Michelle's Law

Michelle's Law, passed last year, requires both self-funded and insured group health plans to provide up to one year of coverage for students who are on medically necessary leaves of absence from postsecondary educational institutions. The law is effective for plan years beginning on or after October 9, 2009, making it effective January 1, 2010 for calendar year plans. Employers should review their plans to ensure compliance for the upcoming plan year.

Continuation Coverage During Medical Leaves of Absence

Under Michelle's Law, an employer's group health plan must continue to provide coverage to a "dependent child" if the child takes a leave of absence from a postsecondary educational institution, or has a change in enrollment status, that:

• begins when the student is suffering from a serious injury or illness;
• is medically necessary (as confirmed in a written communication from the student's treating physician); and
• causes the child to lose student status for purposes of coverage under the plan.

A "dependent child" for purposes of Michelle's Law is a child who (1) is a dependent child of a participant or beneficiary under the terms of the plan, and (2) was enrolled in the plan on the basis of being a student at a postsecondary educational institution immediately before the medical leave of absence began.

The plan must continue the child's coverage for up to one year after the leave of absence begins or, if earlier, until coverage would have otherwise terminated under the terms of the plan (for instance, if the child ages out of the plan or the child's parent terminates employment and loses coverage under the plan).

The level of benefits provided to the child during Michelle's Law continuation coverage must be the same as the benefits the child would have received if the child had continued as a covered student (without regard to Michelle's Law). The premium the plan charges the employee must also remain the same as if the child had maintained regular student status.

Notice Requirement

An employer's group health plan must provide participants notice of the continuation coverage available under Michelle's Law. The plan must include information about the continuation coverage available under Michelle's Law with any notice regarding a requirement for a certification of student status. Summary plan descriptions should also be updated to describe the requirements of Michelle's Law.

Unresolved Issues

Michelle's Law does not address how its continuation coverage interacts with COBRA or multiple medical leaves of absence taken by the student dependent. As no guidance appears to be coming, employers need to decide whether COBRA should begin at the commencement or end of a Michelle's Law leave. The more conservative view, which most employers seem to be adopting, is that COBRA starts at the end of a Michelle's Law leave if the student loses coverage at that time.

Next Steps

• Determine which group health plans must comply with Michelle's Law. Michelle's Law does not apply to group health plans that include only excepted benefits under HIPAA portability rules (e.g., certain limited-scope dental and vision plans and most health FSAs) and to stand-alone retiree medical plans.
• Review summary plan descriptions and include a description of the Michelle's Law continuation coverage in any 2010 restatement or prepare a summary of material modifications to describe the change. Review COBRA provisions for possible amendment.
• Update any certification of student status form to describe the Michelle's Law continuation coverage rules.
• Decide whether to offer COBRA coverage to the dependent child when the child loses coverage due to loss of full-time student status under the plan (more aggressive approach) or whether to offer COBRA only at the end of the Michelle's Law continuation coverage period (more conservative approach). If the more conservative approach is chosen, confirm the plan's stop loss carrier or insurer agrees with that approach.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.