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Adult children and health insurance: Know the new law’s intricacies

by on
in Employee Benefits Program,Human Resources

Employer-sponsored health care programs are governed by several federal laws, including the Employee Retirement Income Security Act (ERISA), the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the new Patient Protection and Affordable Care Act of 2010 (PPACA).

The PPACA significantly changes the health care landscape for many employers. Plans must now cover employees’ children until they reach age 26. In 2014, employers will be required to provide health coverage or face possible penalties.

WHAT’S NEW: Some aspects of the PPACA took effect in September 2010. Most significantly, employees’ children are eligible for coverage until age 26. The new coverage requirement affects all plans renewing on or after Sept. 23, 2010.

The new law doesn’t require employers to obtain proof of age of dependents—but it doesn’t prevent employers from doing so, either.

Now is a good time to carefully audit your health care rolls to ensure that only those who are entitled to coverage actually receive it.

You can insist that employees prove they’re responsible for caring for children covered by your policy. Children don’t have to be dependents of the employee or even live under the same roof. However, the employee does have to show that he or she has or has had in the past an in loco parentis role.

Adult children are eligible for health coverage even if they are married. Biological, adopted, foster and stepchildren are eligible for coverage. However, if a strange 23-year-old “child” suddenly appears out of nowhere, you are entitled to ask questions.

HOW TO COMPLY: Regulations require employers to notify employees of the expanded coverage available to their children by the first day of the new plan. For example, if your new plan starts Jan. 1, 2011, then you must send the notice by that date. The U.S. Department of Labor had created model notice language for employers to use:

“Individuals 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 [insert name of group health plan or health insurance coverage]. Individuals may request enrollment for such children for 30 days from the date of notice. Enrollment will be effective retroactively to [insert date that is the first day of the first plan year beginning on or after Sept. 23, 2010]. For more information contact the [insert plan administrator or issuer] at [insert contact information].”

The notice may come from either the employer or the insurer.

Retroactive coverage

Eligible children of employees are enrolled retroactively to the first day of plan coverage. The regulations provide the following examples:

  • If a child qualifies for enrollment and the parent is not enrolled, the plan must provide an opportunity to enroll the parent, in addition to the child.
  • If a plan has more than one benefit package option and a child qualifies for enrollment, the plan must provide the parent enrolled in one benefit package option an opportunity to enroll the child in any benefit package option for which the child is otherwise eligible. This effectively allows parents to switch their benefit package selections.
  • A child who qualifies for enrollment and who is covered under a COBRA continuation provision must have the opportunity to enroll as an employee’s dependent. In this situation, if the child loses eligibility for coverage due to a qualifying event—including aging out of coverage at age 26—the child has another opportunity to elect COBRA coverage. (If the qualifying event is aging out, the COBRA continuation coverage could last 36 months from the loss of eligibility related to turning 26.)
  • If a child under age 26 never enrolled because he or she was too old under the former terms of the plan, he or she must have an opportunity to enroll.

The plan is not required to enroll the child if the parent is no longer eligible for coverage under the plan—for example, if the parent no longer works for the employer as of the first date on which the enrollment opportunity would be required to be given.

Moving forward

Starting in 2014, most employers may face penalties if they fail to offer health coverage.

For now, ensure that your insurance plan covers everyone it should and that employees know all their rights under the new law. Your insurance plan or broker can help you navigate this complex issue.

In theory, health care costs will eventually go down because more people will be insured. However, for the near future, new mandated coverage will probably raise costs. Making sure only the right people are getting coverage is a good way to contain costs now.

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