[Federal Register: May 13, 2010 (Volume 75, Number 92)]
[Rules and Regulations]
[Page 27121-27140]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13my10-4]
[[Page 27121]]
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Part II
Department of the Treasury
Internal Revenue Service
26 CFR Parts 54 and 602
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Department of Labor
Employee Benefits Security Administration
29 CFR Part 2590
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Department of Health and Human Services
45 CFR Parts 144, 146, and 147
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Group Health Plans and Health Insurance Issuers Relating to Dependent
Coverage of Children to Age 26 Under the Patient Protection and
Affordable Care Act; Interim Final Rule and Proposed Rule
[[Page 27122]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 54 and 602
[TD 9482]
RIN 1545-BJ46
DEPARTMENT OF LABOR
Employee Benefits Security Administration
29 CFR Part 2590
RIN 1210-AB41
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
[OCIIO-4150-IFC]
45 CFR Parts 144, 146, and 147
RIN 0991-AB66
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
AGENCY: Internal Revenue Service, Department of the Treasury; Employee
Benefits Security Administration, Department of Labor; Department of
Health and Human Services.
ACTION: Interim final rules with request for comments.
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SUMMARY: This document contains interim final regulations implementing
the requirements for group health plans and health insurance issuers in
the group and individual markets under provisions of the Patient
Protection and Affordable Care Act regarding dependent coverage of
children who have not attained age 26.
DATES: Effective date. These interim final regulations are effective on
July 12, 2010.
Comment date. Comments are due on or before August 11, 2010.
Applicability date. These interim final regulations generally apply
to group health plans and group health insurance issuers for plan years
beginning on or after September 23, 2010. These interim final
regulations generally apply to individual health insurance issuers for
policy years beginning on or after September 23, 2010.
ADDRESSES: Written comments may be submitted to any of the addresses
specified below. Any comment that is submitted to any Department will
be shared with the other Departments. Please do not submit duplicates.
All comments will be made available to the public. Warning: Do not
include any personally identifiable information (such as name, address,
or other contact information) or confidential business information that
you do not want publicly disclosed. All comments are posted on the
Internet exactly as received, and can be retrieved by most Internet
search engines. No deletions, modifications, or redactions will be made
to the comments received, as they are public records. Comments may be
submitted anonymously.
Department of Labor. Comments to the Department of Labor,
identified by RIN 1210-AB41, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: E-OHPSCA.EBSA@dol.gov.
Mail or Hand Delivery: Office of Health Plan Standards and
Compliance Assistance, Employee Benefits Security Administration, Room
N-5653, U.S. Department of Labor, 200 Constitution Avenue NW.,
Washington, DC 20210, Attention: RIN 1210-AB41.
Comments received by the Department of Labor will be posted without
change to http://www.regulations.gov and http://www.dol.gov/ebsa, and
available for public inspection at the Public Disclosure Room, N-1513,
Employee Benefits Security Administration, 200 Constitution Avenue,
NW., Washington, DC 20210.
Department of Health and Human Services. In commenting, please
refer to file code OCIIO-4150-IFC. Because of staff and resource
limitations, we cannot accept comments by facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address only: Office of Consumer Information and Insurance Oversight,
Department of Health and Human Services, Attention: OCIIO-4150-IFC,
P.O. Box 8016, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address only: Office of Consumer Information and
Insurance Oversight, Department of Health and Human Services,
Attention: OCIIO-4150-IFC, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--
Office of Consumer Information and Insurance Oversight, Department
of Health and Human Services, Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201 (Because access to
the interior of the Hubert H. Humphrey Building is not readily
available to persons without Federal government identification,
commenters are encouraged to leave their comments in the OCIIO drop
slots located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.).
b. For delivery in Baltimore, MD--
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call (410) 786-7195 in advance to schedule your arrival with one
of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://
www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately
three weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security
[[Page 27123]]
Boulevard, Baltimore, Maryland 21244, Monday through Friday of each
week from 8:30 a.m. to 4 p.m. EST. To schedule an appointment to view
public comments, phone 1-800-743-3951.
Internal Revenue Service. Comments to the IRS, identified by REG-
114494-10, by one of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: CC:PA:LPD:PR (REG-114494-10), room 5205, Internal
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044.
Hand or courier delivery: Monday through Friday between
the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-114494-10),
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue,
NW., Washington DC 20224.
All submissions to the IRS will be open to public inspection and
copying in room 1621, 1111 Constitution Avenue, NW., Washington, DC
from 9 a.m. to 4 p.m.
FOR FURTHER INFORMATION CONTACT: Amy Turner or Beth Baum, Employee
Benefits Security Administration, Department of Labor, at (202) 693-
8335; Karen Levin, Internal Revenue Service, Department of the
Treasury, at (202) 622-6080; Jim Mayhew, Office of Consumer Information
and Insurance Oversight, Department of Health and Human Services, at
(410) 786-1565.
Customer Service Information: Individuals interested in obtaining
information from the Department of Labor concerning employment-based
health coverage laws may call the EBSA Toll-Free Hotline at 1-866-444-
EBSA (3272) or visit the Department of Labor's Web site (http://
www.dol.gov/ebsa). In addition, information from HHS on private health
insurance for consumers can be found on the Centers for Medicare &
Medicaid Services (CMS) Web site (http://www.cms.hhs.gov/
HealthInsReformforConsume/01_Overview.asp).
