As families proudly gather at college campuses across the country to celebrate the graduation of loved ones from colleges and universities, it pays to take a moment to review the rules related to dependent coverage under Health Care Reform.
Although most graduates will hopefully be leaving the nest to start exciting and rewarding careers, health insurance might not be one of the benefits offered to them, especially if they will be starting at entry-level or intern positions. How does a child's change in educational and employment status affect his or her ability to be covered by mom's or dad's health insurance policy?
Dependent Coverage to Age 26
Under the Affordable Care Act, graduates generally have the option to stay on their parents' health care plans. When a plan covers dependents, it must continue to make the coverage available until a child reaches the age of 26, even if the young adult is married, no longer lives with his or her parents, is not a dependent on a parent's tax return, or is no longer a student.
Note that there is a temporary exception for grandfathered group health plans, which may exclude adult children who are eligible to enroll in an employer-sponsored health plan other than the group health plan of the parent. This exception will no longer apply for plan years starting on or after January 1, 2014.
The following are key points to remember about the law:
- Beginning in 2014, children up to age 26 can stay on a parent's employer plan (regardless of grandfathered status) even if they have another offer of coverage through an employer.
- Plans that offer dependent coverage cannot impose limits on who qualifies based upon financial dependency, marital status, enrollment in school, residency or other factors.
- Under a change in federal 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.
Remember: Individual states may have dependent coverage requirements that are more favorable to employees and adult children, so it's also important to check with your state insurance department.
Congratulations to the Class of 2013! Wishing you success and good health for years to come!
Be sure to download our free guide, Health Care Reform: What to Expect in 2013–2014, to stay on top of other important changes under the Affordable Care Act.