Group Medical Expense Benefits: Plan Provisions and Taxation Chapter 14

I. Eligibility u A. Similar to group term insurance u B. Dependents: not eligible unless employee covered effective same time as employee spouse unless legally separated and children under 19

u C. Recent federal regulations 1. COBRA 93 a. Adopted children covered on the same basis as natural children b. Plan must recognize medical child support orders c. children are eligible even if born out- of-wedlock, not claimed as dependent, or do not reside with the parent

u 2. HIPAA: puts limitations on preexisting conditions, portability provisions override state laws

II. Coordination of Benefits u Purpose: to eliminate reimbursement in excess of expenses u COB provisions apply to group plans and do not apply to individual coverage u Determination of primary coverage 1. Coverage as an employee is primary 2. for children, the plan of the parent with the earliest birthday in the year is primary

Plan’s parent who has legal custody is primary Coverage as an active employee is primary to coverage as a retired employee

III. Termination of Coverage u COBRA: u Applies to employers with 20 or more employees u Requires employer to continue coverage if a qualifying event occurs death of covered employee, termination of employment for any reason except gross misconduct

reduction in hours divorce or legal separation employee’s eligibility for Medicare a child’s ceasing to be an eligible dependent u Length of continuation: 18 months when employment is terminated

29 months if employee meets SS definition of disability 36 months for other causes

IV. Conversion u can buy individual coverage without evidence of insurability u must have been employed for at least 3 months u must be exercised within 31 days

V. Federal Taxation u Employer contributions are deductible u Employee contributions are deductible if exceed 7.5% of AGI u Benefits are not taxable