When my mother turned 26, she'd been married for nearly seven years and was expecting her sixth child. While she was busy changing and washing countless cloth diapers, the Vietnam War was being fought by soldiers whose average age was 22. The average age of a World War II soldier was a slightly higher at 23 years young. High-school kids still have to register for the Selective Service within 30 days of their 18th birthday.
Shakespeare was 18 when he married Anne Hathaway who was (gasp!) 26 years old. Mozart wrote his first symphony at age 8 (he penned the melody to "Twinkle, Twinkle" at age four), Jesus Christ was 33 when he died. But this is the 21st century and times are different. Wait — Mark Zuckerberg, creator of Facebook and worth an estimated $1.5 billion, just turned 27 this May.
Because young adults are disproportionately uninsured, Congress included provisions for extended adult child coverage in the health care reform law, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. Essentially, these laws require that plans offering dependent child coverage must make the coverage available for children (biological, step, adopted and foster — without regard to student status, marital status or financial dependence) until age 26. Thankfully, the value of this extended employer-provided coverage is not taxable to the employee through the end of the year in which the "child" turns 26.
If only the states' tax treatment of this coverage were so automatic and straightforward.
At about this time last year, we were coming to grips with the fact that PPACA required us to amend our self-insured and self-administered health plan, effective Jan. 1. We were doing queries to assess how many adult children might be impacted and were drafting targeted communication to their parents. We had, of course, been fielding questions from some of these parents since the days immediately after the law's passage. PPACA's authors would be quick to point out that our plan is not required to cover dependent children — but we do have to cover the 26-year-olds if we want to cover the newborns and preschoolers. Some choice.
Prior to Jan. 1, our plan covered children (step, biological and adopted) until age 24 without regard to student status. We were actually taking steps to increase the age to 25 in 2011 - mostly because we're an insurance carrier as well as an employer and the standard version of our fully insured client product had moved to age 25 in recent years. We had, however, planned to retain our stance on requiring financial dependence and excluding coverage for married children.
Even though we didn't have to, for administrative simplification and clarity of message, we have applied the PPACA-mandated definition of child to our self-insured dental and fully insured dependent life policy. We also extended it to our self-insured retiree dental and medical plans. There aren't a lot of adult children on the retiree plans, but we have a fair number of pre-65 retirees on those plans and some of them had children later in life.
We delivered targeted communication to all participants with children in their 20s and offered the mandated special enrollment opportunity, extending our 2011 annual enrollment window to accommodate the 30-day special enrollment period. Of course, we added a number of formerly uncovered adult children to our plans. The cost of doing so remains to be seen. We don't expect it to be material; this demographic is not historically our biggest health care cost drivers.
For now, we've left our coverage tiers unchanged. Employees can elect to cover just themselves, themselves and one other person or they can choose family coverage in order to cover two or more people in addition to themselves. Many of our employees already had family coverage so this PPACA provision gave them an opportunity to help their adult children for "free." (The company subsidizes 75-80% of the cost of family coverage.)
We're self-insured, so state insurance law isn't something we need to monitor closely. However, we are closely watching state payroll/tax law to see whether or not we need to impute income for employees who cover adult kids in states that don't align with federal law. So far, it's looking pretty good. We're closely watching a handful of states — Minnesota, Vermont and Wisconsin among them — who don't yet conform with the federal rules. We're headquartered in Minnesota where our legislators are haggling over a budget deficit, so our payroll and benefits department has not yet breathed a sigh of relief.
Contributing Editor Cindy Bucher is the benefits and compensation manager for a Midwestern financial services company and has been in her current role since 2004. She and her staff serve more than 2,500 active employees and 650 retirees, as well as their families. She can be reached at email@example.com.
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