Dependent Coverage Up to Age 26

The Affordable Care Act (ACA) requires group health plans and health insurance issuers to make coverage available until the adult child reaches age 26, if the coverage provides dependent coverage through their parents’ plans. The ACA’s young adult coverage requirement took effect for plan years beginning on or after Sept. 23, 2010. All plans and issuers should now be in compliance with the age 26 dependent coverage requirement.

This mandate applies to grandfathered and non-grandfathered plans. Parents can decide whether to add adult children to their plan. A child’s marital status has no bearing on their eligibility. There is no requirement to cover the child of a dependent child (that is, a grandchild) or the spouse of a dependent child.

The terms of the plan or health insurance coverage providing dependent coverage of children, including the premiums charged, cannot vary based on age (except for children who are age 26 or older). This means that adult children must be offered all of the benefit packages available to other plan participants and cannot be required to pay more for coverage. Some health plans may choose to extend the coverage for dependents, but that is strictly a case by case situation.

Under federal tax law, employers can offer tax-free health coverage to employees’ adult children through the end of the month in which the children turn age 26. It does not matter whether the children are tax dependents for federal income tax purposes.

Beginning in 2015, the ACA’s employer shared responsibility rules impose penalties on large employers (those with 50 or more full-time and full-time equivalent employees) that do not offer coverage to all full-time employees and their dependent children. For purposes of the employer shared responsibility rules, a “dependent” is defined as a biological or adopted son or daughter who is under 26 years of age. The final rules exclude stepchildren and foster children from the definition of dependent.

If you think you want to cover your dependent children, we may be able to help! If you are interested in hearing more about your options, or have questions relating to other insurance, please feel free to reach out to the professionals at Associated Financial Consultants, an Associated Group company at 954-983-5600.