Federal Health Care Reform Extends Dependent Care Coverage
Jun 2010
(June, 2010) The federal government has issued interim final rules about how people up to age 26 can get covered by their parents' health insurance policies, as part of the Patient Protection and Affordable Care Act.
The U.S. Department of health and Human Services (HHS) reports that approximately one in three of young adults up to age 26 have no health insurance at all. That's three times the rate of uninsured children, according to the Department. HHS estimates that about 1.2 million young adults will elect to stay on a parent's health plan in 2011 as a result of the reform.
The law takes effect for insurance plans that already cover dependents, starting on or after Sept. 23, 2010. Those plans will cover policyholders' children until age 26 -- even if those adult children no longer attend college, don't live with their parents and aren't dependents on a tax return.
Children who were previously dropped because of age from dependent coverage will also be able to re-enroll.
The re-enrollment option only applies to plans that already offer dependent coverage. If a company has such a plan, it must inform employees and their children who may have aged out of the plan that coverage is now available.
Any child enrolling in group health coverage must be offered all the benefits packages available to similarly situated individuals who did not lose coverage by reason of cessation of dependent status. The child also cannot be required to pay more for coverage than a similarly situated individual who did not lose coverage by reason of cessation of dependent status.
If a child qualifies for an enrollment opportunity and the parent is not enrolled but is otherwise eligible to enroll in the group plan, the plan must provide an opportunity to enroll the parent, in addition to the child.
If a plan has more than one benefits option, a child will be eligible for enrollment in any option, regardless of which option applies to the parent.
A parent must be given the opportunity to switch plans should the child enroll in an option to which the parent is not otherwise enrolled.
The coverage applies to married and unmarried children, but does not extend to their spouses or children.
According to John Sarno, president of the Employers Association of New Jersey, there are special rules for employer-sponsored plans that are “grandfathered.”
“Grandfathered plans are plans that were in existence before March 23, 2010, the day the president signed the bill into law. Those plans can exclude dependent coverage if the child is eligible for another group health plan, either from an employer or spouse’s employer. But as of January, 2014, that grandfathered status will expire,” he said.
The IRS has also issued rules to complement the coverage requirements. Changes will be permitted under Flexible Benefit Plans to allow employees to pay for the cost of new coverage on a pre-tax basis, even if the flex plan does not immediately allow for changes in status.
Sarno believes that complex issues will arise, particularly under COBRA-continuation coverage and medical support orders.
“We are not sure yet whether an adult child who is covered under COBRA will be entitled to now elect coverage under a parent’s grandfathered plan. If the child lost coverage because of age, he or she will most likely be allowed to elect the parent’s coverage but if coverage was lost for a non-age related reason, then maybe not. That needs clarification,” he says.
It is also likely that an adult child can obtain a court order directing a parent to put the child on the plan. “I suspect that will happen when the parent and child are estranged and the parent doesn’t want to pay for the extra coverage.”
June 18, 2010 EANJ Webinar
What HR Needs to Know about the Patient Protection and Affordable Care Act Before Leaving for Vacation - Click here for details and to register
