ODI Issues Dependent Age Guidance
As you will remember, Ohio's budget that was enacted into law last July requires health insurers to offer parents the opportunity to purchase health insurance for their children up to age 28. All new or renewed policies effective on or after July 1, 2010 must include this coverage option. Below is the Ohio Department of Insurance's explanation of this new provision of Ohio law.
Ohio Department of Insurance
Frequently Asked Questions on Coverage Expansion to Age 28
March 18, 2010
As part of the budget that was passed in July and became effective in October of 2009, new legislation requires insurers,[1] MEWA's,[2] health insuring corporations[3] and public employee benefit plans[4] to offer parents the opportunity to purchase coverage for their children up to age 28. Policies or contracts issued or renewed and plans established or modified on or after July 1, 2010, must provide this new opportunity.
Technical questions about the changes discussed in this guidance should be directed to the Product Regulation Division, at (614) 644-2644. Consumers with questions may call 1-800-686-1526 or visit http://www.insurance.ohio.gov/Consumer/Pages/HealthCareReformProvisions.aspx
Who is Eligible?
To receive benefits up to the age of 28, the unmarried child must be:
(1) the natural child, stepchild, or adopted child of the employee;
(2) a resident of this state or a full-time student at an accredited public or private institution of higher education;
(3) not employed by an employer that offers any health benefit plan under which the child is eligible for coverage, and
(4) not eligible for coverage under Medicaid or Medicare.
Please note that the older age child does not have to live with the parent, be financially dependent upon the parent or be a student.
What type of coverage does the age expansion law apply to?
It applies to:
- (1) group policies that include coverage for dependents including COBRA and state continuation coverage
- (2) individual policies that include coverage for dependents including conversion, open enrollment basic and standard plans
- (3) coverage issued by insurance companies, MEWAs, public employee benefit plans or Health Insuring Corporations (HICS), also referred to as Health Maintenance Organizations (HMOs) Please note: this coverage extension does not apply to self-insured ERISA plans.
When does the coverage expansion take effect?
The law affects sickness and accident insurance policies and HIC policies that are delivered, issued for delivery or renewed, and plans of health coverage and public employee health plans that are established or modified, in Ohio on or after July 1, 2010. For most existing policies, parents will be able to request coverage for older age children on the policy's first renewal date on or after July 1, 2010. Contact the insurer or group administrator to determine the renewal date of the policy. All new policies issued on or after July 1, 2010 will include the coverage expansion to age 28.
When may an older age child enroll?
- (1) When the child reaches the limiting age.
- (2) When the child experiences a change in circumstances.
- (3) During the annual open enrollment period.
Enrollment and Eligibility Questions
1. How can a parent enroll an older age child?
The parent must contact the employer or benefit administrator to ask how to enroll the older age child and the cost of the coverage.
2. Will a child be allowed to terminate non-employer individual coverage in order to receive coverage under a parent's coverage?
Yes. As long as the child otherwise meets the eligibility criteria outlined above.
3. Will a child who previously reached the maximum age for coverage under the policy and elected COBRA continuation coverage be eligible for continued coverage under the parent's policy after July 1, 2010, when these changes become effective?
Yes. As long as the child meets the eligibility criteria stated above.
4. Must the child have been continuously covered under the parent's policy in order to be eligible for continued coverage after reaching the limiting age for coverage under the policy?
No. The child need not have been continuously covered under the parent's policy. The child must meet the eligibility criteria.
5. Must an employer who does not currently offer coverage to dependents offer coverage to older age children as a result of this change in the law?
No, an employer who does not currently offer coverage to dependents is not required to do so as a result of this continuation of coverage law.
6. Can a HIC require that the older age child meet other plan eligibility criteria such as living in the service area?
Yes. The HIC must use the same eligibility criteria used for other dependents to the extent that the criteria does not conflict with the eligibility criteria listed above.
7. Can the insurer apply a pre-existing condition exclusion period to an eligible child who has had a break in continuous coverage?
Yes. The terms of coverage for the child who has previously reached the maximum age are the same as the terms of coverage for any other person covered under the policy. Limits on preexisting condition exclusions apply to older age children the same as they apply to any other insured.
8. Does special enrollment apply to older age children? Is a carrier required to accept creditable coverage and waive pre-existing condition requirements? With creditable coverage can a carrier underwrite the older age child?
Yes. Older age children returning to coverage must meet the eligibility criteria and have had a qualifying event in order to request coverage under special enrollment. The carrier must accept creditable coverage and waive pre-existing condition requirements for the older age child in the same manner as for any other dependent covered under the policy. The carrier may underwrite the older age child with creditable coverage if the carrier may underwrite other dependents with creditable coverage under the policy.
Premium and rate charges
1. What rate should be charged for the older age child?
The rate charged should be derived from the average child dependent rate for the group or product. The methodology to develop this rate should be actuarially sound.
