Magic Number: Age 26 - Big Changes to Employer Health Care
Plans
From the desk of Susan
Wells
If you are an employer that offers
group health insurance to your employees and their children, you
will soon be required to offer coverage to your employees' adult
children up to the age of 26. Under current law, young adults
typically lose health insurance coverage under their parents' plans
at age 19 unless they are enrolled in college full time.* In
addition, young adults covered through public programs, such as
Medicaid (AHCCCS in Arizona) or the State Children's Health
Insurance Plan lose eligibility for coverage at age 19.
According to the U.S. Department of Health & Human
Services (DHHS), young adults have the highest uninsured rate of
any age group. Approximately 30% of young adults are
uninsured. That translates to more than 20% of the uninsured
population. Since young adults frequently work in entry-level
or part-time jobs or in small businesses that do not offer health
insurance, it is no surprise that a significant number of young
adults do not have access to health insurance offered through their
employers. Contrary to popular belief that young adults are
healthy and do not need health insurance, over 16% of young adults
have chronic illnesses, such as cancer, diabetes or asthma.
The Affordable Care Act, enacted on March 23, 2010, is designed
to ensure that persons up to the age of 26 are offered health
insurance through their parents' employers' health insurance
plans. Effective September 23, 2010 (or such later date as
the employer's health insurance plan year begins),** if dependent
coverage is offered by the employer, health insurance must be
offered to adult children up to the age of 26, regardless of
whether the children attend school, are dependents for tax
purposes, live away from the parents' home or are married.
(Note that the children's spouses and offspring need not be offered
coverage and until 2014 certain existing plans are exempt from
offering coverage to young adults who can obtain coverage through
their own employers.) The coverage offered must be the same
as the coverage offered to other covered individuals. The
cost of coverage must also be the same as the cost for
similarly-situated persons.
Employers must give participants a special enrollment notice and
at least a 30-day period to enroll, regardless of whether the
employer or the plan offers an open enrollment period. The notice
may be distributed at open enrollment; however, the notice and the
enrollment deadline must be prominently displayed. Although it is
not required, employers may want to also post the notice in high
traffic employee areas, such as a lunch or meeting room or on their
employee intranet site. The form of the notice can be reviewed at:
http://www.dol.gov/ebsa/dependentsmodelnotice.doc.
Under The Affordable Care Act and related guidance issued by the
Treasury Department, the value of any employer-provided health
coverage for an employee's child is excluded from the employee's
income through the end of the taxable year in which the child turns
age 26. The portion of the cost of coverage contributed by
the employee is also excluded from the employee's income if their
contribution is made through a cafeteria plan. (Note that the
cafeteria plan document may need to be amended to permit this;
however, if the amendment is made by December 31, 2010, the benefit
would be available immediately.) Employees will also be able to
utilize FSA or HSA plans to reimburse health related claims for
dependent children up to age 26.
Regardless of an employer's political viewpoint on The
Affordable Care Act, employers must implement its extension of
health care to adult children in a timely and proper manner, as The
Affordable Care Act imposes severe penalties for noncompliance.
Additional information can be found on-line at the following web
pages:
http://www.hhs.gov/ociio/regulations/adult_child_fact_sheet.html
http://www.dol.gov/ebsa/faqs/faq-dependentcoverage.html
http://www.dol.gov/ebsa/newsroom/fsdependentcoverage.html
*Note that more than 30 states have already extended young adult
coverage beyond age 19. See http://www.ncsl.org/default.aspx?tabid=14497.
**Note that many insurance companies are offering this
extended coverage prior to the required date.
About the author: Susan E. Wells is business lawyer
and a partner at the Phoenix law firm of Jaburg Wilk where she
assists both business owners
and entrepreneurs. She has extensive
experience representing both franchisees and
franchisors.
3200 North Central Avenue
. Phoenix . Arizona