SUPPLEMENTARY INFORMATION:
I. Background
The Patient Protection and Affordable Care Act (the Affordable Care
Act), Public Law 111-148, was enacted on March 23, 2010; the Health
Care and Education Reconciliation Act (the Reconciliation Act), Public
Law 111-152, was enacted on March 30, 2010. The Affordable Care Act and
the Reconciliation Act reorganize, amend, and add to the provisions of
part A of title XXVII of the Public Health Service Act (PHS Act)
relating to group health plans and health insurance issuers in the
group and individual markets. The term ``group health plan'' includes
both insured and self-insured group health plans.\1\ The Affordable
Care Act adds section 715 to the Employee Retirement Income Security
Act (ERISA) and section 9815 to the Internal Revenue Code (the Code) to
make the provisions of part A of title XXVII of the PHS Act applicable
under ERISA and the Code to group health plans, and health insurance
issuers providing health insurance coverage in connection with group
health plans, as if those provisions of the PHS Act were included in
ERISA and the Code. The PHS Act sections incorporated by this reference
are sections 2701 through 2728. PHS Act sections 2701 through 2719A are
substantially new, though they incorporate some provisions of prior
law. PHS Act sections 2722 through 2728 are sections of prior law
renumbered with some, mostly minor, changes. Section 1251 of the
Affordable Care Act, as modified by section 10103 of the Affordable
Care Act and section 2301 of the Reconciliation Act, specifies that
certain plans or coverage existing as of the date of enactment (i.e.,
grandfathered health plans) are subject to only certain provisions.
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\1\ The term ``group health plan'' is used in title XXVII of the
PHS Act, part 7 of ERISA, and chapter 100 of the Code, and is
distinct from the term ``health plan'', as used in other provisions
of title I of the Affordable Care Act. The term ``health plan'' does
not include self-insured group health plans.
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Subtitles A and C of title I of the Affordable Care Act amend the
requirements of title XXVII of the PHS Act (changes to which are
incorporated into ERISA section 715). The preemption provisions of
ERISA section 731 and PHS Act section 2724 \2\ (implemented in 29 CFR
2590.731(a) and 45 CFR 146.143(a)) apply so that the requirements of
the Affordable Care Act are not to be ``construed to supersede any
provision of State law which establishes, implements, or continues in
effect any standard or requirement solely relating to health insurance
issuers in connection with group or individual health insurance
coverage except to the extent that such standard or requirement
prevents the application of a requirement'' of the Affordable Care Act.
Accordingly, State laws that impose on health insurance issuers
stricter requirements than those imposed by the Affordable Care Act
will not be superseded by the Affordable Care Act.
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\2\ Code section 9815 incorporates the preemption provisions of
PHS Act section 2724. Prior to the Affordable Care Act, there were
no express preemption provisions in chapter 100 of the Code.
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The Departments of Health and Human Services, Labor, and the
Treasury (the Departments) expect to issue regulations implementing the
revised PHS Act sections 2701 through 2719A in several phases. The
first publication in this series was a Request for Information relating
to the medical loss ratio provisions of PHS Act section 2718, published
in the Federal Register on April 14, 2010 (75 FR 19297). These interim
final regulations are being published to implement PHS Act section 2714
(requiring dependent coverage of children to age 26). PHS Act section
2714 generally is effective for plan years (in the individual market,
policy years) beginning on or after September 23, 2010, which is six
months after the March 23, 2010 date of enactment of the Affordable
Care Act.\3\ The implementation of other provisions of PHS Act sections
2701 through 2719A and section 1251 of the Affordable Care Act will be
addressed in future regulations.
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\3\ See section 1004 of the Affordable Care Act.
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Because subtitles A and C of title I of the Affordable Care Act
contain requirements that are applicable to both the group and
individual health insurance markets, it would be duplicative to insert
the requirements into both the existing 45 CFR part 146 (Requirements
for the Group Health Insurance Market) and 45 CFR part 148
(Requirements for the Individual Health Insurance Market). Accordingly,
these interim final regulations create a new part 147 in subchapter B
of 45 CFR to implement the provisions of the Affordable Care Act. The
provisions of the Affordable Care Act, to the extent that they apply to
group health plans and group health insurance coverage, are also
implemented under new regulations added to 29 CFR part 2590 and 26 CFR
part 54.
II. Overview of the Regulations
A. PHS Act Section 2714, Continued Eligibility of Children Until Age 26
(26 CFR 54.9815-2714, 29 CFR 2590.715-2714, 45 CFR 147.120)
Section 2714 of the PHS Act, as added by the Affordable Care Act
(and amended by the Reconciliation Act), and these interim final
regulations provide that a plan or issuer that makes available
dependent coverage \4\ of children must make such coverage available
for children until attainment
[[Page 27124]]
of 26 years of age. The statute also requires the issuance of
regulations to ``define the dependents to which coverage shall be made
available'' under this rule.
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\4\ For purposes of these interim final regulations, dependent
coverage means coverage of any individual under the terms of a group
health plan, or group or individual health insurance coverage,
because of the relationship to a participant (in the individual
market, primary subscriber).
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Many group health plans that provide dependent coverage limit the
coverage to health coverage excludible from employees' gross income for
income tax purposes. Thus, dependent coverage is limited to employees'
spouses and employees' children that qualify as dependents for income
tax purposes. Consequently, these plans often condition dependent
coverage, in addition to the age of the child, on student status,
residency, and financial support or other factors indicating dependent
status. However, with the expansion of dependent coverage required by
the Affordable Care Act to children until age 26, conditioning coverage
on whether a child is a tax dependent or a student, or resides with or
receives financial support from the parent, is no longer appropriate in
light of the correlation between age and these factors. Therefore,
these interim final regulations do not allow plans or coverage to use
these requirements to deny dependent coverage to children. Because the
statute does not distinguish between coverage for minor children and
coverage for adult children under age 26, these factors also may not be
used to determine eligibility for dependent coverage for minor
children.
Accordingly, these interim final regulations clarify that, with
respect to children who have not attained age 26, a plan or issuer may
not define dependent for purposes of eligibility for dependent coverage
of children other than in terms of the relationship between the child
and the participant (in the individual market, the primary subscriber).
Examples of factors that cannot be used for defining dependent for
purposes of eligibility (or continued eligibility) include financial
dependency on the participant or primary subscriber (or any other
person), residency with the participant or primary subscriber (or any
other person), student status, employment, eligibility for other
coverage, or any combination of these. These interim final regulations
also provide that the terms of the plan or policy for dependent
coverage cannot vary based on the age of a child, except for children
age 26 or older. Examples illustrate that surcharges for coverage of
children under age 26 are not allowed except where the surcharges apply
regardless of the age of the child (up to age 26) and that, for
children under age 26, the plan cannot vary benefits based on the age
of the child. The Affordable Care Act, as originally enacted, required
plans and issuers to make dependent coverage available only to a child
``who is not married.'' This language was struck by section 2301(b) of
the Reconciliation Act. Accordingly, under these interim final
regulations, plans and issuers may not limit dependent coverage based
on whether a child is married. (However, a plan or issuer is not
required under these interim final regulations to cover the spouse of
an eligible child).
