Young Adult Children Can Stay On Their Parents' Plans
Longer Under Federal and State Coverage Laws

Federal and New York State laws allow parents to keep their children on their health plan for longer. Learn about the federal law and NYS “Age 29” law below. Also, find out about the federal law extending favorable tax treatment to coverage for eligible adult children.

Federal Extension of Dependent Coverage through Age 25

Federal rules require that when a health plan offers coverage to employees and their dependents, it must allow parents to cover their children on their plan through age 25 (up to age 26).

Children Eligible to Be Covered

Children are eligible to be covered on a parent’s plan through age 25 even if the child is:

• Married;
• Does not reside with the parent;
• Is not financially dependent on the parent;
• Is not in school; and/or
• Is employed

Under these rules, all children under age 26 must be treated the same. This means, for example, that a health plan cannot charge more to cover an older child than it charges to cover a younger child. All children also must be offered the same plan options. For example, older children cannot be limited to HMO coverage while younger children permitted to be covered under either a POS or HMO plan.

How and When Children Can Enroll in Their Parent’s Plan

Federal law requires that all employer-sponsored health plans treat dependents up to age 26 the same when it comes to enrolling under their parent’s health coverage.

This means that if the employer offers family coverage to their employees, workers can add their eligible children under age 26 to their health plan when they first enroll and annually during open enrollment periods.

In addition, a young adult under age 26 who experiences a qualifying event, such as a loss of coverage under another group plan, may be eligible for a special enrollment period during the year. The request to enroll must be made within specified timeframes after the qualifying event takes place (e.g., usually within 30 days of losing other coverage). Check with your insurer for more information.

Who Health Plans Do Not Have to Cover

Health plans do not have to cover the spouse of a child eligible for coverage under this new law, nor do plans have to cover the child of an eligible child. However, the health plan and employer can choose to cover these individuals.

In addition, prior to 2014, existing group health plans do not have to cover children who have access to coverage through their own employer. However, in the event that both parents have coverage through their respective employers and the child does not have access to coverage through his or her own job, then the child must be allowed to enroll in either parent’s plan.

New York State "Age 29" Law

While the federal law does not require health plans to cover children once they turn 26, New York’s “Age 29” law requires insurers, including those selling in the small group market, to offer groups the opportunity to purchase extended dependent coverage for some children through age 29 (up to age 30). The law also allows children through age 29 to purchase coverage through a parent’s policy and pay the premium on their own.

Not all children eligible under the federal law will be eligible for continued coverage under New York law. For example, under New York law, children cannot be married – only unmarried children may be able to remain on their parents’ health plan through age 29.

How New York Law Works for Small Businesses and Their Employees

Currently, small businesses newly purchasing health insurance or renewing existing policies can request that the health insurer extend dependent coverage through age 29 for eligible young adults. This extension would allow eligible children to remain on their parent’s policy (e.g., family plan) through age 29.

If a small business does not extend dependent coverage through age 29 and coverage for the child terminates due to age (e.g., at age 26), the insurer must allow eligible young adults to continue coverage on the group plan through age 29. In this case, for example, the child may be offered coverage not as part of family coverage but separately - e.g., coverage for one person, or an employee-only coverage policy. The employer does not have to pay for the dependent child’s coverage. Rather, the employee, group member or young adult may be required to pay the full cost of coverage (in this example, the full cost of employee-only coverage under the plan).

Children Eligible to Be Covered

Under New York law, eligible young adults include unmarried children who live or work in New York State or within the service area of the insurer. Additionally, children are eligible regardless of student status or financial dependence on their parents. However, young adults cannot be covered under Medicare and cannot be otherwise insured by or eligible for coverage under their own employers’ sponsored health benefit plans.

How and When Children Can Enroll in Their Parent’s Plan

When employers elect to extend dependent coverage through age 29:

• At the time of purchase or renewal, small employers can extend the age of dependent coverage through age 29, typically through the addition of a rider. This is the “Make Available Option” part the Age 29 law.

  Under the Make Available Option, eligible young adults can remain a dependent on a family policy through age 29. Employees can also add their eligible children to their family plan at renewal (during annual open enrollment periods) and special enrollment periods when there is a qualifying event, such as the loss of other group coverage. 

  Check with your insurer for more details or visit the NYS Department of Financial Services website: http://www.dfs.ny.gov/insurance/health/S6030_Age29_make.htm

When employers DO NOT elect to extend dependent coverage to dependents through age 29:

• If the employer does not extend family coverage through age 29, eligible young adults who age-off their parent’s plan after age 25 can continue their coverage, but they must pay the full premium amount of single (employee-only) coverage. This is the “Young Adult Option” part of the Age 29 law.

  Under the Young Adult Option, eligible young adults must request coverage within the following specified timeframes:

  o Annually during a 30-day open enrollment period

  o Within 60 days of aging off their parent’s plan

  o Within 60 days of experiencing a change in circumstances, such as the loss of other group coverage.

  Visit the NYS Department of Financial Services website for more details: http://www.dfs.ny.gov/insurance/health/S6030_Age29_young.htm

Find out more:

These federal and state laws also apply to health insurance purchased by most individuals and sole proprietors. To learn more about individual and sole proprietor coverage, click here.

To learn more about the federal law, visit the “Frequently Asked Questions on Young Adults and the Affordable Care Act” available here: http://cciio.cms.gov/resources/files/adult_child_faq.html .

For more information about how New York State’s “Age 29” law applies to group coverage, please visit the NYS Department of Financial Services Insurance website: http://www.dfs.ny.gov/insurance/health/S6030_Age29.htm
You may also check with your employer or contact a broker or insurer. For insurer contact information, visit our page Buy a Plan or Contact an Insurer.

Favorable Tax Treatment for Eligible Adult Children

For coverage obtained through an employer, the new federal health care law extends certain favorable tax treatment to parents who cover eligible children on their family plan. In general, coverage provided for an employee's child who is under 27 years of age is now generally tax-free to the employee, effective March 30, 2010. Employers with cafeteria plans can also allow employees to begin making pretax contributions for eligible young adults. For more information on these changes, please see IRS Notice 2010-38.

SOURCES:

Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 under the Patient Protection and Affordable Care Act. http://www.dol.gov/ebsa/pdf/dependentcoverage.pdf. Last accessed on February 6, 2012.

NYS Department of Financial Services website: www.dfs.ny.gov/insurance/health/S6030_Age29.htm. Last accessed on October 21, 2011.

U.S. Department of Health & Human Services. Young Adults and the Affordable Care Act: Protecting Young Adults and Eliminating Burdens on Businesses and Families. http://cciio.cms.gov/resources/files/adult_child_faq.html. Last accessed on February 6, 2012.

Last updated: August 20, 2012