Are QMCSOs Still Available Under the Affordable Care Act?
Question: Our company used to occasionally receive a qualified medical child support order (QMCSO), but we haven’t seen one for a few years now. Are they still available under the Affordable Care Act (ACA)?
Answer: Yes, QMCSOs are still available, but they’re less common now, because of changes under the ACA.
As background, a QMCSO is a judgment, decree or order (issued by a court or through a state administrative process) that requires a group health plan to provide coverage to a participant’s child (an alternate recipient) and meets other specific requirements. Before the ACA, some health plans excluded coverage for a child of an employee if, for example:
- The child didn’t live with the employee,
- The employee was divorced and didn’t have primary custody of the child, or
- The child was not the tax dependent of the employee.
QMCSOs required the group health plan of a child’s noncustodial parent to provide coverage to such a child — even if the child was ineligible for the plan under the plan’s definition of “dependent.”
Two significant ACA changes
Every group health plan that’s subject to the Employee Retirement Income Security Act must provide benefits in accordance with a QMCSO. But the ACA made two changes regarding coverage of employees’ children that have a significant impact on QMCSOs:
- Until-age-26 coverage. Nonexcepted group health plans (in other words, major medical plans) that offer coverage to an employee’s children generally must offer the coverage until the children are age 26. This requirement applies regardless of a child’s residency, financial dependence, marital status, custody, student status, employment or other similar factors.
- Section 105(b) definition. Employer-provided accident or health plan coverage for employees’ children who haven’t turned 27 as of the end of the tax year is entitled to tax-favored treatment. This requirement applies regardless of whether the child qualifies as a tax dependent or as a dependent as defined by Sec. 105(b) of the Internal Revenue Code.
As a result of these two changes, children who might have been the subject of QMCSOs in the past are likely to meet the plan’s definition of “dependent” and to qualify for the coverage on a tax-favored basis. Furthermore, the ACA requires individuals — including children — to have health coverage or pay an individual shared responsibility penalty tax. Nevertheless, courts may still need to order an employee to enroll a child in a health plan. For instance, in some cases, coverage is available but the employee doesn’t want to pay for it.
Note also that, under the ACA, a custodial parent without employer-sponsored health care may have access to major medical coverage through a Health Insurance Marketplace that’s less expensive than a noncustodial parent’s employer-sponsored plan. In these situations, a court might order a child to be covered under an individual policy bought through a Marketplace rather than under a noncustodial parent’s employer-sponsored plan pursuant to a QMCSO.
Although you probably won’t see QMCSOs as often as you previously did, they remain an important compliance issue for employers. Consult your benefits advisor to ensure you fully understand the ACA-related changes and are ready to handle one of these orders should it come in.
If you have questions about QMCSOs, please contact Ron Present, Partner and Health Care Industry Group Leader, at firstname.lastname@example.org or 314.983.1358.