Benefits Law Update
        Practical advice from Verrill attorneys

        Implementing Required Health Plan Coverage of Adult Children

        by Eric D. Altholz on September 16, 2010

        Under the Patient Protection and Affordable Care Act, group health plans must extend coverage to employees’ dependents up to age 26. Grandfathered plans enjoy a limited exception to this requirement in cases where the dependent is eligible to enroll in another employer-sponsored group health plan. This post focuses on a handful of practical issues that we have encountered when implementing this required change.

        First, an obvious one: this required extension of coverage only applies to plans that cover dependents. If your plan provides employee coverage only, the plan does not have to be amended to include coverage of adult children. The plan also does not have to cover the spouse (or dependents) of an adult child.

        Second, a plan cannot vary the benefits or coverage provided to children on the basis of age. Regulations issued under the new law state that benefits and coverage provided to adult children must be identical to that provided to similarly situated children who are not adult children, and the benefits and coverage must cost the same.

        Third, the extension of coverage includes adult children who aged out (or never began coverage under the plan because of their age) and now must be given the opportunity to enroll. By the same token, the new law also means that plans can no longer exclude adult children because they get married, cease to be full-time students, live with the parent-employee, or no longer live with their parent-employee or are not financially dependent on the parent. Many plans contain exclusions besides an age limit. Plan language and operation must reflect the multiple aspects of the extended coverage.

        Fourth, individuals to whom adult dependent coverage extended should be treated in the same manner as children. In other words, if a plan is drafted to extend coverage to a step child of an employee as though he or she is a child, the plan should not restrict coverage for the step child through age 26 on the basis of financial dependence, residence, student status, or marriage. Grandchildren, however, can be excluded from coverage.

        Fifth, administrative factors are dissuading grandfathered plans from conditioning the coverage on whether the adult child is eligible for other health coverage. A plan with grandfather status must track whether an adult child is eligible for other employer-based health coverage (not through a parent), which may fluctuate with changes in employment. Grandfathered plans must factor in the soft cost of this administrative requirement in when considering whether to condition adult child coverage on the child’s eligibility for other coverage.

        Benefits Law Update

        Verrill’s Benefits Law Update blog delivers timely insights and practical guidance on the ever-evolving landscape of employee benefits and executive compensation. Our blog provides up-to-date analysis and commentary on a wide range of topics, including timely updates on developments in law affecting employee benefit plans and executive compensation arrangements.

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