The statute and these interim final regulations provide that
nothing in PHS Act section 2714 requires a plan or issuer to make
available coverage for a child of a child receiving dependent coverage.
Under section 1004(d) of the Reconciliation Act and IRS Notice
2010-38 (released to the public on April 27, 2010 and scheduled to be
published in 2010-20 Internal Revenue Bulletin, May 17, 2010),
employers may exclude from the employee's income the value of any
employer-provided health coverage for an employee's child for the
entire taxable year the child turns 26 if the coverage continues until
the end of that taxable year. This means that if a child turns 26 in
March, but stays on the plan past December 31st (the end of most
people's taxable year), the health benefits up to December 31st can be
excluded for tax purposes.
Application to grandfathered health plans. Under the statute and
these interim final regulations, the requirement to make available
dependent coverage for children who have not attained age 26 generally
applies to all group health plans and health insurance issuers offering
group or individual health insurance coverage whether or not the plan
or health insurance coverage qualifies as a grandfathered health plan
\5\ under section 1251 of the Affordable Care Act, for plan years (in
the individual market, policy years) beginning on or after September
23, 2010. However, in accordance with section 2301(a) of the
Reconciliation Act, for plan years beginning before January 1, 2014,
these interim final regulations provide that a grandfathered health
plan that is a group health plan that makes available dependent
coverage of children may exclude an adult child who has not attained
age 26 from coverage only if the child is eligible to enroll in an
employer-sponsored health plan (as defined in section 5000A(f)(2) of
the Code) other than a group health plan of a parent. In the case of an
adult child who is eligible for coverage under the plans of the
employers of both parents, neither plan may exclude the adult child
from coverage based on the fact that the adult child is eligible to
enroll in the plan of the other parent's employer.
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\5\ Section 1251 of the Affordable Care Act, as modified by
section 10103 of the Affordable Care Act and section 2301 of the
Reconciliation Act, specifies that certain plans or coverage
existing as of the March 23, 2010 date of enactment (i.e.,
grandfathered health plans) are subject to only certain provisions.
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Regulations relating to grandfathered health plans under section
1251 of the Affordable Care Act are expected to be published in the
very near future. The Departments anticipate that the regulations will
make clear that changes to plan or policy terms to comply with PHS Act
section 2714 and these interim final regulations, including voluntary
compliance before plan years (in the individual market, policy years)
beginning on or after September 23, 2010, will not cause a plan or
health insurance coverage to lose grandfathered health plan status for
any purpose under the Affordable Care Act, as amended.
Transitional Rule. Prior to the applicability date of PHS Act
section 2714, a child who was covered under a group health plan or
health insurance coverage as a dependent may have lost eligibility
under the plan (or coverage) due to age prior to age 26. Moreover, if,
when a parent first became eligible for coverage, a child was under age
26 but older than the age at which the plan (or coverage) stopped
covering children, the child would not have become eligible for the
plan (or coverage). When the provisions of section 2714 become
applicable, a plan or issuer can no longer exclude coverage for the
child prior to age 26 irrespective of whether or when that child was
enrolled in the plan (or coverage). Also, a child of a primary
subscriber with family coverage in the individual market may be
entitled to an opportunity to enroll if the child previously lost
coverage due to age while other family members retained the
coverage.\6\
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\6\ In the group market, section 9802(a) of the Code, section
702(a) of ERISA, and section 2705 of the PHS Act provide that a plan
or issuer cannot impose any rule for eligibility for benefits
(including any rule excluding coverage) based on a health factor,
including a preexisting condition. These rules were added by HIPAA
and generally became applicable for group health plans for plan
years beginning on or after July 1, 1997. Similar guidance regarding
re-enrollment rights for individuals previously denied coverage due
to a health factor was issued by the Departments of the Treasury,
Labor, and HHS on December 29, 1997, at 62 FR 67689 and on January
8, 2001 at 66 FR 1378, 1403, 1410, 1418.
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Accordingly, these interim final regulations provide transitional
relief for a child whose coverage ended, or who was denied coverage (or
was not
[[Page 27125]]
eligible for coverage) under a group health plan or health insurance
coverage because, under the terms of the plan or coverage, the
availability of dependent coverage of children ended before the
attainment of age 26.
These interim final regulations require a plan or issuer to give
such a child an opportunity to enroll that continues for at least 30
days (including written notice of the opportunity to enroll),
regardless of whether the plan or coverage offers an open enrollment
period and regardless of when any open enrollment period might
otherwise occur. This enrollment opportunity (including the written
notice) must be provided not later than the first day of the first plan
year (in the individual market, policy year) beginning on or after
September 23, 2010. Thus, many plans can use their existing annual
enrollment periods (which commonly begin and end before the start of
the plan year) to satisfy the enrollment opportunity requirement. If
the child is enrolled, coverage must begin not later than the first day
of the first plan year (in the individual market, policy year)
beginning on or after September 23, 2010, even if the request for
enrollment is made after the first day of the plan year. In subsequent
years, dependent coverage may be elected for an eligible child in
connection with normal enrollment opportunities under the plan or
coverage.
Under these interim final regulations, the notice may be provided
to an employee on behalf of the employee's child (in the individual
market, to a primary subscriber on behalf of the primary subscriber's
child). In addition, for a group health plan or group health insurance
coverage, the notice may be included with other enrollment materials
that a plan distributes to employees, provided the statement is
prominent. For a group health plan or group health insurance coverage,
if a notice satisfying these requirements is provided to an employee
whose child is entitled to an enrollment opportunity, the obligation to
provide the notice of enrollment opportunity with respect to that child
is satisfied for both the plan and the issuer.
