Does the new federal-mandate child-support insurance enrollment law apply to NC's state employee health plan?

Plain-English summary

Congress in 1993 told the states: if you want to keep Medicaid funding, pass laws that let custodial parents enforce medical child support orders directly against health insurers and employers, without waiting for open enrollment season. NC complied in 1994 with House Bill 1563 (S.L. 1993 (Reg. Sess. 1994) Ch. 644). Patricia Crawford, who administered the NC Teachers' and State Employees' Comprehensive Major Medical Plan, then had to figure out whether the new law applied to her plan. If it did, every divorce decree assigning health coverage to a State employee would generate a direct demand on the State Plan to enroll the kids.

Assistant AG Jane T. Friedensen answered no.

The law's enforcement obligations ran in two channels. One channel hit "health insurers" (defined in G.S. § 58-51-115(a)(2) and § 108A-69(a)(2)). A "health insurer" was a company subject to Articles 1-63 of Chapter 58, or to Articles 65 and 67, or an ERISA-defined group health plan. The State Plan was not subject to Chapter 58's insurance regulation, and ERISA expressly excludes governmental plans (29 U.S.C. § 1003(b)(1)). So the State Plan was not a "health insurer."

The other channel hit "employer[s] doing business in this State." The new statute did not define that phrase. The AG applied two interpretive defaults. First, the phrase "doing business in this State" is historically used in long-arm and licensing contexts, where it typically describes private entities, not the State itself. Second, statutes that do not expressly mention the State ordinarily do not bind it (Yancey v. North Carolina State Highway and Public Works Commission, 222 N.C. 106 (1942), the long-running NC presumption against statutory binding of the sovereign). The State was therefore not an "employer doing business in this State."

The federal source statute confirmed the reading. 42 U.S.C. § 1396g-1(a)(3) imposed obligations on "employer doing business within the State" without defining the phrase. § 1396g-1(b) defined "insurer" as an ERISA group health plan, an HMO, or a service benefit plan (Blue Cross/Blue Shield type) — none of which captured a state employee health plan. The AG observed that Congress could have included governmental plans expressly and chose not to.

The practical consequence: a custodial parent could not demand that the State Plan enroll a child of a State-employed noncustodial parent on their own initiative. Family-law remedies still applied. G.S. §§ 50-13.4(f), 50-13.9, and 50-13.11 let a court enforce a medical-support order directly against the State employee, who could then be ordered to enroll the child during the normal enrollment process.

Currency note

This opinion was issued in 1995. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Federal medical child support law has been further developed by the Child Support Performance and Incentive Act of 1998 and the National Medical Support Notice (NMSN) framework; State Plan procedures have been overhauled multiple times since 1995.

Background and statutory framework

OBRA 1993 and the Medicaid lever. Congress used the Medicaid funding lever to force every state to adopt parallel laws on medical child support. The federal statute (42 U.S.C. §§ 1396a(a)(60), 1396g-1) directed states to require insurers and employers to enroll children of noncustodial parents on demand by the custodial parent or the state Medicaid agency.

The NC compliance vehicle: House Bill 1563. S.L. 1993 (Reg. Sess. 1994) Ch. 644 added two parallel sets of obligations: one on Chapter 58 insurers (new § 58-51-120) and one on Chapter 108A employers (new § 108A-69). Both keyed off identical definitions of "health benefit plan," "health insurer," and "employer."

The State Health Plan's place in the statutes. Article 3 of Chapter 135 governs the State Plan. It is administered as part of the Department of State Treasurer's benefits authority, not under the insurance code. That structural choice was what kept the Plan outside the "health insurer" definition.

ERISA's governmental-plan carve-out. ERISA (29 U.S.C. § 1003(b)(1)) does not apply to governmental plans. § 1002(32) defines "governmental plan." The State Plan fits the definition, which is why ERISA's parallel medical child support requirements did not pull the Plan in either.

The Yancey rule. Yancey is the foundational NC case for the rule that statutes do not bind the State unless they name it expressly. The AG used Yancey to fill in the silence in "employer doing business in this State."

Family-law backstop. The opinion was careful to note that the carve-out did not leave custodial parents without a remedy. G.S. §§ 50-13.4(f), 50-13.9, and 50-13.11 give NC courts authority to compel a State employee directly to enroll a child. The remedy ran against the employee, not the Plan.

Common questions

Q: Does a federal court order require the State Plan to enroll children regardless of this opinion?

A: The opinion analyzed the 1994 NC and 1993 federal statutory frameworks. Federal courts can enter orders requiring action by State employees, and federal preemption could come into play depending on the order; the AG's reading is that the OBRA scheme itself does not reach governmental plans.

Q: What does a custodial parent do under this opinion to get insurance for the child?

A: Seek enforcement under G.S. §§ 50-13.4(f), 50-13.9, or 50-13.11 against the State-employed noncustodial parent. A court can compel that parent to enroll the child during the State Plan's normal enrollment window.

