Dependent Coverage To Age 26 With the Health Care Reform
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Health Care Reform: Dependent Coverage to Age 26

One of the changes of The Affordable Care Act is extending coverage for dependent children.  Previously, children were normally covered until age 19 or age 24 if they are a full-time student. For plan years beginning September 23, 2010, health plans must cover dependent children up to age 26, regardless of their student status, marital status, whether they live with their parents, or are claimed as a dependent on their parents’ tax return, as long as the dependent is not eligible to enroll in other employer-provided coverage.  After January 1, 2014, dependent coverage up to age 26 will be required, even if the child is eligible to enroll in other employer-provided coverage.

State Rules Could Be More Generous
Keep in mind that some states have regulations that define the maximum dependent child eligibility age, before the Affordable Care Act was passed.  Some states have age limits higher than age 26, but may reduce them when the federal law goes into effect on September 23rd.  The state definition of dependent could be different than the definition under the Affordable Care Act.  Check with your State Department of Insurance to see how the Affordable Care Act will affect the dependent rules in your state.

Tax Benefits
As with other healthcare premiums, the employer share of this extended dependent care premium is excluded from the employee’s taxable income.  If the employer has a cafeteria plan in place, the employee’s share of the premium is also excluded from taxable income.

If an employer extends dependent coverage beyond the child’s 26th birthday, the value of the coverage is excluded from the employee’s income for the entire taxable year in which the child turned 26.  So if the child turns 26 early in the year, and stays on the plan for the rest of the year, none of the premium would be taxable that year.

Insurance Carriers Taking Action Now
Many health insurance carriers have made the decision to voluntarily cover these dependents sooner than required, in order to spare the administrative burden of dis-enrolling those dependents who would have lost coverage when they graduated from school this past May, and re-enrolling them after their plan year renews after this September 23rd.  Check with your health insurance carrier to see if they have already extended dependent coverage – chances are they have.  If early coverage is not an option, the dis-enrolled child will have the opportunity to re-enroll during a special enrollment period.

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