Q&A: What Benefits Changes are Allowed After the Birth of a Child?

Question:

We have an employee whose wife just had a baby. The employee and his other children are currently enrolled in our high-deductible health plan, and his wife is enrolled in a different coverage where she works.

The employee has requested the following changes to his benefits elections:

1. Drop his children from our plan (to be covered under his wife’s plan along with the baby); and
2. Change his own coverage from the HDHP to our lower deductible PPO plan.

Are we allowed to make these changes outside of open enrollment?

Answer:

When an employee requests to adjust their elections outside of open enrollment, it is essential for the employer to determine if the changes made to their benefits comply with both cafeteria plan regulations and HIPAA’s special enrollment provisions. (For a detailed discussion, see our November 2023 Question of the Month.)

In the scenario you describe, the cafeteria plan regulations, in general, allow the employee to remove his dependents from the plan following the birth of a new child. It is advisable to review your cafeteria plan document to confirm this. HIPAA special enrollment rules are not applicable to this issue because they only govern when an employee can elect coverage, not when they can drop it.

Regarding the employee’s request to switch to a lower deductible PPO plan, the carrier is unlikely to approve the request because HIPAA does not mandate it. If the employee was requesting to add the newborn to your plan, then transitioning from the HDHP to the PPO could be considered acceptable. However, removing dependents from the plan does not justify such a modification.

It is recommended that your employee remove his dependents from the plan for now and wait until the next open enrollment period to switch to the lower deductible PPO plan.

For further inquiries or additional clarification, please do not hesitate to contact your account team.

Not a client of The Miller Group? Connect with one of our employee benefits advisors to learn how our compliance team can help you stay on track and confidently meet your obligations.