Q: Why does the State Plan use the insurance code definitions but not be subject to them?

A: HB 1563 chose to define "health insurer" by reference to Chapter 58's regulatory architecture. The State Plan is not regulated under Chapter 58, so the definition does not cover it.

Q: Does this exemption hold for local-government employers (county, municipal)?

A: The opinion's reasoning ("doing business in this State" is a private-entity phrase; statutes do not bind the sovereign without express mention) extends to local governmental employers and their health plans, but each plan's structure must be analyzed individually.

Q: Did the General Assembly close the gap later?

A: NC and federal law have evolved significantly since 1995, including through the National Medical Support Notice. The current State Plan procedures should be confirmed directly with Plan administration.

Q: What if a custodial parent sends a notice anyway?

A: Based on this opinion, the State Plan would not be legally required to act on the notice unilaterally. The custodial parent's better path was a court order on the employee.

Citations from the opinion

• N.C. Gen. Stat. §§ 50-13.4(f), 50-13.9, 50-13.11; 58-51-115(a)(2); 58-51-120(b); 108A-69(b); 135-40.1(7); 135-40.2; 135-40.3
• 1993 (Reg. Sess. 1994) N.C. Session Laws Ch. 644 (House Bill 1563)
• 42 U.S.C. §§ 1396a(a)(60), 1396g-1, 1396g-1(a)(3), 1396g-1(b)
• 29 U.S.C. §§ 1002(32), 1003(b)(1)
• Yancey v. North Carolina State Highway and Public Works Commission, 222 N.C. 106, 22 S.E.2d 256 (1942)

Source

• Landing page: https://ncdoj.gov/opinions/north-carolina-teachers-and-state-employees-comprehensive-major-medical-plan/

Original opinion text

N.C. Gen. Stat. § 135-40.2 (1994) describes those persons eligible for coverage under the Plan or the HMO option, while § 135-40.1(7) (1994) governs the enrollment of dependent children in the Plan. The effective date of an individual's coverage is determined in accordance with the provisions of N.C. Gen. Stat. § 135-40.3 (1994). An employee or retiree may elect from three types of coverage: employee only; employee and children; or employee and family coverage. N.C. Gen. Stat. § 135-40.3(d). If an employee does not enroll or add an eligible dependent to his or her coverage when first eligible, he or she may do so later, but the dependent will be subject to a 12-month waiting period for preexisting health conditions. See N.C. Gen. Stat. §§ 135-40.3(b)(2), 135-40.3(c)(5). Article 3 of Chapter 135 contains no mechanism for the enrollment of a dependent of an eligible employee or retired employee by any means other than an application for coverage of the dependent by the employee or retired employee.

House Bill 1563 was ratified as 1993 (Reg. Sess. 1994) N.C. Session Laws Ch. 644 and became effective 1 October 1994. It amended Article 51 of Chapter 58 and Part 6 of Article 2 of Chapter 108A of the North Carolina General Statutes to add new provisions requiring health insurers and employers, inter alia, to permit the enrollment and coverage of children of noncustodial parents eligible for family health benefit plan coverage who are required to provide such coverage for their children pursuant to a court or administrative order. Such enrollment and coverage must be provided without regard to enrollment season restrictions, and upon request of either the custodial or the noncustodial parent, or of the North Carolina Department of Human Resources. See N.C. Gen. Stat. §§ 58-51-120(b) (1994), 108A-69(b) (1994). House Bill 1563 thus provides a mechanism for the nonjudicial enforcement of medical child support orders without action by, or the consent of, the noncustodial parent obligated to provide health coverage.

Section 1 of House Bill 1563, codified at N.C. Gen. Stat. § 58-51-115(a) (1994), determines the scope of the medical child support enforcement requirements imposed upon insurers, as delineated in Article 51 of Chapter 58, by means of the following definitions:

(1) 'Health benefit plan' means any accident and health insurance policy or certificate; a nonprofit hospital or medical service corporation contract; a health maintenance organization subscriber contract; a plan provided by a multiple employer welfare arrangement; or a plan provided by another benefit arrangement.

(2) 'Health insurer' means any health insurance company subject to Articles 1 through 63 of this Chapter, including a multiple employee welfare arrangement, and any corporation subject to Articles 65 and 67 of this Chapter; and means a group health plan, as defined in section 607(1) of the Employee Retirement Income Security Act of 1974.

Section 3 of House Bill 1563, which added N.C. Gen. Stat. §§ 108A-69 and 108A-70 (1994) to the statutory scheme governing North Carolina's Medicaid program, contains identical definitions of the terms "health benefit plan" and "health insurer." It should be noted, however, that the actual enrollment and coverage obligations set forth in new § 108A-69 are imposed upon "employer[s] doing business in this State," rather than upon "health insurer[s]" as in new § 58-51-120.

