Premium Tax Credit for Adult Children

[GMK]

Wondering how ACA handles the following hypothetical case:

Employee of Company A has a 23 year old son. The son has a job with Company B, 800 miles away in another state. Company B does not offer any health insurance.

Being under age 26, the son is by law eligible for coverage under the Company A plan, but the health insurer in the Company A plan generally covers non-emergency services only if they are done in one of their clinics, which are all located within, say, 60 miles of Company A. This means the son is eligible for coverage that doesn't really provide him coverage where he lives.

If the son signed up for coverage in the exchange/marketplace in the state where he works, would the son's eligibility for the Company A plan coverage make the son ineligible for the premium tax credit and subsidies through the marketplace?

[leevena]

Wondering how ACA handles the following hypothetical case:

Employee of Company A has a 23 year old son. The son has a job with Company B, 800 miles away in another state. Company B does not offer any health insurance.

Being under age 26, the son is by law eligible for coverage under the Company A plan, but the health insurer in the Company A plan generally covers non-emergency services only if they are done in one of their clinics, which are all located within, say, 60 miles of Company A. This means the son is eligible for coverage that doesn't really provide him coverage where he lives.

If the son signed up for coverage in the exchange/marketplace in the state where he works, would the son's eligibility for the Company A plan coverage make the son ineligible for the premium tax credit and subsidies through the marketplace?

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Not enough information to give you an answer.

To begin with, anyone can sign-up for coverage at the exchange, regardless of income. The real question though is if that person receives the tax subsidy. To be eligible for the tax subsidy the applicant must not have been offered a group plan that met the benefits test and affordability test.

[GMK]

Thanks, leevena. Yes, I should have added that the plan offered by Company A meets all the tests for benefits, availability, affordability, etc. Employees of Company A are not eligible for the tax credit or subsidy, because the plan offers 'qualified' coverage.

So, now this far away adult child is eligible for coverage under the Company A plan by virtue of being a child of an eligible employee and under the age of 26. My reading of the rules is that this means that the son is not eligible for the premium tax credit or the subsidy for co-pays and deductibles. Agreed?

Tough break for the son, it seems.

[leevena]

I believe so, but I am not 100% confident. Good thing here is that no one needs to make the decision except the state exchange that the kid goes to for coverage.

[GMK]

Thanks again, leevena.

A primary concern we have is what we put in our notice to employees about the Health Insurance Marketplace.

Along with the information in the model notice, we like to provide specifics that apply to our employees. Since our health plan coverage is 'qualified,' persons eligible for our coverage are not eligible for the credit or subsidy. I plan to say that in our notice, because it will be important to the children of a lot of people here, but I was hoping there was something I missed in the ACA pronouncements that gave those far away adult children a break.

I suppose I could add that far away adult children of our employees should inform their state exchange that the coverage for which they are eligible doesn't provide local coverage and beg for mercy. I don't see this as an option for the federally-facilitated exchanges, but again, maybe I missed it.

[leevena]

Your desire to help by adding the additional wording/information is commendable. But personally I would not do it, too many potential problems may arise from it. Your notice should include a section about how they can learn more about the employer sponsored plan, in which you should point them in the direction of your plan documents. You may want to run this idea by your attorney and see what he/she thinks. Just my two cents. Good luck with it.

[masteff]

Based on leevena's comment, my two cents is that just like the special tax notice advises participants to consult a competent professional tax advisor, any employer write up on this might want to advise to consult with the state exchange on how the subsidy rules apply to their particular personal circumstances.

Good thing here is that no one needs to make the decision except the state exchange that the kid goes to for coverage.

[Peter Gulia]

GMK, along with others' suggestions about carefully describing limits on information that a plan's administrator furnishes, here's a question for you to consider (I don't pretend to know the relevant law).

Could the notice say?: The employer-offered coverage is minimum essential coverage to the extent that a participant or beneficiary uses or would use services that are within the plan's service area; the employer-offered coverage might not be minimum essential coverage within the meaning of Internal Revenue Code 5000A(f) to the extent that a participant or beneficiary uses or would use services that are not within the plan's service area. For more information about how the plan's provisions might affect a person's opportunity to get a premium tax credit under Internal Revenue Code 36B, ask your lawyer.

[GMK]

Thanks to all 3 of you.

We do point to the plan documents in our notice and have had a lawyer OK what we say. We will include something about consulting with the exchange about how the credit and subsidy rules apply to an individual's situation when they are out of the plan's service area. That's a good point, too.

I appreciate getting comments from people who know what they're talking about. I must admit to being surprised that no one has a definitive answer to this. This is not a minor side issue. It affects a major group that ACA is trying to get insured. Lots of young adults under the age of 26 are out there trying to make a life on their own, and in many cases distant from their parents' health care provider system.

Perhaps the answer falls out of the Minimum Value requirement. Maybe people living far away can claim that the plan does not cover 60% of the costs they will incur where they live. Maybe ... perhaps ... Those who are writing the rules need to provide clarification.

[leevena]

Thanks to all 3 of you.

We do point to the plan documents in our notice and have had a lawyer OK what we say. We will include something about consulting with the exchange about how the credit and subsidy rules apply to an individual's situation when they are out of the plan's service area. That's a good point, too.

I appreciate getting comments from people who know what they're talking about. I must admit to being surprised that no one has a definitive answer to this. This is not a minor side issue. It affects a major group that ACA is trying to get insured. Lots of young adults under the age of 26 are out there trying to make a life on their own, and in many cases distant from their parents' health care provider system.

Perhaps the answer falls out of the Minimum Value requirement. Maybe people living far away can claim that the plan does not cover 60% of the costs they will incur where they live. Maybe ... perhaps ... Those who are writing the rules need to provide clarification.

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Glad to be of whatever help we can.

The reason there is no definitive answer is because this is new and we are still trying to figure it all out, including the govt agencies charged with implementation. But you don't really need to be too concerned about the dependents trying to get coverage ("people living far away can claim that the plan does not cover 60% of the cost) because they are not required to prove anything about the coverage. When applying for coverage and subsidy through the exchange the person provides the name of the company and the exchange personnel will do the work.

[GMK]

If my son or daughter were facing this situation, I would like to know what criteria the exchange personnel use when they do the work to decide such cases, if for no other reason than to ensure that my child was not accidentally or mistakenly deprived of a benefit. But that's just me, I guess.

[leevena]

Criteria is simple, they check to see if the person has Minimum Essential Coverage, that the plan meets the 60% AV level, and if it is affordable. Employers are required to submit data/information to a govt data base so that the exchanges can verify and make a decision. Sorry, I don't keep up to date with the mechanics so I cannot give you a detailed explanation. But I hear you about your concern.

[GMK]

Thank you.

The criterion I would like to know is if the 60% AV requirement is the value for the plan regardless of where participants live, or if it will take into account where the person lives.

For example, as described in the OP, the plan can meet all the requirements if you receive your services in the provider's network, but it offers only emergency care coverage outside the network.

We will wait to see if any guidance comes out on this. Thanks, again.