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June 3, 2010
COBRA Premium Subsidy Update

On April 15, 2010 Congress extended the COBRA premium subsidy from March 31, 2010 through May 31, 2010.  The Department of Labor has updated its model Forms to reflect this extension of the COBRA premium subsidy.  Employers should update their COBRA forms to ensure compliance with these new rules.   

    Dependent Coverage Update

    On May 10, 2010, the Department of Labor, the Internal Revenue Service, and the Department of Health and Human Services jointly released Interim Final Regulations on the dependent child coverage age extension requirement of the Patient Protection and Affordable Care Act of 2010.  Key provisions of the Interim Final Regulations as well as the Mass-Health requirements are summarized below.  Employers should update their group health plan documents, administrative forms, and procedures to ensure compliance with these new rules. 

      
    1. Effective Date:  The Interim Final Regulations apply to ALL insured and self-insured group health plans that provide dependent coverage ("Plans") during plan years beginning on or after September 23, 2010 (the "Effective Date").  Plans that exist before the Effective Date are "grandfathered plans" and have some special exceptions (see below).

    2. General Rule:  After the Effective Date, Plans may no longer condition health coverage on a child's tax dependent status.  Instead, Plans must make dependent coverage available until a covered child reaches age 26.  Further, health coverage or premium costs cannot vary based on the age of a covered child. 

    3. Children & Spouses of Covered Dependents:  Plans do not have to extend coverage to the children or spouse of a child receiving dependent coverage under the general rule.

    4. "Aging Out" Transition Rules:  A special rule applies to any child under age 26 who aged out of dependent coverage prior to these new rules.  Under the special rule, Plans must notify the child (or the child's covered parent) that the child may re-enroll in the Plan.  Coverage for a child who re-enrolls must take effect no later than the first day of the first plan year for which the requirement is effective.  For calendar year plans that are not grandfathered plans, the date would be January 1, 2011.       

    5. Grandfathered Plans:  A grandfathered plan is a Plan that exists on March 23, 2010 and provides coverage to dependent children. Grandfathered plans are allowed to exclude an adult child who has not reached age 26 from coverage if the child is eligible to enroll in his or her own employer-sponsored health plan.  However, grandfathered plans can only exclude such children for plan years beginning before January 1, 2014.  
       

    Please note that Massachusetts law requires an insured plan to provide dependent coverage of children for two years as a non-dependent or until the child turns 26, whichever comes first.  This rule continues to apply to Massachusetts employers even if they sponsor a grandfathered plan under the federal law.

    This client alert is intended to inform you of developments in the law and to provide information of general interest.   It is not intended to constitute legal advice regarding a client's specific legal problems and should not be relied upon as such.  This client alert may be considered advertising under the rules of the Massachusetts Supreme Judicial Court.