Any child enrolling in group health plan coverage pursuant to this
enrollment right must be treated as a special enrollee, as provided
under the regulations interpreting the HIPAA portability provisions.\7\
Accordingly, the child must be offered all the benefit packages
available to similarly situated individuals who did not lose coverage
by reason of cessation of dependent status. The child also cannot be
required to pay more for coverage than similarly situated individuals
who did not lose coverage by reason of cessation of dependent status.
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\7\ HIPAA is the Health Insurance Portability and Accountability
Act of 1996 (Public Law 104-191). Regulations regarding the
treatment of HIPAA special enrollees are included at 26 CFR 54.9801-
6(d), 29 CFR 2590.701-6(d), and 45 CFR 146.117(d).
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The Departments have been informed that many health insurance
issuers have announced that they will allow continued coverage of adult
children before such coverage is required by the Affordable Care Act. A
plan or issuer that allows continued coverage of adult children before
being required to do so by the Affordable Care Act is not required to
provide the enrollment opportunity with respect to children who do not
lose coverage.
Examples in these interim final regulations illustrate the
application of these transitional rules. One example illustrates that,
if a child qualifies for an enrollment opportunity under this section
and the parent is not enrolled but is otherwise eligible for
enrollment, the plan must provide an opportunity to enroll the parent,
in addition to the child. Similarly, another example illustrates that,
if a plan has more than one benefit package option, a child qualifies
for enrollment under this section, and the parent is enrolled in one
benefit package option, the plan must provide an opportunity to enroll
the child in any benefit package option for which the child is
otherwise eligible (thus allowing the parent to switch benefit package
options). Another example illustrates that a child who qualifies for an
enrollment opportunity under this section and who is covered under a
COBRA continuation provision must be given the opportunity to enroll as
a dependent of an active employee (i.e., other than as a COBRA-
qualified beneficiary). In this situation, if the child loses
eligibility for coverage due to a qualifying event (including aging out
of coverage at age 26), the child has another opportunity to elect
COBRA continuation coverage. (If the qualifying event is aging out, the
COBRA continuation coverage could last 36 months from the loss of
eligibility that relates to turning age 26.) The final example in this
section illustrates that an employee who joined a plan prior to the
applicability date of PHS Act section 2714, and has a child who never
enrolled because the child was too old under the terms of the plan but
has not yet turned 26, must be provided an opportunity to enroll the
child under this section even though the child was not previously
covered under the plan. If the parent is no longer eligible for
coverage under the plan (for example, if the parent has ceased
employment with the plan sponsor) as of the first date on which the
enrollment opportunity would be required to be given, the plan would
not be required to enroll the child.
B. Conforming Changes Under the PHS Act
1. References to the Public Health Service Act
Conforming changes to references to sections of title XXVII of the
PHS Act are made throughout parts 144 and 146 of title 45 of the Code
of Federal Regulations to reflect the renumbering of certain sections
by the Affordable Care Act.
2. Definitions (45 CFR 144.103)
These interim final regulations define ``policy year'' as the 12-
month period that is designated in the policy documents of individual
health insurance coverage. If the policy document does not designate a
policy year (or no such document is available), then the policy year is
the deductible or limit year used under the coverage. If deductibles or
other limits are not imposed on a yearly basis, the policy year is the
calendar year. The Affordable Care Act uses the term ``plan year'' in
referring to the period of coverage in both the individual and group
health insurance markets. The term ``plan year'', however, is generally
used in the group health insurance market. Accordingly, these interim
final regulations substitute the term ``policy year'' for ``plan year''
in defining the period of coverage in the individual health insurance
market.
III. Interim Final Regulations and Request for Comments
Section 9833 of the Code, section 734 of ERISA, and section 2792 of
the PHS Act authorize the Secretaries of the Treasury, Labor, and HHS
(collectively, the Secretaries) to promulgate any interim final rules
that they determine are appropriate to carry out the provisions of
chapter 100 of the Code, part 7 of subtitle B of title I of ERISA, and
part A of title XXVII of the PHS Act, which include PHS Act sections
2701 through 2728 and the incorporation of those sections into ERISA
section 715 and Code section 9815.
In addition, under Section 553(b) of the Administrative Procedure
Act (APA) (5 U.S.C. 551 et seq.) a general notice of proposed
rulemaking is not required when an agency, for good cause, finds that
notice and public comment thereon are impracticable, unnecessary, or
contrary to the public interest. The
[[Page 27126]]
provisions of the APA that ordinarily require a notice of proposed
rulemaking do not apply here because of the specific authority granted
by section 9833 of the Code, section 734 of ERISA, and section 2792 of
the PHS Act. However, even if the APA was applicable, the Secretaries
have determined that it would be impracticable and contrary to the
public interest to delay putting the provisions in these interim final
regulations in place until a full public notice and comment process is
completed. The statutory requirement implemented in these interim final
regulations was enacted on March 23, 2010, and applies for plan years
(in the individual market, policy years) beginning on or after
September 23, 2010. Having a binding rule in effect is critical to
ensuring that individuals entitled to the new protections being
implemented have these protections uniformly applied.
Moreover, the provisions in these interim final regulations require
lead time for implementation. These interim final regulations require
that an enrollment period be provided no later than the first day the
obligation to allow dependent children to enroll until attainment of
age 26 takes effect. Preparations presumably would have to be made to
put such an enrollment process in place. Group health plans and health
insurance issuers also would have to take the cost associated with this
new obligation into account in establishing their premiums, and in
making other changes to the designs of plan or policy benefits, and any
such premiums and changes would have to receive necessary approvals in
advance of the plan or policy year in question.
For the foregoing reasons, the Departments have determined that it
is essential to provide certainty about what will be required of group
health plans and health insurance issuers under the statutory
requirements implemented in binding regulations as far in advance of
September 23, 2010 as possible. This makes it impracticable to engage
in full notice and comment rulemaking before putting regulations into
effect, and in the public interest to do so through interim final
regulations under which the public will have an opportunity for
comment, but that opportunity will not delay putting rules in effect (a
delay that could possibly last past September 23, 2010).
