Stepchildren under ACA

[Scott]

I've managed to avoid dealing with ACA until now, so this is my first real venture into the weeds. I'm trying to determine whether an employer can require an employee to prove that a stepchild lives with him or her in order to cover the stepchild as a dependent on the employer's health plan.

As I understand, under Section 2714 of the PHSA, if an employer allows employees to cover their stepchildren under the employer's health plan, the employer cannot impose any restrictions on coverage of the stepchild (i.e., residency with the employee) as long as the stepchild is under age 26.

Under the proposed Code Section 4980H regs, stepchildren were considered dependents, but under the final 4980H regs, stepchildren are excluded from the definition of dependent. So, there doesn't appear to be a violation of Code Section 4980H if an employer doesn't offer coverage to an employee's stepchildren in a manner that satisfies 4980H.

So, if an employer were to allow employees to cover their stepchildren, but only if the stepchildren live with the employees, what would be the consequence? It appears that it would be a violation of PHSA Section 2714, but not Code Section 4980H. Is that correct? Could violating PHSA Section 2714 on this point somehow cause a violation of Code Section 4980H, even though stepchildren are not considered dependents for purposes of 4980H? Is there a penalty for violating PHSA Section 2714?

[Flyboyjohn]

The penalty for violating PHSA 2714 (a "market reform") is the nasty $100/day/person 4980D penalty

[Peter Gulia]

Since your query seems to be about what an employer's health plan could provide (and just to satisfy my curiosity so I learn something), why does the employer seek flexibility about covering a participant's stepchild only if the stepchild resides with the participant?