PPACA Age 26

[Chaz]

As we all know, effective January 1, 2011 (for calendar year plans), plans that cover dependent children will be required to coverage adult children to age 26, regardless of dependency status.

Hypo:

Employer has a number of tiers of coverage, including Employee-only, Employee + Children. Both the employer and employee contribute to the coverage. Employee is estranged from his 25 year old son. The son comes to plan and says "I am entitled to coverage. Put me on the plan." Employee says "I don't want to pay more for his coverage."

Three questions:

1-Does the plan have to cover the child?

2-If the plan does have to cover the child, can the plan require the employee pay for the employee share (presumably pre-tax through a cafeteria plan) or must the employer have the child pay separately?

3-If the child pays separately, does he pay the Employee-only rate or does he pay the difference between the Employee + Children rate and the Employee-only rate?

Any help is appreciated.

[GMK]

Consider if the employee who is entitled to coverage said that he/she wanted to be in the plan but didn't want to pay his/her share for her own coverage?

Would the plan have to cover the employee?

Could the plan require the employee to pay for the coverage?

Would the plan have to accept a non-standard payment method for the employee's coverage?

I think the answers are no, no, and no (but the plan is not prevented from accepting an alternate payment method).

Same for the son's coverage. The plan cannot prevent the employee from adding coverage for eligible dependents, but the plan cannot require the employee to do so, and the plan does not have to cover someone who doesn't pay their share of the premium.

The plan could choose to allow the son to pay his own share of the premium, which would be whatever the plan charges for older dependents in other cases. Here I'd look at it in terms of what amount would be considered imputed income to the employee if the premium for older dependent coverage were taxable (e.g., it could be the employee amount for single coverage).

[GMK]

Just to add that the premium amount is not an academic question. Several states require availability of coverage beyond age 26, which gets us back to calculating imputed income for the employee.

For reference, here's a federal and state summary, as of August 2009:

http://www.ncsl.org/default.aspx?tabid=14497

[Chaz]

Thanks for the response.

I understand that an employee cannot refuse to pay and still receive coverage. (I would argue, though, that the terms of an employment relationship CAN require the employee to pay for health coverage. That's a topic for a different time.) In any event, in my hypothetical, assume that the son is willing to pay.

I guess my question comes down to whether the EMPLOYEE can control whether the child gets coverage or whether the child has an independent right (like with COBRA) to the coverage, with or without the employee's involvement. The regs discuss that coverage must be made "available" to the child and also talks about the child paying for the coverage.

The second question is, if coverage must be offered, MUST the plan provide for an alternative payment option for the child (it probably COULD do it but must it?) or could it cram down the employee?

[GMK]

I guess my question comes down to whether the EMPLOYEE can control whether the child gets coverage or whether the child has an independent right (like with COBRA) to the coverage, with or without the employee's involvement.

MUST the plan provide for an alternative payment option for the child (it probably COULD do it but must it?) or could it cram down the employee?

Good questions, and I don't have the answers.

I understand the employee's point of view, but I don't know if the employee can prevent the child's coverage, as long as the employee in not otherwise affected (in terms of the plan, not in terms of his/her rage, disgust, etc.).

With luck, others will chime in.

[Chaz]

The issue from my perspective is not whether the parent can prevent the child from enrolling even if the parent isn't affected (i.e., has to pay), it's whether the employer needs to set up a separate administrative scheme for collecting the premiums from the child.

[Peter Gulia]

On Chaz's hypo, perhaps the plan's administrator might send son a claims-denial letter that explains the administrator's discretionary interpretation of the plan that only an employee may pay (and only by wage reduction) for the non-employer portion of any cost of coverage. This claims-denial letter would describe the plan's procedure for review of a denied claim. If the son seeks review, the next denial would explain that he has ehausted the plan's claims and review procedures (and so may sue in Federal court). One imagines that the probabilities are against son finding a lawyer who would successfully argue that the administrator's interpretation was an abuse of discretion.

[david rigby]

Implicit in the original post is that the 25-year-old son is not a dependent. Correct?

If so, does anything else matter?

[Chaz]

Implicit in the original post is that the 25-year-old son is not a dependent. Correct?

If so, does anything else matter?

When I wrote the hypothetical, I presumed that the son wasn't a dependent. I'm not sure why (theoretically, at least) it would matter in any case.

[Chaz]

On Chaz's hypo, perhaps the plan's administrator might send son a claims-denial letter that explains the administrator's discretionary interpretation of the plan that only an employee may pay (and only by wage reduction) for the non-employer portion of any cost of coverage. This claims-denial letter would describe the plan's procedure for review of a denied claim. If the son seeks review, the next denial would explain that he has ehausted the plan's claims and review procedures (and so may sue in Federal court). One imagines that the probabilities are against son finding a lawyer who would successfully argue that the administrator's interpretation was an abuse of discretion.

That would be good advice if the plan administrator was comfortable that the plan (however it is interpreted) is in compliance with the law. I'm not sure that I am comfortable with whether such a denial would comply with PPACA and in my mind it would be risky finding out through a court decision

[david rigby]

When I wrote the hypothetical, I presumed that the son wasn't a dependent. I'm not sure why (theoretically, at least) it would matter in any case.