Issuance of proposed regulations would not be sufficient because
the proposed regulations would not be binding, and different group
health plans or health insurance issuers could interpret the statutory
language in different ways. Had the Departments published a notice of
proposed rulemaking, provided for a 60-day comment period, and only
then prepared final regulations, which would be subject to a 60-day
delay in effective date, it is unlikely that it would have been
possible to have final regulations in effect before late September,
when these requirements could be in effect for some plans or policies.
It therefore is in the public interest that these interim final
regulations be in effect and apply when the statutory protections being
implemented apply.
IV. Economic Impact and Paperwork Burden
A. Summary--Department of Labor and Department of Health and Human
Services
As stated earlier in this preamble, these interim final regulations
implement PHS Act section 2714, which requires plans or issuers that
make dependent coverage available for children to continue to make such
coverage available for an adult child until the attainment of age 26.
The regulation also provides an enrollment opportunity to individuals
who lost or were not eligible for dependent coverage before age 26.\8\
This provision generally is effective for plan years (in the individual
market, policy years) beginning on or after September 23, 2010, which
is six months after the March 23, 2010 date of enactment of the
Affordable Care Act.
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\8\ The Affordable Care Act adds section 715 and Code section to
make the provisions of part A of title XXVII of the PHS Act
applicable to group health plans, and health insurance issuers
providing health insurance coverage in connection with group health
plans, under ERISA and the Code as if those provisions of the PHS
Act were included in ERISA and the Code. The PHS Act sections
incorporated by this reference are sections 2701 through 2728.
Section 1251 of the Affordable Care Act provides rules for
grandfathered health plans, and these rules are further clarified in
section 10103 of the Affordable Care Act and section 2301 of the
Reconciliation Act.
---------------------------------------------------------------------------
The Departments have crafted these interim final regulations to
secure the protections intended by Congress in the most economically
efficient manner possible. The Departments have quantified costs where
possible and provided a qualitative discussion of the economic benefits
and some of the transfers and costs that may stem from these interim
final regulations.
B. Executive Order 12866--Department of Labor and Department of Health
and Human Services
Under Executive Order 12866 (58 FR 51735), this regulatory action
has been determined ``significant'' and therefore subject to review by
the Office of Management and Budget (OMB). Section 3(f) of the
Executive Order defines a ``significant regulatory action'' as an
action that is likely to result in a rule (1) having an annual effect
on the economy of $100 million or more in any one year, or adversely
and materially affecting a sector of the economy, productivity,
competition, jobs, the environment, public health or safety, or State,
local or tribal governments or communities (also referred to as
``economically significant''); (2) creating a serious inconsistency or
otherwise interfering with an action taken or planned by another
agency; (3) materially altering the budgetary impacts of entitlement
grants, user fees, or loan programs or the rights and obligations of
recipients thereof; or (4) raising novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order. OMB has determined that this
regulation is economically significant within the meaning of section
3(f)(1) of the Executive Order, because it is likely to have an annual
effect on the economy of $100 million in any one year. Accordingly, OMB
has reviewed these rules pursuant to the Executive Order. The
Departments provide an assessment of the potential costs, benefits, and
transfers associated with the regulatory provision below. The
Departments invite comments on this assessment and its conclusions.
1. Need for Regulatory Action
PHS Act section 2714, as added by the Affordable Care Act and
amended by the Reconciliation Act requires group health plans and
health insurance issuers offering group or individual health insurance
coverage that make dependent coverage available for children to
continue to make coverage available to such children until the
attainment of age 26. With respect to a child receiving dependent
coverage, coverage does not have to be extended to a child or children
of the child or a spouse of the child. In addition, as provided by the
Reconciliation Act, grandfathered group health plans are not required
to offer dependent coverage to a child under 26 who is otherwise
eligible for employer-sponsored insurance other than a group health
plan of a parent for plan years beginning before January 1, 2014. PHS
Act section 2714 generally is effective for plan years (in the
individual market, policy years) beginning on or after September 23,
2010. Thus, these interim final regulations are necessary to amend the
Departments' existing regulations to
[[Page 27127]]
implement these statutorily mandated changes.
2. Summary of Impacts
In this section, the Departments estimate the number of individuals
affected by these interim final regulations, and the impact of the
regulations on health insurance premiums in the group and individual
markets. Beginning with the population of individuals age 19-25, the
number of individuals potentially affected is estimated by applying
several criteria including whether their parents have existing
employer-sponsored insurance (ESI) or an individual market policy; and
whether the individuals are themselves uninsured, have ESI, individual
market policies or other forms of coverage. A range of assumptions
concerning the percentage of the potentially affected individuals that
will accept the offer of new dependent coverage--``take-up'' rates-- is
then applied to estimate the number of newly covered individuals. The
premium impact is calculated by using an estimated incremental
insurance cost per newly-covered individual as a percent of average
family premiums.
In accordance, with OMB Circular A-4,\9\ Table 1 below depicts an
accounting statement showing the Departments' assessment of the
benefits, costs, and transfers associated with this regulatory action.
---------------------------------------------------------------------------
\9\ Available at http://www.whitehouse.gov/omb/circulars/a004/a-
4.pdf.
Table 1--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits:
Annualized Quantified: low estimate.................... 0.19 million previously uninsured individuals gain
coverage in 2011.
mid-range estimate..................................... 0.65 million previously uninsured individuals gain
coverage in 2011.
high estimate.......................................... 1.64 million previously uninsured individuals gain
coverage in 2011.
Qualitative: Expanding coverage options of the 19-25 population should decrease the number uninsured, which in
turn should decrease the cost-shifting of uncompensated care onto those with insurance, increase the receipt of
preventive health care and provide more timely access to high quality care, resulting in a healthier
population. Allowing extended dependent coverage will also permit greater job mobility for this population as
their insurance coverage will no longer be tied to their own jobs or student status. Dependents aged 19-25 that
have chronic or other serious health conditions would still be able to continue their current coverage through
a parent's plan. To the extent there is an increase in beneficial utilization of healthcare, health could
improve.
----------------------------------------------------------------------------------------------------------------
Discount Period
Costs\10\ Low Mid-range High Year rate covered
estimate estimate estimate dollar percent \11\
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($millions/ 11.2 11.2 11.2 2010 7 2011-2013
year)............................
