So Your Child Is Aging Out of Your Health Care Plan….Now What?

July 29, 2014

One of the more well-known provisions of health care reform is the “age 26 mandate,” which requires employer-sponsored health plans offering dependent coverage to allow children to remain on the plan until they reach age 26.

Before this Affordable Care Act requirement, plans had varied enrollment age limits for children, with many requiring that children also be unmarried and enrolled full-time in school to be eligible for coverage.  The ACA’s “age 26 mandate” applies to any child of an enrolled employee, regardless of school enrollment or marital status.  This means that as long as your employer provides family coverage, your child can remain on your health care plan until he or she turns age 26.

In addition, the ACA provides that the value of any employer-provided health plan coverage for an employee’s child under age 26 is excluded from such employee’s taxable income.  This means that if your employer covers all or part of the cost of the coverage for the child, you as the employee are not taxed on the value of such coverage.  The tax benefit applies until your child reaches age 26, or if your employer chooses to provide coverage to children beyond age 26, the tax benefit applies until the end of the taxable year in which your child reaches age 26.

For example, if your child is on your employer-sponsored plan, and turns age 26 in June, but the employer allows children to remain on the plan until the end of the plan year (generally, either June 30 or December 31), then the value of the employer-sponsored coverage is excluded from your taxable income through the end of that plan year.

But what to do when a child turns age 26 and loses coverage through the parent’s plan?  Here are a few options to consider:

COBRA

After loss of dependent status upon reaching age 26, your child can remain on the plan for up to 36 months by enrolling in COBRA coverage.  Generally, employers with a minimum of 20 employees are subject to COBRA. You can check with your employer to determine whether COBRA coverage is available.  Keep in mind that although COBRA premiums are limited to 102% of the premium charged for enrollees on the plan, they do generally include the employer and the employee cost of coverage, as well as a 2% administrative fee.   This means, for example, that if the employer previously covered 60% of the cost of the dependent child’s premium, that cost is no longer paid by the employer once the dependent child is on COBRA, but instead, is billed as part of the child’s premium.

Connect for Health Colorado

If your child is turning age 26 and losing coverage under your employer-sponsored plan, check out Connect for Health Colorado, the new health care exchange.  Your child will qualify for a special 60-day enrollment period to enroll in one of the plans available on the exchange.  The 60-day clock starts ticking upon loss of coverage, so if, for example, your child turns age 26 in June and loses employer-sponsored plan coverage through the parent’s plan as of June 30, the 60-day clock begins running on July 1.  Further, coverage is effective the first of the month after enrollment.  So if your child will lose coverage as of July 1, it is best to seek enrollment in June, for coverage effective July 1.  Otherwise, if you enroll in July, coverage would not be effective until August 1.   See the Connect for Health website for more information and plan options.

Medicaid

Your child may qualify for Medicaid coverage.  If you go through the Connect for Health exchange to seek coverage, the application process automatically determines whether your child qualifies for Medicaid coverage.  Keep in mind that if your child does qualify for Medicaid, he or she is not eligible to receive subsidies on the exchange.  If he or she does not qualify for Medicaid, then the health care exchange enrollment process continues to determine any applicable subsidies and plan selection.  You can obtain additional Medicaid eligibility and enrollment information here.

Other Group Coverage

Is your child employed or in school?  He or she may have access to group coverage.  Make sure to keep informed of the enrollment periods that may be applicable.  Often, the child may only have 30 days from the date of loss of coverage to enroll in another group coverage plan.  You also want to make sure you compare the premiums and coverage available through group coverage and the premiums and coverage available to your child through enrollment on the health care exchange.

This post was written by Julie Borisov from Colorado PERA. Would you like to write a guest post for The Dime? Email us at dimecontact@copera.org.