, will be the first practical problem your client needs to argue about (14) with the medical plan after the divorce.
2. You may have to accept language less protective of the alternate recipients in order to obtain a plan administrator's acceptance of a QMCSO.
3. A QMCSO cannot include a plan to provide for any benefit not already in the plan. 29 USC § 1169(a)(4). (15) Also a court cannot go beyond a plan administrator's adverse decision to enforce a QMCSO.
1. The Omnibus Budget Reconciliation Act of 1993 ("OBRA" '93), P.L. 103-66, Title IV, Subtitle D, 4301(a), 107 Stat. 371, as added Aug. 10, 1993.
2. Medical child support is described in 42 USC § 1396g-1.
3. A QMCSO is not required for medical plans which are not subject to Title I of ERISA, e.g., medical plans which cover only a business owner and his or her spouse, or employee welfare benefit plans.
4. HMOs are closed health care delivery systems that restrict patient choice by requiring the patient to obtain care from participating providers (physicians, hospitals) in the contracted network. Health care services obtained outside of the closed network, except for emergencies, are not covered. HMOs have dual functions in both underwriting risk and in providing health care coverage. Rather than mandating providers, PPOs create different reimbursement levels (coinsurance, deductibles) for the patient, depending upon whether the patient selects a PPO-approved provider or another provider. HMOs and PPOs compete and survive by restricting choice, providing financial penalties, and reducing utilization of services. Traditional health care coverage plans are referred to as "indemnity" type plans, e.g., Blue Cross and Blue Shield of Michigan.
5. A medical plan's coverage of adopted children is probable from the time the child is placed with the family in anticipation of adoption. Given Michigan's new adoption law, the exact timing of coverage is unclear. ERISA § 609, 20 USC § 1169(c)(2, 3) states that pre-existing medical conditions are covered only in the case of adopted children or children who have been placed for adoption. The distinction between adopted and natural born children for the coverage of pre-existing medical conditions is suspect and may very well be unconstitutional (paralleling distinctions between legitimate and illegitimate children, for example). The aggressive stance is to insist that no pre-existing conditions will deter coverage for any Alternate Recipient.
6. Subject to the usual limitations of the Consumer Credit Protection Act, 15 USC § 1673(b).
7. When an HMO attempts to underwrite the risk for services outside of its network, state insurance regulations and reserve requirements must be followed. ERISA § 609 does not address these requirements. Note that ERISA's expansive preemption doctrine does not apply to state insurance regulations, which are expressly saved from preemption.
8. Standard language: "until a child reaches the age of 18 or until a child reaches the age of 19 1/2, if the child is residing with the payee or at an institution and regularly attending high school on a full-time basis with a reasonable expectation of completing sufficient credits to graduate from high school, whichever is later."
9. A change in the plan participant's employer will require a new QMCSO; however, the previous QMCSO can structure the expectations between the parties to the litigation regarding the type and level of health care coverage.
10. The Consolidated Omnibus Budget Reconciliation Act of 1985, P.L. 99-272, 100 Stat. 82 (1986) ("COBRA"). Under COBRA, the employer must tell the Plan Administrator of the termination of the employee within 30 days of termination. The Plan Administrator then tells the Designated Recipient of the termination within 14 days. The Designated Recipient next has 60 days in which to elect continued COBRA coverage and 45 days after the election to pay premiums for coverage from the COBRA event.
11. A QMCSO excludes benefits that are not part of the medical plan's benefit structure, unless required by a statute relating to medical child support as described in section 1908 of the Social Security Act, 42 USC § 1396g-1, in accordance with ERISA § 609. This provision is analogous to that of QDROs which prevent a QDRO from offering any benefit not provided for in the retirement or pension plan.
12. From authors' own personal experiences.
13. These required changes include, for example, a prohibition against insurers excluding children not claimed as dependents on the plan participant's federal income tax return or children who do not reside with the plan participant or in the insurer's area. 42 USC § 1396g-1(a)(1).
14. trans.: "beg from the medical plan."
15. Except changes required by the amendment to the Social Security Act, 42 USC 1369g-1.