House Bill 1563 does not define the term, "employer doing business in this State." The use of the qualifying phrase "doing business in this State" strongly suggests that neither the State itself, nor any other governmental entity whose employees and retirees and their respective dependents are eligible for coverage under the State Health Plan, is an "employer" within the meaning of the new legislation. The use of the phrase "doing business within the State" in other legislative contexts, such as long-arm statutes, usually connotes private rather than governmental entities. Moreover, general statutes that do not expressly mention the State ordinarily do not bind it. See Yancey v. North Carolina State Highway and Public Works Commission, 222 N.C. 106, 110, 22 S.E.2d 256 (1942). It accordingly appears that the obligations imposed by § 108A-69 upon employers of parents subject to medical child support orders are inapplicable to the State Health Plan and the governmental entities whose employees and retirees and their respective dependents are otherwise eligible for coverage under the State Health Plan.

Neither the State Health Plan, nor the governmental entities whose employees and retirees and their respective dependents are eligible for coverage thereunder, meet the definition of "health insurer" set forth in Sections 1 and 3 of House Bill 1563 (N.C. Gen. Stat. §§ 58-51-115(a)(2) and 108A-69(a)(2) respectively). Neither the State Health Plan nor the governmental entities in question are health insurance companies subject to Articles 1 through 63 of Chapter 58, or corporations subject to Articles 65 and 67 of that Chapter. Likewise, neither the State Health Plan, nor governmental entities whose employees and retirees and their respective dependents are eligible for coverage thereunder, are group health plans as defined in Section 607(1) of the Employee Retirement Income Security Act of 1974 (ERISA). This is because ERISA is, by its express terms, inapplicable to governmental plans. See 42 U.S.C. §§ 1002(32), 1003(b)(1). It therefore can be concluded that the obligations imposed upon health insurers by House Bill 1563 do not extend to the State Health Plan or to the governmental entities whose employees and retirees and their respective dependents are eligible for coverage thereunder.

The evident exclusion of the State Health Plan and governmental employers from House Bill 1563 is consistent with the federal directives that provided the impetus for the adoption of the legislation. House Bill 1563 was enacted in response to a new federal mandate contained in the Omnibus Budget Reconciliation Act of 1993 (OBRA 93). OBRA 93 amended the federal Medicaid statutes set forth in Title XIX of the Social Security Act to require, inter alia, that states wishing to continue receiving federal funding for their Medicaid programs adopt various laws relating to medical child support. See 42 U.S.C. §§ 1396a(a)(60), 1396g-1. 42 U.S.C. § 1396g-1(a) sets forth the subject matter and content of the required state laws. Section 1396g-1(a)(3) details the obligations that must be imposed upon an "employer doing business within the State," but does not define the term. As noted previously, however, this term ordinarily connotes a private rather than a governmental entity. It accordingly appears that governmental entities are not subject to the obligations that states must impose upon employers pursuant to § 1396g-1(a)(3).

42 U.S.C. § 1396g-1(b) defines the term "insurer" to include "a group health plan, as defined in section 607(1) of the Employee Retirement Income Security Act of 1974, a health maintenance organization, and an entity offering a service benefit plan." As noted previously, the State Health Plan is not a group health plan as defined by ERISA. Nor is it a health maintenance organization. Furthermore, the term, "entity offering a service benefit plan" generally is understood to refer to Blue Cross/Blue Shield plans, under which the insuring entity furnishes payment to health care providers pursuant to contract, rather than providing reimbursement to the consumer of health services as is done under traditional indemnity plans.

42 U.S.C. § 1396g-1(b) does not include governmental plans as defined in 29 U.S.C. § 1002(32) within its definition of the term "insurer." Congress presumably would have done so had it intended that governmental entities and governmental plans such as the State Health Plan be subject to the required state laws governing the conduct of insurers with respect to medical child support orders. It reasonably can be concluded that Congress did not intend to subject state or local governments, or governmental plans such as the State Health Plan, to the requirements of the state laws mandated by 42 U.S.C. §§ 1396a(a)(60) and 1396g-1. The evident exemption of the State Health Plan, and of the governmental entities whose employees and retirees and their respective dependents are eligible for coverage thereunder, from the provisions of House Bill 1563, accordingly is consistent with underlying federal law.

In conclusion, the medical child support enforcement provisions of House Bill 1563, 1993 (Reg. Sess. 1994) N.C. Session Laws Ch. 644, are inapplicable to the North Carolina Teachers' and State Employees' Comprehensive Major Medical Plan and the governmental entities whose employees and retirees, along with their dependents, are eligible for coverage under the Plan or its HMO option. Medical child support orders nonetheless may be enforced directly against State employees and retirees who fail to enroll, or maintain coverage for, their eligible dependent children under the State Health Plan in accordance with the provisions of N.C. Gen. Stat. §§ 50-13.4(f), 50-13.9 and 50-13.11 (1994 Cum. Supp.).

MICHAEL F. EASLEY Attorney General

Jane T. Friedensen, Assistant Attorney General