Are you sick of dealing with health insurance yet? Extensions, changes, amendments… it seems to be never ending.
Well here’s the latest fine print you need to be aware of:
If you currently have a grown child on your health insurance plan, or you’re age 28 or younger and insured on your parent’s health insurance plan, you need to be aware that the dependent coverage laws, in Ohio, will soon be changing.
Both the federal government, through the Affordable Care Act (ACA), and the state government, through the budget that was passed in July of 2009, have passed legislation allowing older age children to remain covered under their parents’ coverage. However, the current federal and state laws aren’t the same.
The federal law requires plans to extend the eligibility age for dependents up to age 26.
Under current Ohio law, if health insurance coverage is provided to an insured’s unmarried dependent, that coverage must, upon the request of the insured, be extended to age 28.
However, Ohio recently passed legislation that eliminates this requirement.
As of January 1, 2016, that age requirement is being lowered from age 28 to age 26, and will apply to any policies that are effective or renewed on or after this date.
Who is eligible?
State Law:
- The child must be unmarried.
- The child must be the natural child, stepchild, or adopted child of the insured, subscriber or covered employee.
- They have not reached their 28th birthday (26th birthday as of January 1, 2016).
- They are a resident of the State of Ohio (however, does not need to live with his or her parents) or are a full-time student at an accredited public or private institution of higher education.
- They are not employed by an employer that offers any health benefit plan under which the child is eligible for coverage.
- They are not eligible for coverage under Medicaid or Medicare.
Federal Law:
- The child may be married or unmarried.
- They must be the child of the covered employee as defined under the plan or policy.
- They have not yet reached their 26th birthday.
- They do not have their own employer coverage available if the parent is covered under a group health plan that was in existence on March 23, 2010 (grandfathered plan).
- No other eligibility requirements are permitted.
- Neither the state law nor the federal law requires a child to live with or be financially dependent on upon the parent.
Disabled dependents
Coverage for a dependent child who is, and continues to be, incapable of self-sustaining employment by reason of mental retardation or physical handicap and is primarily dependent upon the employee for support and maintenance, will not terminate.
Applicable health plans
Ohio’s dependent coverage laws apply to:
- Group sickness and accident insurance policies that include coverage for dependents, including COBRA and state continuation coverage.
- Individual policies that include coverage for dependents including conversion, open enrollment basic and standard plans.
- Multiple employer welfare arrangements offering an insurance program or public employee benefit plans. This coverage does not apply to self-insured Employee Retirement Income Security Act (ERISA) plans.
- Coverage issued by insurance companies or Health Insuring Corporations, also known as Health Maintenance Organizations.
Federal laws apply to:
Health plans, including insured and self-insured group health plans, that provide dependent coverage to children are required to permit an adult child to stay on family coverage until age 26 (this includes self-insured ERISA plans).
Dependent Eligibility
Under the ACA, health plan coverage must be made available to qualifying young adults up to age 26. Qualifying young adults include:
- Sons & daughters
- Stepsons & stepdaughters
- Adopted children
- And possibly eligible foster children of the parent, regardless of the qualifying young adult’s marital status.
It does not matter whether the qualifying young adults are tax dependents for federal income tax purposes. Parents may decide whether to add adult children to their plan, but there is no requirement to cover the child of a dependent child.
Dependent Student Coverage
A federal law (Michelle’s law) also extends coverage for students with a serious illness or injury who take a medically necessary leave of absence.
Under the federal provision, coverage is extended for one year from when the leave of absence begins unless, under the terms of the plan, coverage would terminate as of an earlier date.
The health care reform law diminished the impact of Michelle’s Law, which will now primarily affect plans that provide coverage to dependent students who are age 26 or over.
Tax Law
When the ACA was passed, the federal tax code was also revised. The revised tax code provides that, for federal tax purposes, the value of employer-provided coverage for young adult dependents is excluded from the employee’s gross income through the end of the tax year in which the dependent child turns age 26.
Ohio follows federal law with respect to excluding the value of dependent coverage from income.
However, Ohio has special rules regarding tax treatment that currently apply for coverage provided to adult children over the federal minimum age requirement.
Under those rules, Ohio does not tax employees for the value of dependent coverage up to age 28, if such amounts are paid with money included in the taxpayer’s federal adjusted gross income (shown on W-2) and the plan is not subsidized (for example, through employer contributions).
Implications for Employers
Employers in Ohio that offer dependent coverage must, upon the request of the insured, provide coverage to dependent children of employees up to age 28 (lowered to age 26 for policies issued or renewed on or after January 1, 2016). However, health insurance policies must continue dependent coverage for disabled dependents.
In addition, since Ohio generally does not tax the value of dependent coverage up to age 28, the cost of dependent coverage of adult children up to the end of the year in which the child reaches age 26 is tax-free at the state and federal level.
However, coverage for a dependent child that continues beyond the end of the tax year in which the child reaches age 26 will be taxable at the federal level, unless the child qualifies as the employee’s tax dependent.
Conclusion
If these changes have you head spinning, and you’re asking yourself ‘how does this affect me’, give us a call or Request a Proposal. We’re here to help!