In recent years, employers have embraced the idea of dependent audits in an attempt to ferret out ineligible dependent children from health benefit plans. Most plans cover dependent children to age 19 and age 23 or 25 if the child is dependent and a full-time student. Under the new health care law, that is all out the window and hundreds of thousands, perhaps millions of adult children are now eligible to be enrolled in their parents health plan. In fact, in many cases there will be a strong incentive for the child to remain on the parents plan.
It does not matter if the child is a dependent, if the child is attending college or even if the child is married. The only exception for group plans is if the child is eligible to enroll in another employer’s coverage (but only for plan years beginning before January, 2014). The Senate bill required the child to be unmarried but the reconciliation bill removes that language. The law also contemplates employer contributions because there is a clear statement that such contributions will be included as income to the child unless he or she is a dependent of the employee. However, it appears that the intent for this employer contribution not to be imputed income and changes are being made in the Reconciliation legislation. Generally speaking, the intent was to cover these children just as any younger child is covered under the employer plan.
For group health plans this change can be significant as new children come under plan coverage. Employers who recently audited such coverage may be required to notify their employees that dropped children can be reinstated as of January 1, 2011. In order to avoid what may be a financial hardship for workers employers may want to consider initiating this process in advance of 2011. In addition, this will change the scope of COBRA as previously COBRA beneficiaries are returned to the active group.
These provisions are effective for plan years that begin after six months from enactment of the law – January 1, 2011 for most employer plans.
As usual, all sections of the legislation will be subject to new regulations and employers can expect millions of pages of those over the next several years.
‘‘SEC. 2714. EXTENSION OF DEPENDENT COVERAGE.
(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child (who is not married) until the child turns 26 years of age. Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.
‘‘(ii) ADULT DEPENDENT COVERAGE.—For plan years beginning before January 1, 2014, the provisions of section 2714 of the Public Health Service Act (as added by this subtitle) shall apply in the case of an adult dependent with respect to a grandfathered health plan that is a group health plan only if such dependent is not eligible to enroll in an eligible employer-sponsored health plan (as defined in section 5000A(f)(2) of the Internal Revenue Code of 1986) other than such grandfathered health plan.’’.
(b) CLARIFICATION REGARDING DEPENDENT COVERAGE.—Section 2714(a) of the Public Health Service Act, as added by section 1001(5) of the Patient Protection and Affordable Care Act, is amended by striking ‘‘(who is not married)’’.