The Eighth Circuit recently upheld a plan administrator’s denial of coverage to a college student who completed only six credit hours in a spring semester. The denial was based on the ERISA group health plan’s “full-time student” provision. This case highlights the importance of drafting provisions for group health plan coverage carefully so as not to broaden or narrow eligibility in a way that would be inconsistent with the plan’s goals.
In this case, the student, a stepson of a covered participant, attended a local college. In his last spring semester, the student enrolled in eleven credit hours but later dropped five hours and only completed six credit hours. He had enrolled in and completed at least twelve credit hours in previous semesters. During the spring semester when he completed only six hours, the student underwent various medical treatments totaling approximately $16,000. The health plan denied coverage for those treatments on the basis that he was not a full-time student.
The plan provided that dependents eligible for coverage included unmarried children under age 23 who are dependent upon a covered participant and “whose time is devoted principally to attending school or college as a full-time student.” The plan did not define full-time student. As a result, the plan administrator exercised its discretion and determined that full-time status required enrollment in a minimum of twelve credit hours per semester, the same amount necessary to constitute a “full load” as described by the student’s college catalog. The plan administrator found that the student did not meet the eligibility requirements for coverage during that particular spring semester. While the court agreed that the student’s argument for coverage was reasonable, it concluded that the plan administrator’s decision to deny coverage was a reasonable interpretation of the plan’s full-time student provision. Under an abuse of discretion standard of review, a court will not disturb a plan administrator’s decision when reasonable and supported by substantial evidence as in this case.
This case reminds employers to draft provisions for group health plan eligibility carefully. Employers should recognize that while narrowly-defined provisions are not always desirable, broad provisions can create confusion for participants and result in disputes relating to interpretation of these terms. Clearly drafted provisions also should enable participants to timely notify the plan administrator when a COBRA qualifying event, such as loss of student status, occurs.