10.4 10.4 10.4 2010 3 2011-2013
A one-time notice of right to enroll must be sent to those affected.
Qualitative: To the extent additional coverage increases utilization of health care services, there will be
additional costs incurred to achieve the health benefits.
----------------------------------------------------------------------------------------------------------------
Transfer: \12\
Annualized Monetized 3,459.3 5,250.2 6,893.9 2010 7 2011-2013
($millions/year).............
3,482.5 5,274.5 6,895.4 2010 3 2011-2013
Qualitative: If the rule causes family health insurance premiums to increase, there will be a transfer from
individuals with family health insurance coverage who do not have dependents aged 19-25 to those individuals
with family health insurance coverage that have dependents aged 19-25. To the extent that these higher premiums
result in lower profits or higher prices for the employer's product, then the higher premiums will result in a
transfer either from stockholders or consumers.
----------------------------------------------------------------------------------------------------------------
\10\ The cost estimates are annualize across the years 2011-2013, and reflects a single point estimate of the
cost to send out a notice in the first year only.
\11\ The Departments limited the period covered by the RIA to 2011-2013, because it only has reliable data to
make projections over this period due to the fact that in 2014, things will change drastically when the
subsidies and tax credits to offset premium increases and the exchanges are in effect.
\12\ The estimates in this table reflect the annualized discounted value in 2010 of the additional premium costs
for family policies calculated as the product of the newly covered dependents in each year from 2011-2013 (see
below) and an incremental cost per newly-covered person in those years (see below).
3. Estimated Number of Affected Individuals
The Departments' estimates in this section are based on the 2004-
2006 Medical Expenditure Panel Survey Household Component (MEPS-HC)
which was projected and calibrated to 2010 to be consistent with the
National Health Accounts projections. The Departments estimate that in
2010, there are approximately 29.5 million individuals aged 19-25
(young adults) in the United States. Of those individuals, 9.3 million
young adults (of whom 3.1 million are uninsured) do not have a parent
who has either ESI or non-group insurance, and thus they have no access
to dependent coverage. As shown in Table 2, among the remaining 20.2
million young adults whose parents are covered either by ESI or by non-
group insurance:
3.44 million are currently uninsured,
2.42 million are covered by their own non-group insurance,
5.55 million are covered by their own ESI,
5.73 million are already on their parent's or spouse's
ESI, and
3.01 million have some other form of coverage such as
Medicaid or TRICARE.
[[Page 27128]]
Table 2--Young Adults Aged 19-25 by Insurance Status
----------------------------------------------------------------------------------------------------------------
ESI as a
Uninsured* Non-group Own ESI dependent Other Total
----------------------------------------------------------------------------------------------------------------
Total U.S. Population Aged 19-25.. 6.59 2.69 6.98 5.75 7.5 29.5
All Young Adults in U.S. with a Parent with a Policy by Young Adult Insurance Status
----------------------------------------------------------------------------------------------------------------
Parents have ESI.................. 3.28 2.03 5.32 5.73 2.91 19.27
Parents have non-group............ 0.16 0.40 0.23 ........... 0.10 0.88
----------------------------------------------------------------------------------------------------------------
Subtotal A.................... 3.44 2.42 5.55 5.73 3.01 20.15
----------------------------------------------------------------------------------------------------------------
*The bolded numbers are potentially affected by the regulation.
Source: MEPS 2004-2006 HC Surveys, controlled to 2010 consistent with the National Health Accounts. Note: Total
number of young adults, age 19-25 is 29.5 million; the 20.15 million in this Table are the subset whose
parents have either ESI or non-group coverage.
Initially, the subset of this group of young adults that will be
affected by these interim final regulations are those who are either
uninsured (3.44 million) or covered by individual coverage (2.42
million). The statute does not require grandfathered group health plans
to offer coverage to young adults who currently have their own ESI or
an offer of an ESI. For the purposes of this analysis, it is assumed
that all plans begin 2011 with grandfathered status. These impacts
could change if plans lose their Grandfathered status.
Of these 5.86 million young adults, as shown in Table 3, 3.49
million are also unlikely to switch to their parents' coverage because:
They are already allowed to enroll in extended dependent
coverage for young adults through their State's existing laws, but have
chosen not to (2.61 million). Thirty-seven states already have
requirements concerning dependent coverage in the group market,
although most of these are substantially more restrictive than those
contained in this regulation.\13\ Using information about State laws
obtained from the Kaiser Family Foundation,\14\ a State by State
profile of State required coverage based on a person's State of
residence, age, student status, and living situation was developed.
This profile was then overlaid on MEPS data to obtain an estimate of
the number of individuals that would newly become eligible for coverage
due to these interim final regulations.
---------------------------------------------------------------------------
\13\ Restrictions include requirements for financial dependency,
student status, and age limits.
\14\ As described in Kaiser Family Foundation, Definition of
Dependency by Age, 2010, KFF State Health Facts, at http://
www.statehealthfacts.org/comparetable.jsp?ind=601&cat=7.
---------------------------------------------------------------------------
They have an offer of ESI and have parents who are covered
by ESI (0.48 million). For the purposes of this regulatory impact
statement, the Departments assume that the parents of these young
adults will be in grandfathered group health plans, and thus that these
young adults will not be affected by the provisions of these interim
final regulations. To the extent that some of the coverage in which
these parents are enrolled is not grandfathered, the effect of these
interim final regulations will be larger than the estimates provided
here.
Finally, there are 0.40 million young adults who have non-
group coverage and whose parents have non-group coverage. Because the
parents' non-group coverage is underwritten, there is not likely to be
any financial benefit to the family in moving the young adult onto the
parents' coverage, and the Departments assume that these young adults
will not be affected by the regulation.
TABLE 3--``Uninsured'' and ``Non-group'' Young Adults Unlikely to be
Affected by Extending Dependent Coverage to Age 26
------------------------------------------------------------------------
Non-Group
Uninsured coverage Total
------------------------------------------------------------------------
(1) Young adults potentially 1.30 1.31 2.61
covered by parent ESI due to
state law.......................
