The passing of the Affordable Care Act (ACA) and the age 26 mandate eased the stress of finding health insurance for many parents of adult children. Our previous blog, 9 Questions Parents Are Asking About the Age 26 Mandate, answers questions that parents are asking plan sponsors about the mandate. Less frequently discussed is how it applies to disabled adult children.
Plans and parents want to know the parameters for covering post-age 26 disabled dependents. Does eligibility vary by type of health plan, or are there other requirements? The questions and answers below seek to provide additional guidance on these issues.
- Must disabled children over age 26 be covered under an employer’s group health plan?
No. ERISA does not require group health plans to provide coverage to any dependents—Some plans only cover employees, not spouses or children. Under the ACA, an applicable large employer (ALE) may choose to either offer affordable minimum essential coverage that provides minimum value to its full-time employees (and their dependents) or potentially owe a penalty to the Internal Revenue Service. “For purposes of the employer shared responsibility provisions, a dependent is an employee’s child (including a child who has been legally adopted or placed for adoption) who has not reached the age of 26. Spouses are not considered dependents and neither are stepchildren or foster children.” Some state insurance laws that apply to dependent coverage also become operative only if the plan provides spousal or dependent coverage. Employers choosing to provide group health plan coverage to dependents must follow all applicable laws.
The International Foundation report Employee Benefits Survey—2020 Results finds that 57.2% of all employers surveyed cover disabled adult dependents in their plan.
Plans that choose not to provide coverage for any dependents should clearly state this in their plan document, summary plan description and any communications to employees. Plan sponsors should review any documents sent to them by a third-party administrator or insurer to ensure there is no implication that dependent coverage is provided.
2. If a fully insured group health plan provides coverage to dependents, must the plan cover disabled adult children under the health plan beyond age 26?
Yes, in certain instances. Fully insured group health plans must follow state insurance laws in addition to the ACA. Employers must look to state laws to see what types of mandates, if any, are in place. Some states have dependent coverage requirements for fully insured plans that exceed the federal minimums established by the ACA.
Two examples include the following.
- Georgia law requires that a health services plan or health insurer exempt dependent children incapable of self-sustaining employment due to disability from dependent age limits.
- California’s state insurance mandate for fully insured plans requires that coverage continue for post-age 26 children if the child is not capable of self-sustaining employment by reason of a physically or mentally disabling injury, illness or condition and if the child is chiefly dependent upon the employee for support and maintenance.
If there is no state insurance law requiring coverage for disabled adult dependents over age 26, then the plan does not need to extend coverage beyond age 26.
3. If a self-funded group health plan provides coverage to dependents, must the plan provide coverage to disabled adult children beyond age 26?
Yes, provided the adult child meets plan eligibility requirements. Unlike fully insured plans, self-insured group health plans are not subject to state insurance mandates. Self-insured plans often say post-age 26 children are eligible if they meet the tax definition of a “disabled child.” The tax definition under Internal Revenue Code Section 22(e)(3) requires that a child be “permanently and totally disabled.” The definition of “permanently and totally disabled” requires the individual to be “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” If the disabled adult child meets the disabled child definition and plan eligibility requirements, coverage must be provided.
4. Are there any other eligibility requirements that plans can impose on disabled adult children over age 26 to obtain coverage?
Yes. Plans can impose several other eligibility requirements before the disabled adult child is eligible for coverage. They may:
- Require that the disabled child also have been enrolled in the group health plan before reaching age 26. If the child was not covered under the employer’s plan before turning 26, coverage may not be available.
- Require medical and/or financial documentation of the disability to confirm that the child meets the definition of an eligible disabled child over age 26
- Require that the above disability documentation be updated regularly to ensure the post-age 26 disabled child continues to meet the conditions for eligibility. Employers take note—Some states have rules on how frequently this information may be requested under their insurance code. For example, in California, the insurance carrier may request this information not more frequently than annually after the two-year period following the disabled child turning age 26.
Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.
Amanda Wilke, CEBS
Information/Research Specialist at the International Foundation
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