Health Care Plan Administrator Cannot Limit Enrollment of Employee on Leave

BNA reports that the court said the administrator’s denial of coverage amounted to a restriction that the participant be actively at work and not on leave during the HIPAA 30-day special enrollment period. The court said HIPAA prohibits eligibility discrimination for enrollment in plans based on health status, medical condition, or disability, and that Congress intended to expand eligibility for coverage for newborns and their parents.

The court also ruled that the employee was eligible for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). It said notice of continuation coverage was triggered when the participant became ineligible for coverage upon returning to work on a part-time basis.

When the employee was hired, she declined health care coverage provided by her employer because she was eligible for Medicaid.   When the employee gave birth to her son 15 weeks prematurely she was informally granted a medical leave of absence.  

Less than a month after giving birth, the employee applied for coverage under her employer’s health care plan for herself and her son.   The plan administrator denied her coverage because she was working on a part-time basis.    The administrator never sent a denial letter to the employee, so when and how she became aware of the denial is unclear, according to the court.

The hospital and employee filed a lawsuit against the administrator challenging the denial of her claim for benefits under the Employee Retirement Income Security Act (ERISA) and HIPAA.

HIPAA requires a plan to have a “dependent special enrollment period … of not less than 30 days” beginning on the date of birth, the court said.    The court found that the employee was eligible for benefits when she applied for benefits less than 30 days after her son’s birth.

The court rejected the administrator’s argument that on the date the employee attempted to enroll, she no longer was a full-time employee entitled to benefits and thus no longer eligible for coverage, saying that she was a full-time employee when her baby was born because her employer had not filed any paperwork to reclassify her as a part-time employee when she was on leave.  The court further said that HIPAA does not require an employee to return to work on a full-time basis on the date a special enrollment election is made.  HIPAA’s special enrollment period provision precludes the administrator from imposing restrictions on plan enrollment that would eliminate the right to elect coverage, according to the opinion.

Since she was eligible for benefits when her son was born, the court said the employee should have been provided with notice of COBRA coverage when her rights to benefits expired on her return to work as a part-time employee.  The court said neither the employer nor the plan administrator gave the employee notice of her right to elect COBRA coverage, but issues of fact existed as to whether and how much in premiums the employee would owe the administrator for benefits and how long COBRA coverage was available.

The case is Livingston v. South Dakota State Medical Holding Co., D.S.D., No. CIV 04-4139, 1/20/06.