Health Care Reform – Dependent Coverage Regulations
May 26, 2010
As mentioned in a previous alert the Patient Protection and Affordable Care Act (PPACA) (signed into law on March 23, 2010) as modified by the Health Care and Education Reconciliation Act of 2010 (“Reconciliation Bill” and combined, “Health Care Act”) extended health care coverage to dependents until age 26. On May 13, 2010, the Department of Health and Human Services (HHS) issued interim final regulations regarding this extended coverage for adult dependents. The dependent coverage rules are effective for the first plan year beginning on or after September 23, 2010. Therefore, calendar plan years must comply with the new rules beginning on January 1, 2011.
When Must Coverage be Offered?
The Health Care Act does not require group health plans and insurers to offer coverage to dependents, but group plans offering dependent coverage, must comply with the new rules and cover adult children until age 26. Adult children must be covered even if they do not live with their parents, are not dependents on their parent’s tax return, are no longer students, or even if they are married (although the adult dependents’ own spouses and their children do not qualify).
Plans and insurance policies must allow dependents who qualify to enroll during a special enrollment window of at least 30 days starting no later than the effective date (January 1, 2011 for calendar year plans or policies). Plans or policies may use their existing annual enrollment periods to satisfy the special enrollment requirements. Further, the Department of Labor (DOL) has encouraged insurance companies to begin covering adult dependents earlier than September 23, 2010. A list of companies who have responded is available on the DOL website (see link below).
Notice of this new special enrollment opportunity must be provided as soon as possible but in no event later than the effective date. The notice may be included with other open enrollment materials distributed to employees (participants) and must be prominent among the materials. Notice to participants is deemed notice to their dependents.
Dependent coverage laws in certain states such as Illinois currently allow health insurance policies to apply a surcharge to coverage provided to adult dependents. As of the effective date of the new Federal dependent coverage rules, insurers in those states will no longer be allowed to apply a surcharge. The new rules expressly prohibit surcharges for adult dependents, who must be treated the same as similarly situated minor dependents.
Group plans in existence on March 23, 2010 are temporarily exempted from providing coverage to adult dependents according to the new rules, if the adult dependent is eligible to purchase other employer-based health coverage such as through their own jobs. This minor grandfathering exception will no longer be available for plan years beginning in 2014 and thereafter.
The text of the regulations and related information may be found here.