Guidance on Adult Dependent Coverage Released

Today the Department of Labor (DOL), the Treasury, and the Department of Health and Human Services (HHS) released clarifying guidance on the provisions in the new health reform law that require group health plans to cover adult dependent children up to age 26.

Highlights of the new regulation include:

• Except for children age 26 or older, the terms of the policy cannot vary for dependent coverage based on age of a child
• Additional charges (e.g. surcharges, fees, etc.) are not allowed unless the surcharge applies regardless of the age of the child
• Married adult dependents are eligible for this new benefit. However, coverage does not have to be offered to the adult child's spouse or children.
• Plans must provide a special enrollment period - that includes written notice - for at least 30 days to adult children whose coverage may have ended under a plan or who may have been previously denied coverage. This is effective no later than the first day of the first plan year beginning on or after September 23, 2010 (i.e., January 1, 2010 for most employer-sponsored plans).
• Because of the special enrollment period, the adult child is treated as a special enrollee per HIPAA laws. Therefore, employers must:
• Make available to adult children all benefit packages that are offered to other similar individuals who did not lose coverage because they lost dependent status; and
• Charge the same premium price that they charge other similar individuals who did not lose coverage because they lost dependent status
• Financial contributions set aside for this new benefit may be excluded from the employee's income for the entire taxable year the child turns 26 so long as the coverage continues until the end of that given taxable year.

On a related note, HHS released cost estimates of this new benefit, concluding that it will cost $3,380 for each dependent and thus will raise premiums by 0.7 percent in 2011 for employer plans. A little over one million young adult dependents are expected to sign up, with HHS estimating that more than half of them would have been uninsured if not for this program. While this aspect of the health reform law is effective September 23, 2010, many insurers across the country have already pledged to cover this population far in advance of September. A list of these insurers can be seen in the below referenced DOL Fact Sheet.

Click here to access the regulation.
Click here to view the DOL fact sheet.
Click here to read the FAQs, courtesy of DOL.