One of the first provisions of the new health care reform act (the “Act”) to be effective is the requirement to extend dependent coverage to children up to age 26. Regulations regarding this requirement were issued on May 13, 2010, and although the regulations do not answer all the possible questions regarding this provision of the Act, they do provide some much-needed guidance. Effective on the first day of the first plan year following September 23, 2010 (i.e. January 1, 2011, for calendar year plans), group health plans (including insured and self-funded plans) and health insurance issuers offering group or individual health insurance policies which offer dependent coverage, will be required to extend that dependent coverage to children up to age 26.
Key Take Aways
The regulations provide guidance on eligibility, uniformity of coverage, transition rules, special rules for “grandfathered” plans and state law impact. Eligibility determinations for dependent coverage now must be based solely on the relationship between the child and the participant. Factors such as residence, financial support, student status and marital status no longer apply. Generally, benefit plans and insurance policies cannot vary the terms or cost of the coverage for dependents covered up to age 26. In other words, all dependents must be treated (for premium and coverage purposes) the same.
The regulations also provide certain transition rules, including notice requirements, which may apply to children previously denied coverage or those already dropped from coverage due to age and in situations where the employer is considering implementing the extended coverage prior to the required effective date. Until January 1, 2014, “grandfathered plans” (as defined in the Act) are not required to offer the extended dependent coverage to a child who is eligible for other employer-provided coverage. Finally, these rules are intended to provide a minimum standard of coverage across all states. With respect to insured coverage, state laws that impose stricter requirements on health insurance issuers continue to apply and are not superseded by the Act.
Employers should begin reviewing their plan documents and operating procedures to determine how to implement these changes. Consideration also needs to be given to the timing and communication of these new requirements.