The Department of Health and Human Services (HHS) could release as early as today an interim final rule on the provision in the health care reform bill allowing dependents up to age 26 to remain on a parent’s health care plan.
The provision was originally included in the health care bill to help people in their mid-twenties, the demographic least likely to have insurance, to have an affordable option besides a federal COBRA plan. Current law varies by state, but most dependents must be off a parent’s insurance by age 21 or 22. The insurance expansion has a deadline of September 23, but sixty-five insurers as of last week are already offering to keep older dependents on through age 26.
The concern for employers is how the provision will be implemented. For an association or business offering insurance, it is unclear how dependents aged 22-26 will be classified – with other dependents or at a different rate.
The IRS has already issued guidance on the tax implications of the provision. In their April 27 guidance, the IRS stated that insurance offered to under-27 children is generally tax-free for the employee and those employees in employer-provided cafeteria plans can begin making pretax contributions for this benefit. You can read a thorough analysis of the provisions at the Society of Human Resource Management health care page.
Some of the expected provisions from the HHS guidance include: children can be on a parent’s plan even if they are married, don’t live at home, or are not a dependent for tax reasons. They are prohibited until 2014 from joining a parent’s plan if they have an offer of insurance through their employer.
ASAE will post details on the HHS rule here once it becomes available.
