Reform Rule on Covering Adult Children Looms

One of the first big pieces of health care reform legislation kicks in this month, when adult children up to age 26 must be covered by employed parents’ health insurance, regardless of student status. Previously, only dependents in college typically remained on their parents’ insurance plans after age 18, unless state law mandated coverage for older children who were not in school.

“This change is effective for plan years or plans that start on or after September 23, but many new plan years won’t start until January 1,” said Sarah Bassler Millar, a partner in the employee benefits and executive compensation practice group at Philadelphia-based law firm Drinker Biddle.

Some adult children already are being covered. In April, 66 health insurers agreed to a Department of Health and Human Services request to begin early enrollment of adult dependents who would have aged out of their existing coverage between April and either September 23 or a later starting date for a parent’s employer’s 2011 plan year. The agency wanted to prevent the cost and inconvenience of dropping adult children, providing interim COBRA coverage and then re-enrolling them.

“Some insurers gave employers a choice, while others just did it,” said Tracy Watts, a principal in the health and benefits practice at Mercer, a New York-based HR consulting firm. But many “self-insured employers said no. They said they didn’t have the budget for it.”

To comply with the eligibility expansion, employers must provide written notice of a 30-day open enrollment period for employees’ adult children. This “may take employers by surprise since typical open enrollment is two weeks,” Watts said. “So they should start a little earlier.”

Although eligibility expansion seems straightforward, the definition of a child raises questions. Many firms had extended dependent status to grandchildren, nieces and nephews based on residency with an employee. “The new law doesn’t allow that,” Millar said. “Advocacy groups are asking for clarification. It’s not clear that we’ll get clarity by January 1.” 

Filed by Workforce Management contributor Bridget Mintz Testa. To comment, e-mail editors@workforce.com.