Sullivan Benefits Employer Alert - GUIDANCE ISSUED ON ADULT CHILD COVERAGE

Effective for plan years beginning on or after September 23, 2010, the Affordable Care Act requires plans that offer coverage to children on their parents' plan to make the coverage available until the adult child reaches the age of 26. The Departments of Health and Human Services, Labor, and Treasury have issued regulations implementing the Affordable Care Act by expanding dependent coverage for adult children up to age 26.

Employers with health plans that offer dependent coverage must offer coverage to enrollees' adult children until age 26, even if the young adult no longer lives with his or her parents, is not a dependent on a parent's tax return, or is no longer a student. There is a transition period for "grandfathered plans" (plans in existence as of March 23, 2010) that generally do not have to provide dependent coverage until 2014 if the adult child has another offer of employer-based coverage aside from coverage through the parent. The new policy providing access for young adults applies to both married and unmarried children, although their own spouses and children do not qualify.
　
A Special Enrollment Opportunity is required. For plan years beginning on or after September 23, 2010, plans must give children who qualify an opportunity to enroll that continues for at least 30 days regardless of whether the plan or coverage offers an open enrollment period. This enrollment opportunity and a written notice must be provided not later than the first day of the first plan or policy year beginning on or after September 23, 2010. The new policy does not otherwise change the enrollment period or start of the plan or policy year.
　
Benefits must be extended at the same price; no additional premiums can be charged for adult children. Any qualified young adult must be offered all of the benefit packages available to similarly situated individuals who did not lose coverage because of cessation of dependent status. Qualified individuals cannot be required to pay more for coverage than those similarly situated individuals.

Effective March 30, 2010 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 26. This tax benefit applies regardless of whether the plan is required by law to extend health care coverage to the adult child or the plan voluntarily extends the coverage.

Locally, the following insurance companies will begin covering young adults voluntarily under their fully insured* plans before the implementation date required by the Act. This will help to avoid gaps in coverage for new college graduates and other young adults, and to save on insurance company administrative costs of dis-enrolling and re-enrolling them between May 2010 and September 23, 2010. To date, well over 65 insurers have agreed to voluntarily continue coverage for young adults who graduate or age off their parents' insurance before the implementation deadline.