(2) Young adults with an offer of 0.31 0.17 0.48
ESI whose parents have ESI......
(3) Young adults with non-group ........... 0.40 0.40
coverage whose parents have non-
group coverage..................
--------------------------------------
Subtotal B................... 1.61 1.88 3.49
------------------------------------------------------------------------
As shown in Table 4, this leaves approximately 2.37 million young
adults who might be affected by this provision, or approximately eight
percent of the 29.5 million young adults in the age group. Among the
approximately 2.37 million young adults who are estimated to be
potentially affected by this provision, approximately 1.83 million are
currently uninsured, and 0.55 million are currently covered by their
own non-group coverage.
TABLE 4--Young Adults Potentially Affected by Extending Dependent
Coverage to Age 26
------------------------------------------------------------------------
Non-group
Uninsured coverage Total
------------------------------------------------------------------------
Parents have ESI................. 1.67 0.55 2.21
Parents have non-group........... 0.16 ........... 0.16
--------------------------------------
[[Page 27129]]
Total (Subtotal A-Subtotal 1.83 0.55 2.37
B)*.........................
------------------------------------------------------------------------
Source: MEPS 2004-2006 HC Surveys, controlled to 2010 consistent with
projections of the National Health Accounts.
*Subtotal A is in Table 2 and Subtotal B is in Table 3.
It is difficult to estimate precisely what fraction of the 2.37
million young adults who might potentially be affected by the provision
will actually enroll on their parents' coverage. A study by Monheit and
Cantor of the early experience in States that have extended coverage to
dependents suggests that few uninsured children in these States shift
to their parents' policy.\15\ However, data and methodological
difficulties inevitably lead to substantial uncertainty about the
finding.
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\15\ Monheit, A., J. Cantor, et al, ``State Policies Expanding
Dependent Coverage to Young Adults in Private Health Insurance
Plans,'' presented at the Academy Health State Health Research and
Policy Interest Group Meeting, Chicago IL, June 27, 2009.
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The Departments considered two other points of reference to
estimate take-up rates. One is the work that has analyzed take-up rates
among people made newly eligible for public coverage by Medicaid
expansions. These studies suggest take-up rates in the range of 10-34
percent.\16\ However, the populations eligible for these expansions
have different socio-demographic compositions than those eligible for
the dependent coverage provisions covered under these interim final
regulations, and the decision to take-up Medicaid is clearly different
than the decision to cover a child on a parent's private insurance
policy. A second point of reference are estimates from the Kaiser/HRET
Employer Health benefits Survey \17\ which suggest that, depending on
the size of the worker contribution, between 77 percent and 90 percent
of employees accept offers of family policies. Again, these estimates
would be based on a group that differs in characteristics from those
eligible for new dependent coverage. These concerns notwithstanding,
the analyses of Medicaid expansions and employee take-up of employer
sponsored coverage provide useful points of reference.
---------------------------------------------------------------------------
\16\ Bansak, Cynthia and Steven Raphael. ``The Effects of State
Policy Design Features on Take-Up and Crowd-out Rates fro the State
Children's Health Insurance Program.'' Journal of Policy Analysis
and Management, Vol. 26, No. 1, 149-175. 2006. Find that for the
time period 1998-2002 take-up rates for SCHIP were about 10 percent.
Currie, Janet and Jonathan Gruber. ``Saving babies: The Efficacy
and Cost of Recent Changes in Medicaid Eligibility of Pregnant
Women.'' The Journal of Political Economy, Vol. 104, No. 6, Dec.
1996, pp. 1263-1296. Find for Medicaid expansions during the 1979-
1992 period the take-up rate for eligible pregnant women was 34
percent.
Cutler, David and Jonathan Gruber. ``Does Public Insurance Crowd
Out Private Insurance?'' The Quarterly Journal of Economics, Vol.
111, No. 2, May 1996, pp. 391-430. Find that for the Medicaid
expansions from 1987-1992 the take-up rate for the uninsured is
close to 30 percent, while for pregnant women it was seven percent.
Gruber, Jonathan and Kosali Simon. ``Crowd-Out Ten years Later:
Have Recent Public Insurance Expansions Crowded Out Private Health
Insurance?'' NBER Working Paper 12858. January 2007. Find that for
the Medicaid expansions during 1996-2002 the take-up rate was 7
percent across all children, but nearly one-third for uninsured
children.
\17\ Found at http://www.kff.org/insurance/snapshot/
chcm020707oth.cfm.
---------------------------------------------------------------------------
Recognizing the uncertainty in the area, the Departments produced a
range of assumptions concerning take-up rates. In developing the range
of take-up rates, the Departments assume that these rates will vary by
the following factors: (1) The young adult's current health coverage
status (uninsured young adults are less likely to take advantage of the
dependent coverage option than young adults already covered by non-
group insurance, because young adults who have purchased non-group
insurance have shown a strong preference for coverage, and can almost
always save money and get better coverage by switching to their
parents' policy); (2) the young adult's health status (young adults in
fair or poor health are more likely to take advantage of the option
than those in excellent, very good or good health), and (3) the young
adult's living situation (those living with their parents are more
likely to take up the option than those not living with their parents).
The almost fully covered or ``high'' take-up rate scenario assumes
that regardless of health or insurance status, 95 percent of young
adults living at home and 85 percent of those not living at home would
move to dependent coverage. For the mid-range scenario, the Departments
assume that relative to the high take-up rate scenario, 90 percent of
the uninsured whose health status was fair or poor health and 50
percent of those in good to excellent health would move to dependent
coverage. In the low take-up rate scenario, the Departments adjusted
the percentages to 80 percent and 10 percent of the high take-up rate
scenario. In all three scenarios, the same assumptions apply to
individuals with non-group policies whose parents have ESI--95 percent
of those living at home and 85 percent of those living elsewhere would
move to dependent coverage.
In the low take-up rate scenario, the assumptions lead to the
result that approximately 30 percent of eligibles will enroll in
dependent coverage. In the mid-range scenario, they result in an
approximate 50 percent take-up rate, and in the high take-up scenario,
they result in an approximate 90 percent take-up rate. The Departments
are uncertain regarding which of these scenarios is most likely but are
confident that they bracket the expected outcome.
