Dealing with the Age 26 Coverage Requirements

May 18, 2010 (PLANSPONSOR.com) - This week's question(s) focus on the requirement to cover “dependents” up to age 26.
By PS

If a plan is now required to cover dependents to age 26, can the plan charge a different premium for dependents who are over 19 and not full-time students?

No, the new regulations governing dependent coverage to age 26 (the “age 26” regulations) specify that the terms of the plan “cannot vary based on age” (except for children who are age 26 or older).  75 Fed. Reg. 27122 (May 13, 2010).  The regulations provide examples showing that a plan cannot impose a premium surcharge on certain dependent children based on age and cannot limit what benefit options are available to these dependents.

Can the plan still require a child to be a tax dependent of the employee?

No, the new age 26 regulations provide that a plan may not define a dependent child other than in terms of the relationship between the child and participant (e.g., natural child, step child, etc.).  The regulations specify that the plan may not deny or restrict coverage based on factors such as: financial dependency, residency, student status, employment, eligibility for other coverage (except under the pre-2014 grandfather rule described below), or marital status. 

Are grandfathered plans subject to these rules? 

Yes, but there is a special grandfathered group health plan exception that will apply until 2014.  A grandfathered group health plan (i.e., one in place on March 23, 2010) may exclude an adult child if the adult child is eligible to enroll in an employer-sponsored health plan other than a group health plan of a parent.  Based on this language, it appears that coverage available to an adult child through his or her own employer (or his or her spouse’s employer) will trigger the grandfather rule.  Also note that the grandfather rule is triggered if an adult child merely is eligible for such coverage, even if they do not enroll.  (We understand that the agencies will issue guidance on what is considered a grandfathered plan shortly.)

Does the plan need to allow children who already have aged out an opportunity to re-enroll?

Yes – if they are under age 26.  The regulations confirm that the coverage requirement applies to children whose eligibility for coverage previously ended, or who were denied coverage (or were not eligible for coverage), because of age.  The plan is required to provide these children with a special 30-day enrollment period (similar to a HIPAA special enrollment period).  This means the child (and the participant through whom the child is eligible for coverage) must be offered all of the benefit packages available to similarly situated individuals.  The regulations state that the re-enrollment right also extends to children who have lost dependent eligibility and are on COBRA (when these dependents age out and lose eligibility at age 26, the Preamble to the rules states that they will have a second opportunity to elect COBRA).

The regulations require the plan to provide written notice of the opportunity to enroll.  The notice may be provided to employees on behalf of dependent children and may be included with other enrollment materials, as long as it is prominently displayed.  The notice must be provided by the effective date of the regulation for that plan (i.e., the first day of the plan year beginning on or after September 23, 2010, or January 1, 2011 for calendar year plans).  The plan must allow 30-days for enrollment, with coverage retroactive to the effective date.

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Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions 

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html  

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Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm’s Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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