Dependent Coverage to Age 26

Dependent coverage to age 26 is the requirement in section 2714 of the Public Health Service Act, codified at 42 U.S.C. 300gg-14 and implemented at 45 C.F.R. 147.120. The statute is one sentence: "A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child until the child turns 26 years of age." It applies to plan years beginning on or after 23 September 2010.

Neither the statute's heading, "Extension of dependent coverage," nor the regulation's, "Eligibility of children until at least age 26," is really a name for the thing, which is why it goes by a description rather than a term of art. Note also what the sentence does not say. It does not require any plan to cover dependents. It says that a plan which covers children must go on doing so until 26, which makes it a rule about the shape of an existing benefit rather than a new entitlement.

The list of things a plan may not look at is the operative part. The regulation at 45 C.F.R. 147.120(b)(1) provides that a plan or issuer "may not deny or restrict dependent coverage for a child who has not attained age 26 based on the presence or absence of the child's financial dependency (upon the participant or primary subscriber, or any other person); residency with the participant ... or with any other person; whether the child lives, works, or resides in an HMO's service area or other network service area; marital status; student status; employment; eligibility for other coverage; or any combination of those factors." Every item on that list was a condition plans used to impose. The one that surprises people most is eligibility for other coverage: an adult child who is offered health insurance at their own job may still stay on a parent's plan, and the parent's plan may not use that offer as a reason to exclude them.

Coverage ends at the birthday, and the regulation's own example is unambiguous. Paragraph (a)(2) works it through: a plan covers children until the child turns 26; the child's birthday is 17 July 2011; "the last day the plan covers the child is July 16, 2011"; and the plan satisfies the requirement. So a plan that terminates coverage the day before the 26th birthday has complied. In practice many plans run coverage to the end of the birthday month or the end of the plan year, and employers often say so in their enrollment materials. That is a more generous plan design, not the legal minimum, and the difference between the two can be nearly a year of coverage, so it is worth confirming rather than assuming.

Which children, and the grandchild limit. A plan is permitted by 147.120(b)(2) to limit dependent child coverage to children described in Internal Revenue Code section 152(f)(1), the tax definition covering a son, daughter, stepchild, adopted child or eligible foster child. For anyone outside that definition, "such as a grandchild or niece," the plan may impose additional conditions, such as requiring that the individual be a dependent for income tax purposes. And both statute and regulation are explicit that nothing requires a plan to cover the child of a child receiving dependent coverage. So a young adult on a parent's plan does not thereby get coverage for their own baby from the grandparent's plan.

The terms may not vary by the child's age. Paragraph (d) requires that the terms of dependent coverage "cannot vary based on age (except for children who are age 26 or older)," and the regulation gives examples of what that forbids: a premium surcharge for children older than 18, or restricting children over 18 to one of two benefit packages. It does not forbid a distinction that applies to everyone in the plan. The regulation's own example allows a copayment charged to everyone aged 19 and over, employees and spouses included, and waived for everyone under 19.

The health-coverage rule and the tax rule are different regimes, and their ages differ. Section 300gg-14(c) says that nothing in the section modifies "the definition of 'dependent' as used in title 26 with respect to the tax treatment of the cost of coverage." Separately, Internal Revenue Code section 105(b) excludes from income reimbursements for the medical care of "any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27." The coverage requirement stops at 26 and the tax exclusion runs through the end of the year in which the child turns 26, which is one reason plan practice frequently runs to year-end even though the law does not require it.

Other law can still require coverage the ACA does not. The regulation notes in the same paragraph that "other requirements of Federal or State law, including section 609 of ERISA or section 1908 of the Social Security Act, may require coverage of certain children." The first is the qualified medical child support order regime, under which a court or administrative order can compel a plan to cover a child; the second is a Medicaid-related requirement. Many states also extend dependent coverage past 26 on their own terms for insured plans, which is a question for a state insurance department rather than something to generalize about.

1. Check that the plan covers children at all. The requirement attaches only to a plan that already provides dependent coverage of children.

2. The adult child is eligible on the parent's terms alone. The plan may ask about the relationship, and about nothing else on the prohibited list.

3. Enroll at open enrollment, or at a special enrollment event. Becoming eligible for coverage is one; the plan's own enrollment rules and the Marketplace's special enrollment periods govern the timing.

4. Coverage runs until the 26th birthday. The plan may end it the day before, and may voluntarily run it longer.

5. Losing it triggers the next decision. Aging off a parent's plan is a loss of coverage, which opens a Marketplace special enrollment period and usually a special enrollment right in an employer plan of the young adult's own.

A hypothetical about the dates, because that is what goes wrong. Simone's 26th birthday is 17 July. Her mother's plan takes the regulation's minimum and ends her coverage on 16 July, the day before, exactly as the regulation's own example allows.

Her partner Theo turns 26 on the same day, but his father's plan runs dependent coverage to the end of the plan year, which is 31 December. Theo has five and a half more months of coverage than Simone, from identical facts, because one plan chose the legal minimum and the other chose to be more generous. Simone's loss of coverage on 16 July opens a Marketplace special enrollment period running from 60 days before that date to 60 days after it, so the sensible move is to apply in advance and start new coverage on 17 July rather than discover the gap afterwards.

What the rule does well

• It removed every condition plans used to attach, so a young adult cannot be dropped for moving out, marrying, leaving school or taking a job.
• It covers a period when many people are in unstable or benefit-free work, and it does so without anyone having to qualify for a subsidy.
• Adding an adult child to family coverage is often cheaper than a separate plan, particularly where the parent's plan is already at a family rate.
• It reaches individual-market coverage as well as employer plans, so a self-employed parent's policy is covered by the same rule.

Its limits

• It requires nothing of a plan that does not cover children in the first place.
• It ends at the birthday, and a plan that takes the legal minimum can end coverage the day before it, mid-treatment and mid-year.
• The parent's plan network may be useless to a child living in another state, since the plan may not exclude them for it but is not required to build a network around them either.
• It does not extend to the adult child's own children.
• Staying on a parent's plan can be the wrong financial answer even when it is available, because a young adult with low income may qualify for a Marketplace subsidy or Medicaid that the parent's coverage displaces.