HRB 3 - Health Reform’s Coverage for Dependent Children Explained
Released May 10, 2010I Download as a PDF May 10, 2010
-- The Patient Protection and Affordable Care Act (“PPACA”) provides that if an individual or group health plan (whether insured or self-funded) provides coverage for dependents, a dependent child must be allowed to remain on the plan until he/she reaches his/her 26th birthday. This provision in the law takes effect on the first day of the first plan year beginning on or after September 23, 2010 (January 1, 2011 for calendar year plans).
Generally, a dependent includes a legal child, a child placed for adoption, or a foster child. Coverage is available without regard to whether the parent can claim the child as a dependent, and without regard to the child’s marital status. The law does not require coverage for a dependent child’s spouse, nor for grandchildren.
Interim Final Regulations
On May 10, 2010, the Departments of Treasury, Labor and Health and Human Services issued interim final regulations, together with a Fact Sheet and FAQs, defining dependent eligibility. Of particular note, these regulations require that a 30-day enrollment opportunity must be provided to:
- Dependents who were not eligible when the parent first became covered under the plan;
- Dependents who have lost eligibility; and
- Dependents currently on COBRA, due to loss of eligibility.
Special Enrollment. The HIPAA-required special enrollment provisions apply to dependent children who become newly eligible by virtue of this law. This means that a newly eligible dependent, and his/her parents, have a special enrollment opportunity to enroll in any of the benefit packages offered by the employer.
Notice Requirement. A written notice explaining the special enrollment opportunity, and the 30-dayenrollment period, must be provided no later than the first day of the first plan year beginning on or after September 23, 2010. The notice must include a statement that children whose coverage ended, or who were denied coverage (or were not eligible for coverage), because the availability of dependent coverage of children ended before attainment of age 26 are eligible to enroll in the plan or coverage. The notice may be provided to an employee on behalf of the employee’s child. In addition, the notice may be included with other enrollment materials that a plan distributes to employees, provided the statement is prominent.
Cost of Coverage. The older-aged dependent cannot be subjected to a surcharge, premium penalty, or any other plan differential, unless such differentials are imposed on all dependents under the plan. The regulations include several examples to illustrate this point:
Example of Permissible Plan Differential:
- A group health plan offers a choice among the following tiers of health coverage: self-only, self-plus-one, self-plus-two, and self-plus-three-or-more. The cost of coverage increases based on the number of covered individuals. The plan provides dependent coverage of children who have not attained age 26. In this example, the plan does not violate the uniformity requirement relating to variance based by age. Although the cost of coverage increases for tiers with more covered individuals, the increase applies without regard to the age of any child.
Examples of Impermissible Plan Differential:
- A group health plan offers a choice of self-only or family health coverage. Dependent coverage is provided under family health coverage for children of participants who have not attained age 26. The plan imposes an additional premium surcharge for children who are older than age 18.
- A group health plan offers two benefit packages: an HMO option and an indemnity option. Dependent coverage is provided for children of participants who have not attained age 26. The plan limits children who are older than age 18 to the HMO option.
COBRA Matters. A dependent child who is on COBRA due to loss of eligibility can come back on the plan as a newly eligible dependent at the time the plan becomes subject to this provision, or, at such earlier time as the plan so provides. At the point the child again ages off the plan at age 26, or such later date as the plan so provides, an up to 36-month COBRA continuation period will be available.
Grandfathered Plans. For plans in existence on March 23, 2010 (“grandfathered plans”), dependent coverage must be provided up to the child’s 26th birthday, unless the child has access to other employer-provided coverage. The regulations clarify that “other employer coverage” does not include coverage of another parent’s plan. The goal, of course, is to ensure that parent’s plan don’t engage in a game of hot potato.
Conclusion. Many insurance plans, and some employers sponsoring self-funded plans, are choosing to comply with the expanded dependent definition early. It is very important to work closely with the insurer to ensure compliance with the contract. Also, it is important for insured plans to understand the coordination between state law and federal law; the federal law and state insurance law must be coordinated, so that the participant receives the most generous benefit.
Author: Karen R. McLeese, Esq.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
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