This is the first in a series of articles about health care reform.
The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (together referred to as the health care reform law), included a number of provisions extending health care coverage to adult children. The key issues related to these changes are summarized below.
Q.1 Do employer sponsored group health plans have to provide coverage to adult children of covered employees?
A.1 As of the first plan year beginning on or after September 23, 2010, if an employer sponsored group health plan (self-funded or insured) covers any dependent children, it must make that coverage available to a child of a covered employee until the child turns 26 years old. Whether or not the adult child can be claimed as a tax dependent of the covered employee is irrelevant.
Q.2 What if the adult child of an employee has coverage available through his or her employer?
A.2 Grandfathered plans (those in existence on March 23, 2010) do not need to provide coverage to adult children who have other group health coverage available through an employer until the first plan year beginning on or after January 1, 2014. If an employer's plan was not in existence on March 23, 2010 and provides dependent coverage, then it must cover adult children to age 26 starting with the first plan year beginning on or after September 23, 2010, even if an adult child has other employer health coverage available.
Q.3 Does it matter if the adult child is married?
Q.4 Must an employer sponsored plan cover an adult child's spouse or dependents?
Q.5 How much can an employer plan charge for this coverage (coverage for adult children to age 26)?
A.5 The health coverage provided to dependents cannot vary based on the dependent's age (except for children who are age 26 or older). This means, among other things, that the employer can't charge an employee more to cover these newly eligible children than the employee is charged to cover younger children.
Q.6 What are the tax consequences to the employee?
A.6 The health care reform law included a provision to exclude from an employee's income any amounts paid for coverage for an adult child who has not attained age 27 by the end of the tax year. This allows a plan to structure its coverage to run through the end of the month or year in which the child turns age 27 without adverse tax consequences to the employee. This also means that an employer could change its medical flexible spending account plan to allow for reimbursement of expenses incurred on behalf of adult children to age 27, regardless of whether the children are dependents. The health care reform law also specifies that self-employed individuals who buy their own insurance can deduct the cost of covering adult children to age 27.
Go to Health Care Reform page.