Reform Alert - News from the Blues' Office of National Health Reform

More information available regarding continued coverage for dependent children up to age 26

May 13, 2010

Background: On April 21, BCBSM announced that BCBSM and BCN reached an agreement with the Department of Health and Human Services regarding the continuation of dependent coverage up to age 26, in advance of the new regulatory requirement of the Patient Protection and Affordable Care Act scheduled to take affect this September. 

Effective immediately, we will continue coverage for dependents that are currently enrolled in our fully-insured plans if they are under age 26. Self-funded groups are not required to offer extended coverage before PPACA requires it, but have the option to do so. 

Following is a Q&A that will help you answer questions you receive about the announcement. This is an updated version of the Q&A that was sent on April 21, including additional details from the Department of Health and Human Services.

Q&A

What is happening with coverage for children who would normally roll off their parents' policies when they turn a certain age? 

It has been BCBSM's longstanding policy to allow dependents to remain on their parents' BCBSM health insurance coverage for the remainder of the calendar after graduation for fully-insured customers. 

The legislation requires health plans which offer dependent coverage to cover dependent children until age 26, for plan years beginning on or after Sept. 23, 2010. 

What about my child who previously rolled off my policy but is still under 26? How can I re-enroll my eligible adult child?

Dependents up to age 26 whose coverage ended in that Plan by reason of reaching a dependent eligibility threshold must be offered coverage on their parents' policy for plan years beginning on or after Sept. 23, 2010. BCSBM will work with customers to enroll dependents under 26 in time to meet the requirement to do so. 

What plans are required to extend dependent coverage up to 26?

The coverage extension applies to all BCBSM individual policies and employer plans beginning with the first plan year on or after Sept. 23, 2010. In the case of a grandfathered group plan however, this requirement of extending coverage is not applicable until 2014 if the adult child is eligible to enroll in an employer group health plan other than that of a parent. 

Does this apply to all people who have group coverage?

Self-insured groups can choose whether or not to extend dependent coverage for their employees in advance of the Sept, 23, 2010 requirement to do so. However, all group plans have to comply beginning with the first plan year starting on or after Sept. 23, 2010 (except as noted above for a grandfathered group plan where the adult child is eligible for employer group coverage other than that of a parent). 

Are there limits on who qualifies based on financial dependency, martial status, enrollment in school, residency or other factors? 

No. An eligible dependent must only be the child of a covered individual by birth, legal adoption or legal foster arrangement. 

Once the requirement to extend coverage is applicable to the particular Plan, the Plan may not restrict or deny coverage for an adult child based on financial dependency, residency with the parent, student status, or any other combination of these factors. There is one exception for "grandfathered" group plans in existence on March 23, 2010. If the parents' group plan is grandfathered, that plan may exclude adult children who are eligible to enroll in another employer-sponsored health plan other than that of a parent. This exception will not apply for plan years beginning on or after Jan. 1, 2014, when children up to age 26 can stay on their parents' employer plan even if they are eligible for other employer coverage. A plan that came in to existence after March 23, 2010, is called a "non-grandfathered" plan.

If the parents' policy is a fully-insured, grandfathered plan:

  • Currently covered adult children will stay on the policy 
  • If the adult child's coverage in that plan previously ended by reason of reaching a dependent eligibility threshold, the first plan year beginning on or after Sept. 23, 2010, the adult child will be able to re-enroll on their parents' policy 
  • As noted above, there is a special rule for grandfathered group plans where the adult child is eligible for other employer group coverage 

If the parents' policy is a fully-insured, non-grandfathered plan:

  • Currently covered adult children will stay on the policy 
  • The adult child will be able to re-enroll on their parents' policy with the plan year beginning on or after Sept. 23, 2010 

If the parents' policy is a self-insured, grandfathered plan:

  • Adult children currently covered on their parents' policy will roll off at graduation (or whenever the plan guidelines specify), unless the employer chooses otherwise 
  • The adult child will be able re-enroll on their parents' policy with the first plan year beginning on or after Sept. 23, 2010 if they are not eligible for other employer group coverage 

If the parents' policy is a self-insured, non-grandfathered plan

  • Adult children currently covered on their parents' policy will roll off at graduation (or whenever the plan guidelines specify), unless the employer chooses otherwise 
  • The adult child will be able to re-enroll on their parents' policy with the first plan year beginning on or after Sept. 23, 2010 

Will adult children be given a special chance to enroll after Sept. 23, 2010?

Yes. For plan years beginning on or after Sept. 23, 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. BCBSM and your employer will work together to provide details about when and how to enroll.

Does the adult child have to purchase an individual policy?

No. Eligible adult children wishing to take advantage of the new coverage will be included in the parents' individual family policy.

Will Medicare cover adult children in the same way that private insurance will?

No. The provision does not apply to Medicare.

Is BCBSM required to provide coverage for the spouse of the adult children or the children of adult children receiving the extended coverage?

No.

Are there tax benefits related to the extension of dependent coverage? 

Yes. 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. The exclusion applies to any coverage that is provided to an adult child from March 30, 2010, through the end of the taxable year in which the child turns 26.

Who benefits from the tax treatment?

This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.

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