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You can now get employer-based health insurance for adult children up to age 27

Posted by Charles II on April 27, 2010

From the White House:

The Patient Protection and Affordable Care Act provides that health coverage under an employee’s children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010. The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. Please see the press release below, the IRS Notice, and this White House Blog Post for more information (also posted below).
Thank you,
White House Office of Legislative Affairs

See details below the fold

——————————————————————————–http://www.irs.gov/newsroom/article/0,,id=222193,00.html

Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27

IR-2010-53, April 27, 2010

WASHINGTON — As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee’s children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.

The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.

IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.

“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”

This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.

Information on other health care provisions can be found on this website, IRS.gov.

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More Support for Young Adults

Posted by Nancy-Ann DeParle on April 27, 2010 at 12:24 PM EDT

When health insurance reform became the law of the land, we knew our work was just beginning. While passing the law was a tremendous accomplishment, the President and his Administration are now focused on the next challenge: making sure the law is implemented smoothly, quickly, and effectively. In fact, the day after the bill passed, the first thing the President asked of his senior staff was “Where are we on implementation?”

One of the most important provisions in health reform for young adults and their families is the new provision that allows young adults to stay on their parents’ health care plan until age 26. This provision takes effect on September 23, 2010, and it could help more than 4.7 million uninsured young Americans.

But we knew that some young adults graduating from college this spring could risk losing their health insurance before the provision takes effect, only to be added back onto their parents’ policy the next time their parents’ plan comes up for renewal on or after September 23rd. That was bad news for families and bad news for insurance companies too. Removing an individual from a health insurance plan and then adding them back on a few months later takes time, and it costs money.

That’s why on April 19, Health and Human Services Secretary Kathleen Sebelius called on leading insurance companies to begin covering young adults voluntarily before the September 23 implementation date required by the new health reform law. Early implementation would avoid gaps in coverage for new college graduates and other young adults and save on insurance company administrative costs of dis-enrolling and re-enrolling them between May 2010 and September 23, 2010. Early enrollment will also enable young, overwhelmingly healthy people who will not engender large insurance costs to stay in the insurance pool.

And we’re pleased to report that the following insurance companies are doing just that:

Blue Cross and Blue Shield of Alabama
Blue Cross Blue Shield of Delaware
Blue Cross and Blue Shield of Arizona, Inc.
Blue Cross and Blue Shield of Florida
Arkansas Blue Cross and Blue Shield
Blue Cross and Blue Shield of Hawaii
Blue Shield of California
Blue Cross of Idaho Health Service
Regence Blue Shield of Idaho
Wellmark Blue Cross and Blue Shield of Iowa
Health Care Service Corporation
Blue Cross and Blue Shield of Kansas
Blue Cross Blue Shield Association
Blue Cross and Blue Shield of Louisiana
WellPoint, Inc.
CareFirst BlueCross and BlueShield
Blue Cross and Blue Shield of Massachusetts
Blue Cross and Blue Shield of Kansas City
Blue Cross and Blue Shield of Michigan
Blue Cross and Blue Shield of Montana
Blue Cross and Blue Shield of Minnesota
Blue Cross and Blue Shield of Nebraska
Blue Cross & Blue Shield of Mississippi
Horizon Blue Cross and Blue Shield of New Jersey, Inc.
HealthNow New York, Inc.
The Regence Group
Excellus Blue Cross and Blue Shield
Capital BlueCross
Blue Cross and Blue Shield of North Carolina
Independence Blue Cross
BlueCross BlueShield of North Dakota
Highmark, Inc.
Blue Cross of Northeastern Pennsylvania
BlueCross and BlueShield of Tennessee
Blue Cross and Blue Shield of Vermont
Blue Cross & Blue Shield of Rhode Island
Premera Blue Cross
Blue Cross and Blue Shield of South Carolina
Blue Cross and Blue Shield of Wyoming
Kaiser Permanente
Cigna
Aetna
United
WellPoint
Humana
Capital District Physicians’ Health Plan (CDPHP), Albany, New York
Capital Health Plan, Tallahassee, Florida
Care Oregon, Portland, Oregon
Emblem Health, New York, New York
Fallon Community Health Plan, Worcester, Massachusetts
Geisinger Health Plan, Danville, Pennsylvania
Group Health, Seattle, Washington
Group Health Cooperative Of South Central Wisconsin, Madison, Wisconsin
Health Partners, Minneapolis, Minnesota
Independent Health, Buffalo, New York
Kaiser Foundation Health Plan Oakland, California
Martin’s Point Health Care, Portland, Maine
New West Health Services, Helena, Mt
The Permanente Federation, Oakland, California
Priority Health, Grand Rapids, Michigan
Scott & White Health Plan, Temple, Texas
Security Health Plan, Marshfield, Wisconsin
Tufts Health Plan, Waltham, Massachusetts
UCARE, Minneapolis, Minnesota
UPMC Health Plan, Pittsburgh, Pennsylvania

Today, we marked another step forward in our work to provide coverage to young adults with the release of new guidance from the Internal Revenue Service specifically stating that children can be covered tax-free now on their parents’ health insurance policy. The new guidance also discusses incentives the Affordable Care Act provides for employers to immediately extend health insurance coverage to young adults.

This new guidance will help employers as they work to provide better benefits to their employees and cover more Americans. To learn more, check out the press release and fact sheet (pdf).

Nancy-Ann DeParle is Director of the White House Office of Health Reform

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4 Responses to “You can now get employer-based health insurance for adult children up to age 27”

  1. Charles II said

    Well, we have set a new spam record: 165 pingbacks in under 24 hours. Pingbacks are now blocked.

    Memo to self: Never write about insur@nce.

  2. altruance said

    This is one of the big benefits of the recent health care reform. In the past we have worked with employer groups who have had several employees unable to get insurance for their children after graduating from college. As many parents know, after college children under 27 will be in transition often between jobs or school. Keeping insurance coverage in place for children with any medical history was almost impossible. Thanks for bringing this to more people’s attention as the insurance carriers are moving really slow on this.

    [Siteowner: The direct link to this business has been removed. Anyone who is interested can doubtless figure it out, but commercial posts are discouraged.]

  3. I have a friend, in PA, with an uncovered 25-year old son. Contrary to this press release, Highmark is not allowing her to add him to her insurance and affirmatively denied that they are required to do so.

    [Siteowner: link to site edited, since site is not active. When it becomes active, please advise, and link will be activated… assuming it’s not a commercial site, malware, or otherwise objectionable.]

    • Charles II said

      Interesting. According to the press release, this provision only becomes law in late September. Will the son still be 25 on that date? There may be some wrinkle to explain this. Otherwise, Highmark could find itself up to its a@@ in trouble.

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