PPACA Provides Clarification to "Age 26" Coverage Mandate
Recently, the Department of Labor (“DOL”) issued guidance on the Patient Protection and Affordable Care Act (“PPACA”) in the form of a Q&A. While any information clarifying the statute and its regulations is helpful, among the most important information provided in this communication was clarification of the “Age 26” coverage mandate. Prior to this, we only had the regulations for guidance, and they required that health plans eliminate dependent child eligibility criteria such as financial dependency, residency with the participant, student status, employment, eligibility for other coverage, or marriage. The regulations specifically stated, “a plan may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of the relationship between the child and the participant.”
The Q&A clarified that a health plan does not fail to satisfy the requirements of PPACA because the plan limits health coverage for children up to age 26 to only those children who are described in section 152(f)(1) of the Internal Revenue Code (“IRC”). This means that for an individual not described in the IRC, such as a grandchild or niece, a plan may impose additional conditions on eligibility for health coverage, such as a condition that the individual be a dependent for income tax purposes.
IRC 152(f)(1) defines the term “child” to mean an individual who is: (1) a son, daughter, stepson, or stepdaughter of the taxpayer; or (2) an “eligible foster child” of the taxpayer. An “eligible foster child” means an individual who is placed with the taxpayer by an authorized placement agency or by judgment decree, or other order of any court of competent jurisdiction. Any adopted children of the taxpayer are treated the same as natural born children.
The late timing of this clarification may not have provided the best news for plans that volunteered to cover adult children aging out of their parents’ health plans before the PPACA mandate took effect, as was strongly encouraged by HHS Secretary Sebelius to avoid a gap in coverage for children who graduated from college this past May. Plans that waited to provide this coverage, and are now considering their open-enrollment options under PPACA, will want to consider whether to impose additional eligibility requirements on those children who do not fall under code IRC 152(f)(1). If plans decide to use different categories of dependents, benefit administrators may find that they will need programming changes to track the different dependent eligibilities.
Additionally, plans should consider their enrollment eligibility regarding child dependents in their free-standing dental, vision, and retiree plans, which are exempt from the requirements of PPACA. Plan sponsors could require an altogether different set of eligibility criteria for these exempt plans. Plans need to make these decisions before sending any open-enrollment materials to participants.