Q: How does the Affordable Care Act affect young adults?
A: The Affordable Care Act requires plans and issuers that offer dependent coverage to make the coverage available until the adult child reaches the age of 26.
Q: What plans are required to extend dependent coverage up to age 26?
A: The Affordable Care Act requires plans and issuers that offer dependent coverage to make the coverage available until a child reaches the age of 26. Both married and unmarried children qualify for this coverage. This rule applies to all plans in the individual market and to new employer plans. It also applies to existing employer plans unless the adult child has another offer of employer-based coverage (such as through his or her job). Beginning in 2014, children up to age 26 can stay on their parent's employer plan even if they have another offer of coverage through an employer.
Q: I'm a young adult under the age of 26 and I'm on my parents plan now, but I'm scheduled to lose coverage soon. How can I keep my health insurance?
A: First, check with your insurance company. Private health insurance companies that cover the majority of Americans have volunteered to provide coverage for young adults losing coverage as a result of graduating from college or aging out of dependent coverage on a family policy. Second, watch for open enrollment. Young adults may qualify for an open enrollment period to join their parents' family plan or policy. Insurers and employers are required to provide notice for this special open enrollment period. Finally, expect an offer of continued enrollment for plans that began on or after September 23, 2010. Insurers and employers that sponsor health plans will inform young adults of continued eligibility for coverage until the age of 26. Young adults and their parents need not do anything but sign up and pay for this option.
Starting in October, 2013, Your Health Idaho, Idaho’s health insurance marketplace (also called an exchange), will provide a way for individuals and families to shop for, compare and choose a health insurance plan. Some Idahoans, depending on their income, will be eligible to get assistance in paying their health insurance premiums. Coverage under the new plan will begin in January 2014.
Q: I'm under the age of 26, and I used to be on my parents' plan, but I recently lost this coverage because I graduated from college. Can I get coverage?
A: Yes. Check with your insurance company to see if they will provide that coverage to you now. If not, watch for the special open enrollment period and sign up then.
Q: Are plans required to immediately enroll eligible young adults in their parents' plan?
A: No. The law says that the extension of dependent coverage for children is effective for plan years beginning on or after 6 months after the enactment of the law – that means plan years beginning on or after September 23, 2010. You should check with your insurance company or employer to see if they are offering this coverage option.
Q: Will young adults have to pay more for coverage or accept a different benefit package?
A: Any qualified individual must be offered all of the benefit packages available to children who did not lose coverage because of loss of dependent status. The qualified young adult cannot be required to pay more for coverage than similarly situated individuals who did not lose coverage due to the loss of dependent status.
Q: Can plans or issuers who offer dependent coverage limit who qualifies based upon financial dependency, marital status, enrollment in school, residency or other factors?
A: No. Plans and issuers that offer dependent coverage must provide coverage until a child reaches the age of 26. There is one exception for group plans in existence on March 23, 2010. Those group plans may exclude adult children who are eligible to enroll in an employer-sponsored health plan, unless it is the group health plan of their parent. This exception is no longer applicable for plan years beginning on or after January 1, 2014.
Q: Does the adult child have to purchase an individual policy?
A: No. Eligible adult children wishing to take advantage of the new coverage will be included in the parents' family policy.
Q: Will Medicare cover adult children in the same way that private health insurance will?
A: No. The provision does not apply to Medicare.
Q: Are plans or issuers required to provide coverage for children of children receiving the extended coverage?
Q: What happens if a young adult under the age of 26 is not eligible for employer-sponsored insurance and both parents have separate plans that offer dependent coverage?
A: Neither parent's plan can deny coverage.
Q: Does the law apply to plans or issuers that do not provide dependent coverage?
A: No. There is no federal requirement compelling a plan or issuer to offer dependent coverage at this time.
Q: I understand that there are tax benefits related to the extension of dependent coverage. Can you explain these benefits?
A: Under a change in tax law included in the Affordable Care Act, 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. This tax benefit applies regardless of whether the plan or the insurer is required by law to extend health care coverage to the adult child or the plan or insurer voluntarily extends the coverage.
Q: When does this tax benefit go into effect?
A: The tax benefit became effective March 30, 2010. Consequently, the exclusion applies to any coverage that is provided to an adult child from that date through the end of the taxable year in which the child turns 26.
Q: Who benefits from this tax treatment?
A: 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.
Q: May employees purchase health care coverage for their adult child on a pre-tax basis through the employer's cafeteria plan?
A: Yes. In addition to the exclusion from income of any employer contribution towards qualifying adult child coverage, employees may pay the employee portion of the health care coverage for an adult child on a pre-tax basis through the employer's cafeteria plan – a plan that allows employees to choose from a menu of tax-free benefit options and cash or taxable benefits.
Q: Plans and insurers can terminate dependent coverage after a child turns 26, but employers are allowed to exclude from the employee's income the value of any employer-provided health coverage through the end of the calendar year in which the child turns age 26. This is confusing.
A: Under the law, the requirement to make adult coverage available applies only until the date that the child turns 26. However, if coverage extends beyond the 26th birthday, the value of the coverage can continue to be excluded from the employee's income for the full tax year (generally the calendar year) in which the child had turned 26. For example, if a child turns 26 in March but is covered under the employer plan of his parent through December 31st (the end of most people's taxable year), the value of the health care coverage through December 31st is excluded from the employee's income for tax purposes. If the child stops coverage before December 31st, then the premiums paid by the employee up to the time the plan was stopped will be excluded from the employee's income.