Very important. From PPACA

A group health plan and a health insuranceissuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to makesuch coverage available for an adult child (who is not married)until the child turns 26 years of age.

Therefore, if the "kid" is not a dependent, the plan/employer is not required to provide coverage. (It might provide coverage for another reason, but not for this one.) That's how I read it; I would be interested in other opinions.

[Peter Gulia]

On the query about whether a son is or isn't some kind of "dependent", the new rule says:

Restrictions on plan definition of dependent. With respect to a child who has not attained age 26, a plan or issuer may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of a relationship between a child and the participant. Thus, for example, a plan or issuer may not deny or restrict coverage for a child who has not attained age 26 based on the presence or absence of the child's financial dependency (upon the participant or any other person), residency with the participant or with any other person, student status, employment, or any combination of those factors. In addition, a plan or issuer may not deny or restrict coverage of a child based on eligibility for other coverage, except that paragraph (g) of this section provides a special rule for plan years beginning before January 1, 2014 for grandfathered health plans that are group health plans. (Other requirements of Federal or State law, including section 609 of ERISA or section 1908 of the Social Security Act, may mandate coverage of certain children.)

On risking the hazards and inconvenience of litigation, there might not be a much better way to get a conclusion (if anyone challenges a denial). The plan administrator's lawyer will read the same statute, interim rule, and other law sources that Chaz and the rest of us read. Uncertainty about the right answer to a question isn't a sufficient reason for failing to decide a properly presented question.

The alternative of not taking any risk on failing to offer coverage to adult children could mean taking a risk of harming the plan by providing coverage and payment methods that need not have been provided and in so doing worsening costs or benefits for everyone else. If not required by the plan's documents, risking those harms might be a fiduciary breach.

A plan administrator's task often involves interpreting ambiguous law. That's why courts defer to an administrator's interpretation unless it was so obviously wrong that it must have been an abuse of discretion.

[Guest sniffles]

It seems to me (and I may be wrong about this) that the Employee is the person who is entitled to elect health coverage for any and all dependents as he is the only one employed by the Employer offering the health plan.

I would be very reluctant to add a dependent (without a court order) if my employee refuses to elect coverage for this dependent.

I would contact the government agency with this scenario to see what they suggest and what RIGHTS if any that a dependent may have when their parent does not want to enroll them in the Employer's health plan.

[Guest Benny Comply]

If I am understanding the original question correctly, then this issue should be addressed in your plan document. For example, our welfare plan documents state that the Employee may enroll his or her eligible Dependents in the same coverage options in which the Employee is enrolled. They do not provide for an independent coverage election to be made available to the Dependent (except under COBRA or per a QMCSO as stated in previous posts).

[oriecat]

The regs discuss that coverage must be made "available" to the child and also talks about the child paying for the coverage.

Do you have a link or quote of these regs? The section of PPACA that David Rigby quoted said available for the child, not to the child, and I think that might be an important distinction.

[LRDG]

The inference in the highlighted portion is the relationship between child and participant that is relied upon to define the dependent status for the plan.

Restrictions on plan definition of dependent. With respect to a child who has not attained age 26, a plan or issuer may not define dependent [/i]for purposes of eligibility for dependent coverage of children other than in terms of a relationship between a child and the participant.

The employee/employer relationship is the basis for any offer of employment based coverage, which does not exist between a dependent and the plan. A dependent under the old rules would not have legal standing to demand coverage without the employee/participant including a dependent for coverage.

Is the plan required to treat some dependents differently than others in terms of extending the offer of coverage via the participant/employee?

[Chaz]

The employee/employer relationship is the basis for any offer of employment based coverage, which does not exist between a dependent and the plan. A dependent under the old rules would not have legal standing to demand coverage without the employee/participant including a dependent for coverage.

I think under the "old rules," the child would have legal standing to demand coverage in cases where coverage is being provided through COBRA. The question for me is whether the PPACA age 26 requirement is to be treated the same way.

[Chaz]

The regs discuss that coverage must be made "available" to the child and also talks about the child paying for the coverage.

Do you have a link or quote of these regs? The section of PPACA that David Rigby quoted said available for the child, not to the child, and I think that might be an important distinction.

I'm not sure of the significance of provide coverage "for" or providing coverage "to" the child. I think the regs use the words interchangeably but I haven't checked that closely.

Here is sample language from the regs (actually the preamble) that says that the child "pays" for the coverage. The phrase is used multiple times.

"The child also cannot be

required to pay more for coverage than similarly situated individuals

who did not lose coverage by reason of cessation of dependent status."

If the employee has the choice, wouldn't the regs say "The employee cannot be required to pay more. . . ."?

[LRDG]

Failure of the regs to mandate on dependent to age 26 coverage does not create a mandate.

Overturning long standing precedent with respect to the plan's dependent premium payment via the EE, and for dependent access to coverage via the EE, without a specific regulatory mandate instructing the plan, has the potential to create regulatory problems, in addition to extending coverage unintentionally. Expanding exponentially on the law of unintended consequences.

That a covered child would have legal standing to demand COBRA was not within the scope of your question or my answer.