2. Can a carrier charge an older age child a single rate?
A carrier can charge an older age child a single rate as long as the rate is derived from the dependent rate. Carriers may not use the single employee rate without adjustment or a COBRA rate instead of the implied cost of dependent coverage.
3. Can a carrier charge a rate based on underwriting?
Yes, a carrier may underwrite the entire group but not solely the older age child. Carriers may develop the eligible dependent rate using the rates currently charged to a group for the coverage in which the parent of the older age child is enrolled.
Other Questions
1. When the older age child reaches age 28, may the child elect COBRA or state continuation coverage and receive additional coverage?
No. When coverage ends at age 28 the older age child is not eligible for COBRA or state continuation coverage because the child would not be considered a dependent.
2. Does the coverage expansion to age 28 apply to HCTC qualified plans (health coverage tax credit)?
Yes. The HCTC is a federal tax credit administered by the IRS that workers displaced by foreign trade can apply for to help pay part of the cost of their health plan premium.
Information about HCTC can be viewed at the Internal Revenue Service's website which includes several links, such as frequently asked questions on related HCTC issues: www.irs.gov/individuals/article/0,,id=109915,00.html
3. Does this apply to vision and dental plans?
No. Policies that cover only limited benefits are exempted from the requirements of this coverage age expansion law.
Tax Implications
The following information was prepared by the Ohio Department of Taxation
For additional information: http://tax.ohio.gov/
Income Tax Division (614) 466-0224
1. Q. Are amounts paid for health coverage, including premiums paid for an accident and health insurance policy which provides coverage for adult children over age 23 up to age 28, deductible for Ohio income tax purposes?
If such amounts are paid for with money included in the taxpayer's federal adjusted gross income, the amounts are deductible on the Ohio income tax return.
(Note: An employee's payments for health coverage for an employer-sponsored plan are generally excluded from the employee's federal adjusted gross income and are not shown on the employee's W-2. Only amounts for health coverage which are paid with money which is included in federal adjusted gross income (as shown on the W-2) are deductible.)
2a. Q. May a person pay for health coverage out of a health savings account set up under the provisions of the Internal Revenue Code?
Generally no, however, there are two exceptions. With a health savings account set up under the provisions of the Internal Revenue Code you may only pay for health coverage from the account if you are collecting federal or state unemployment benefits, or if you have COBRA continuation coverage through a former employer.
2b. Q. May a person pay for the health coverage out of a medical savings account set up under the provisions of the Ohio Revised Code?
Yes.
3. Q. How do the changes in Ohio House Bill 1, effective October 16, 2009, affect the deduction on the Ohio income tax return for health coverage?
Ohio House Bill 1 expands the Ohio income tax deduction for amounts paid for health coverage. Ohio taxpayers may deduct health coverage, including premiums paid for accident and health plans for themselves and their dependents, if the plans are not subsidized (e.g. through employer contributions). For a taxpayer with a subsidized health coverage plan, the cost of the coverage must have been included in federal adjusted gross income on the taxpayer's federal income tax return in order to be deductible on the Ohio return. For purposes of this deduction, "dependent" includes qualifying children up to age 28 and qualifying relatives, without regard to the "gross income" test or the "more-than-half-support" test of Internal Revenue Code section 152. Qualifying relative includes an individual with the same principal abode as the taxpayer and who is a member of the taxpayer's household.
4. Q. During 2010 I am paying for health coverage for myself, my spouse and our 27 year-old unmarried son. The health coverage plan is not employer subsidized. Our son earns $30,000, lives in his own house and provides all of his own support. For purposes of Ohio income tax may I deduct the entire cost of the health coverage plan paid?
Yes.
5. Q. During 2010 I paid $8,000 for non-emergency medical care for my 27 year-old unmarried son. My son earns $30,000, lives in his own house and provides all of his own support. For purposes of Ohio income tax may I deduct the $8,000 medical care payment?
No, the change in the definition of "dependent" in Ohio House Bill 1 is only applicable to the cost of the health coverage plan. It does not affect payments for medical care.
6. Q.Because there is now a difference between the Internal Revenue Code and the Ohio Revised Code regarding the deductibility of the cost of the health coverage plan, will Ohio employers who offer health coverage plans need to provide additional reporting on employees' W-2's?
Yes. Employers who provide health coverage plans, the costs for which are partially deductible under the Internal Revenue Code but fully deductible under the Ohio Revised Code, will report the difference on the W-2's of the affected employees. Box 1 of the W-2 will show the wages for purposes of the Internal Revenue Service. Box 16 will show wages for purposes of Ohio income tax, and the difference will be shown in Box 14. The amount shown in Box 14 of the W-2 will be one of the adjustments made on Line 2 of the Ohio return.
