More Details - Health Insurance Coverage for a Child under Age 27

The Department of Health Services and the Treasury Department have recently released additional guidance and details related to the health insurance coverage for a child under the age of 27.  Before the passage of the Affordable Care Act into law, many health plans and issuers could remove adult children from their parents' policies because of their age, whether or not they were a student, or where they lived.  Under this new law, plans and issuers that offer dependent coverage will be required to make the coverage available until an adult child reaches the age of 26. 


Effective Dates - This new provision is effective for plan years beginning on or after September 23, 2010.  Therefore, for plans in existence before the September date, the mandatory coverage for children could be delayed until the next anniversary date for the policy.  With that said, there are a huge number (65 at publication date) of insurers that have agreed to an early implementation of this provision.  Check with your employer, insurer or plan administrator to see when the coverage will be available for your health policy.

Tax Benefits - Under a change in tax law included in the Affordable Care Act, the value of any employer-provided health coverage for an employee's child is excluded from the employee's income through the end of the taxable year in which the child turns 26.  This tax benefit applies regardless of whether the plan or the insurer is required by law to extend health care coverage to the adult child or the plan or insurer voluntarily extends the coverage.  The tax benefit is effective March 30, 2010.  Consequently, the exclusion applies to any coverage that is provided to an adult child from that date through the end of the taxable year in which the child turns 26.

Broad Eligibility - This expanded health care tax benefit applies to various workplace and retiree health plans.  It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.  

Self-Employed Individuals Thus, self-employed individuals can include their child under the age of 27 in their self-employed plan and deduct the premium cost as part of their above-the-line, self-employed health insurance deduction.

Pre-Tax Coverage Through Employer’s Cafeteria Plan - In addition to the exclusion from income of any employer contribution towards qualifying adult child coverage, an employee may pay the employee’s portion of the health care coverage for an adult child on a pre-tax basis through the employer's cafeteria plan - a plan that allows employees to choose from a menu of tax-free benefit options and cash or taxable benefits.  The IRS provided in recent guidance that the cafeteria plan could be amended retroactively up until December 31, 2010 to permit these pre-tax salary reduction contributions.

Enrollment Notice - For plan or policy years beginning on or after the September 23, 2010 implementation date, plans and issuers must (see an exception below) give children who qualify, an opportunity to enroll that continues for at least 30 days regardless of whether the plan or coverage offers an open enrollment period.  This enrollment opportunity and a written notice must be provided no later than the first day of the first plan or policy year beginning on or after September 23, 2010.  The new policy does not otherwise change the enrollment period or start of the plan or policy year.

Exception - There is one exception for group plans in existence on March 23, 2010. Those group plans may exclude adult children who are eligible to enroll in an employer-sponsored health plan, unless it is the group health plan of their parent.  This exception is no longer applicable for plan years beginning on or after January 1, 2014.

Equal Benefits - Any qualified young adult must be offered all of the benefit packages available to similarly situated individuals who did not lose coverage because of cessation of dependent status.  The qualified individual cannot be required to pay more for coverage than those similarly situated individuals.  The new policy applies only to health insurance plans that offer dependent coverage in the first place; while most insurers and employer-sponsored plans offer dependent coverage, there is no requirement to do so.

If you have questions related to health care for children, please give this office a call. 

---