By Roberta Watson, Dannae Delano and Barry Salkin
Employers frequently provide group health plan coverage for their employees through pre-tax contributions to a cafeteria plan. Elections under a cafeteria plan cannot be revoked during the year, unless there is a change in the status of the employee (and in certain circumstances, his or her spouse or dependent), or with respect to events triggering a special enrollment period. One such event triggering a special enrollment period is ceasing to be eligible under Medicaid or the Children’s Health Insurance Program (“CHIP”). The minimum special enrollment period for individuals losing eligibility for Medicaid or CHIP is 60 days from the loss of coverage. The law does not preclude special enrollment periods of greater than 60 days. Nevertheless, almost all plans provide only for the statutory minimum 60-day special enrollment period.
In a July 20, 2023, open letter to employers, plan sponsors, and health plan issuers, CMS, the Center for Medicare and Medicaid Services, a division of the Department of Health and Human Services, encouraged employers and other plan sponsors to provide a temporary special enrollment period beginning March 31, 2023, and ending on July 31, 2024, for persons who lose Medicaid or CHIP coverage during that period and seek to enroll in group health plan coverage. This would be comparable to an extension of the special enrollment period that CMS is making for Exchange-based coverage. There is no legal basis upon which CMS can rely in requesting this voluntary action by employers. In effect, CMS is asking employers to take this action because it believes that it is the “right thing to do,” in light of the “complex transition” (discussed more fully below) “and the importance of maintaining life-saving coverage for employees and their families.” From an ERISA standpoint, an employer wanting to implement this CMS recommendation would need to amend its plan, which is a settlor function, rather than a fiduciary function. Even if it were treated as a fiduciary function under ERISA, there is no fiduciary duty to maximize a plan participant’s benefits beyond what the law requires. Nevertheless, employers often act protectively towards their employees when it comes to making sure that they have access to health coverage, so some employers will likely wish to honor CMS’s request.
In addition to recommending this plan change with respect to special enrollment periods, CMS also encouraged employers and other plan sponsors to take the following actions:
- Inform employees about Medicaid and CHIP renewals and encourage employees who are covered under Medicaid or CHIP to update their contact information with their state agency. This action is significant, because employees otherwise eligible for Medicaid or CHIP may have lost contact with their state agency.
- Ensure that eligible employees can easily enroll in their employer-based plan after losing Medicaid or CHIP coverage.
- Remind employees that they may be eligible for Exchange-based coverage if they are not eligible for employer-sponsored or other employment-based coverage that is both affordable and meets minimum standards under the Affordable Care Act.
This call for voluntary action by CMS was prompted by a provision of the Consolidated Appropriations Act of 2023 that expired on March 31, 2023. As CMS explained, eligibility for Medicaid coverage is generally renewed each year. However, during the pandemic, most Medicaid terminations were paused so that individuals could continue to have coverage.
Effective March 31, 2023, continuous enrollment in Medicaid expired and state agencies are presently resuming regular eligibility and enrollment operations, carefully reviewing the eligibility of the enrollees. The consequence of the resumption of regular state Medicaid processes is that many individuals whose qualifications are reviewed will no longer be eligible for Medicaid or CHIP, as the case may be. CMS’s concern is that, given the circumstances surrounding the resumption of Medicaid and CHIP renewals for the first time in three years, many individuals will need more than 60 days to apply for and enroll in coverage, because in many instances they will not realize that they have lost coverage until they next attempt to access medical care.
Because CMS is only encouraging employers to take action, no action is required. However, cases will certainly arise in which individuals incur significant medical costs after their 60-day special enrollment period has expired and plan sponsors should decide if they want to amend their plans to avoid this result for employer-sponsored coverage in much the same way as CMS is doing for requests made for Exchange based coverage.