Digging Deeper Into the New Adult Children Coverage Rules

June 8, 2010 (PLANSPONSOR.com) - Two weeks ago this column addressed new regulations related to coverage of adult children to age 26. 
By PS

These regulations generally provide that a group health plan may define the relationship between a dependent child and the enrollee (e.g., natural child, step-child, etc.), but may not add other conditions, such as tax dependency, residency, student status, or marital status (see Dealing with the Age 26 Coverage Requirements).

This week’s column follows up with additional questions received online related to the age 26 rules (You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions).  

Are grandfathered plans subject to these rules?  Can an employer with a grandfathered plan choose to allow dependent children to enroll in the plan even if they have other employer coverage?

Both grandfathered and non-grandfathered plans are subject to the new regulations.  However, 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. 

The grandfathered plan is not required to use the exception though.  For example, the plan may want to be more generous or may decide it is too administratively burdensome to track which dependent children are eligible for other employer coverage.  The plan may decide to allow all dependent children under age 26 into the plan, regardless of eligibility for other coverage.  This approach would be permissible, too.

If a retiree medical plan covers only former employees and their spouses (and not dependent children), must the plan now cover dependent children to age 26?

No, the new regulations allow a group health plan to define the relationship between the child and enrollee (e.g., natural child, step-child, etc.) and do not require a plan to cover dependent children at all.  But, to the extent the plan covers a certain type of child, it must do so to age 26 without additional conditions, such as tax dependency or student status.

Our Open Enrollment period is two weeks.  The new re-enrollment period for dependent children who have aged out of the plan must be 30 days.  Can we still hold both enrollments at the same time?  Does this mean our Open Enrollment also must be 30 days?

The regulations require that a group health plan must provide a one-time special enrollment period for children whose eligibility for coverage previously ended, or who were denied coverage (or were not eligible for coverage) because of age.  This enrollment period must begin by the effective date of the requirement (i.e., the start of the plan year beginning on or after 9/23/10, or 1/1/11 for calendar year plans) and extend for 30 days.  The plan could hold this special enrollment period before the beginning of the plan year (such as in conjunction with Open Enrollment) or can hold the special enrollment period beginning on the first day of the plan year. 

Whatever the case, the special enrollment must extend for 30 days.  There is no requirement that any other enrollment that coincides with the special enrollment (such as Open Enrollment) must extend 30 days, but the plan may want to have a consistent time period to avoid confusion (or be clear when both enrollment period begin and end).  If the plan chooses to hold the special enrollment so that it extends into the plan year (for example, if the special enrollment starts on 1/1/11 for a calendar year plan), coverage must be retroactive to the start of the plan year.

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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  

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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