Extended Coverage for Children – Q and A

childrenshealthcareOne of the more discussed parts of the 2008 and 2009 health care reform bills was the provision that allowed parents to cover their children on their health plans until age 25. Over the past year, there have been a number of questions raised by Iowans over how these laws would impact their families. Since we are now at a time when many Iowans are again looking at their health care coverage, this is an opportune time to review how this change in policy and how it impacts Iowans.

What change in current practice does HF 2539 bring to the coverage of children under family health insurance coverage?
For children of parents in state‐regulated plans, they may continue coverage in some circumstances when they would have been off their parent’s contracts under current insurer rules. The law does not apply to insurance plans governed by federal law.

What types of plans are covered by state regulation and therefore covered by this law?
Individual plans, insurance plans provided by employer groups subject to Iowa law and self‐funded plans for employees of state, county or municipal governments are subject to this law. Many large employers and medium‐sized employer groups will not be subject to this law, if they are self‐funded plans, as such plans are not subject to regulation by this state but instead governed by federal law.

What are the new age limits and how do they compare to the old limits?
For those plans covered by this provision, the new maximum age for children to remain covered is 25, which was formerly 19 years old in most cases. Some coverages currently limit coverage for full‐time dependent students to 23. There is no maximum age for full‐time students under this law.

Do children have to be dependents to remain covered?
Not after the law becomes effective. The new law does not reference dependent children, only currently covered children.

Does the law require me to provide this coverage?
No. The law simply requires insurers regulated by the state of Iowa to provide this as an option.

What could cause a child currently covered under a family contract to lose

Insurers are not required to continue to cover a child who is no longer a resident of Iowa, or who marries.

What happens if children are not currently covered on their parent’s insurance, but are under the age of 25. Can they enroll?
That would depend on an individual’s situation and the enrollment terms of their insurance plan. The 2008 law specified that this was a continuation of existing coverage to the anniversary date after becoming age 25, so that the coverage had to already be in force prior to July 1 for the continuation to be possible. But in 2009, the law was amended to clarify that parents could re-enroll their children to get this coverage.

What if my health insurance policy anniversary date falls on a date different than July 1?
The language in the statute stipulates that the effective date of the continuation provision will be on the date the policy renews. For those contracts renewing July 1, that will be the effective date of the change, while other policy anniversary dates will have applicability at times consistent with their renewal.

Are there tax consequences to providing coverage to a child who is not a dependent?
There can be. Federal tax law defines who is a dependent, with age of a child being one of the qualifying tests. Any portion of premiums paid by an employer for coverage of a child that does not meet the definition of dependent under federal law will be included in the employee’s gross income as reported on the employee’s W‐2.

The new law extended coverage to children who may not meet the definition of dependent under federal tax law (e.g. full‐time student but older than 25). In 2009, the Legislature took steps to make the coverage not subject to state income tax. But the issue of any federal tax remains. Employees considering continuation of their child on their health plans past age 19 should consult with their tax accountant or advisor.

Is it possible that continuing coverage under an employer-based plan may be more expensive than buying individual coverage for the child who is over 19 and not a student?
Yes. It may be possible to buy similar coverage for less than the cost of continuing a child over 19 on an employer plan because of the relatively low health risk associated with young people. However, such individual enrollment will probably require that the health of the child be considered in the insurer’s decision about accepting coverage of the child. This means pre-existing conditions may play a factor in the insurer’s decision.

Are children who are not eligible to remain on a parent’s coverage able to get insurance elsewhere?
As has always been the case, until the law reaches full applicability for all children, those who no longer qualify for dependent coverage will have traditional options. Those options will still exist in addition to the option to continue the child on the parent’s health plan even after the new law went into effect on July 1.

The child may purchase continuation at group single rates, may become employed with an employer providing coverage, may apply for individual coverage (usually at a much lower rate given their typically low risk as healthy young adults) or if they do not qualify for any coverage, may enroll in HIPIowa. It is possible that healthy children may qualify to again be covered under a parents plan by application after the provision covering children through age 25 applies to a group upon the renewal of the group on or after July 1.

Iowans who still have questions about how this change in the law impacts their coverage should consult with the Iowa Insurance Division. The Division can be contacted at 1-877-955-1212.