Health Care Reform

In this alert we will cover the applicable change requirements to the group health plans and health insurance issuers, as well as the amendments to the IRC giving certain favorable tax treatment to adult children who have not attained age 27 as of the end of the taxable year and are effective March 30, 2010.

Purpose of Reform
A common theme you will see in all of the legislative alerts in the coming months is that the purpose for healthcare reform and the Patient Protection and Affordable Care Act is to insure millions of the now currently uninsured Americans. According to the Kaiser Family Foundation about 30% of all young adults are uninsured. This particular provision, according to Kathleen Sebelius, the Secretary of Health and Human Services, estimates about 1.2 million young adults will now gain coverage.

Many young adults lose their access to coverage when they either marry, graduate college, or no longer are an eligible dependent on their parents’ tax return. This provision hopes to fill those coverage gaps.

Kathleen Sebelius is working closely with many of the nation’s largest insurers to encourage early adoption of the rules rather than waiting until the required deadline. As a result many of the insurers have agreed to voluntary adoption of the rules to prevent the targeted group from falling off their health plans in the spring only to be reenrolled in the fall.

Summary of Health Plan Issuers
Under the Act, all plans and insurance issuers that offer dependent coverage must offer coverage to an enrollee’s adult children whether married or unmarried until the child reaches age 26, even if the adult child no longer lives with the parents, is not a dependent on the parent’s tax return, or is no longer a student.
Plans that do not provide dependent coverage are not required to do so under the Act
Extended eligibility does not apply to the adult child’s spouse or children
Expansion of eligibility is effective for plan or policy years beginning on or after September 23, 2010
Calendar year plans will have to comply as of January 1, 2011
For Grandfathered plans, if the adult child is eligible for another employer-based health plan other than the parents coverage, plans would generally not have to provide extended dependent coverage to that child until 2014