Table 5--Number of Individuals with New Dependent Coverage and Impact on Group Insurance Premiums, 2011-2013
----------------------------------------------------------------------------------------------------------------
Low estimate Mid-range estimate High estimate
--------------------------------------------------------------------------------
2011 2012 2013 2011 2012 2013 2011 2012 2013
----------------------------------------------------------------------------------------------------------------
Individuals with New Dependent 0.68 0.97 1.08 1.24 1.60 1.65 2.12 2.07 1.98
Coverage (millions)...........
From Uninsured (millions)...... 0.19 0.29 0.33 0.65 0.94 0.91 1.64 1.42 1.21
Incremental Premium Cost Per $3,670 $3,800 $4,000 $3,380 $3,500 $3,690 $3,220 $3,340 $3,510
Individual Coverage...........
Impact on Group Insurance 0.5 0.7 0.7 0.7 1.0 1.0 1.2 1.2 1.1
Premiums (%)..................
----------------------------------------------------------------------------------------------------------------
[[Page 27130]]
These take-up rate assumptions are then applied to the number of
potentially affected individuals displayed in Table 3. The resulting
number of individuals with new dependent coverage is summarized in
Table 5. Under the mid-range take-up rate assumption, the Departments
estimate that in 2011, 1.24 million young adults will newly be covered
by their parents' ESI or non-group market policies, of whom 0.65
million were previously uninsured, and 0.6 million were previously
covered by non-group coverage. The number of individuals newly covered
by their parents' plans would be 0.7 and 2.12 million under the high
and low take-up rate assumptions respectively, with 0.2 and 1.64
million of these individuals being previously uninsured. Relative to
the individuals covered under the high take-up rate assumption, higher
proportions of the low- and mid-range assumption groups are accounted
for by people who previously had non-group coverage (72 percent and 48
percent respectively in contrast to 23 percent for the high take-up
rate group). This difference is a result of the Departments' assumption
for the low- and mid-range take-up rates that people with non-group
coverage will be more likely than healthy people who were uninsured to
take advantage of the dependent coverage option.
Under the mid-range take-up rate assumptions, the estimated number
of young adults covered by their parents' plans in 2012 increases
somewhat over the 2011 estimate to 1.6 million in total, of whom
approximately 0.9 million would have been uninsured. The increase in
the estimate for 2012 results from the assumption that as children
reach the age that would have caused them to be excluded from their
parents' policy before the implementation of these interim final
regulations, a large fraction of them now will remain on their parents'
policy. Similarly, the estimated number of young adults enrolling in
their parents' non-group policy increases from just under 75,000 in
2011 to approximately 100,000 in 2012, and 120,000 in 2013.
4. Benefits
The benefits of these interim final regulations are expected to
outweigh the costs to the regulated community. In the mid-range take-up
rate assumption, the Departments estimate that in 2011, 0.65 million
previously uninsured individuals will now be covered on their parent's
policies due to these interim final regulations and 1.24 million
individuals total will now be covered on their parent's coverage.
Expanding coverage options for the 19-25 population should decrease the
number uninsured, which in turn should decrease the cost-shifting of
uncompensated care onto those with coverage, increase the receipt of
preventive health care and provide more timely access to high quality
care, resulting in a healthier population. In particular, children with
chronic conditions or other serious health issues will be able to
continue coverage through a parent's plan until age 26. Allowing
extended dependent coverage also will permit greater job mobility for
this population as their health coverage will no longer be tied to
their own jobs or student status.
5. Costs and Transfers Associated With the Rule
Estimates for the incremental annual premium costs for the newly
covered individuals are developed based on expenditure data from MEPS
and vary based on the take-up rate assumptions. These incremental costs
are lowest for the high take-up rate assumption since the newly covered
group would contain a relatively high percentage of individuals whose
health status was good to excellent. Conversely, the low take-up rate
assumption results in the highest incremental costs because a higher
percentage of the newly covered individuals would be those whose health
status was fair to poor. For those enrolling in their parents' ESI, the
expected annual premium cost under the mid-range take-up rate
assumption would be $3,380 in 2011, $3,500 in 2012 and $3,690 in 2013.
If these costs were distributed among all family ESI plans, family
premiums would be expected to rise by 0.7 percent in 2011, 1.0 percent
in 2012, and 1.0 percent in 2013 due to these interim final
regulations.\18\ The comparable incremental costs and premium effects
for the low and high take-up rate assumptions are summarized in Table
5. To the extent that these increases are passed on to workers in the
form of higher premiums for all workers purchasing family policies or
in the form of lower wages for all workers, there will be a transfer
from workers who do not have newly covered dependents to those who do.
To the extent that these higher premiums result in lower profits or
higher prices for the employer's product, the higher premiums will
result in a transfer either from stockholders or consumers.
---------------------------------------------------------------------------
\18\ For purposes of this regulatory impact analysis, the
Departments assume that there would be no effect on premiums for
employee-only policies.
---------------------------------------------------------------------------
In addition, to the extent that these interim final regulations
result in a decrease in the number of uninsured, the Departments expect
a reduction in uncompensated care, and a reduction in liability for
those who fund uncompensated care, including public programs (primarily
Medicaid and State and local general revenue support for public
hospitals), as well as the portion of uncompensated care that is paid
for by the cost shift from private premium payers. Such effects would
lead to lower premiums for the insured population, both with or without
newly covered children.
For the small number of children (75,000 in 2011) enrolling in
their parents' non-group insurance policy under the mid-range take-up
assumption, the Departments expect estimated annual premium cost to be
$2,360 in 2011, $2,400 in 2012 and $2,480 in 2013. To a large extent,
premiums in the non-group market are individually underwritten, and the
Departments expect that most of the premium cost will be borne by the
parents who are purchasing the policy to which their child is added.
If, instead, these costs were distributed over the entire individual
market (as would be the case in a pure community-rated market), then
individual premiums would be expected to rise 0.7 percent in 2011, 1.0
percent in 2012, and 1.2 percent in 2013 due to these interim final
regulations. However, the Departments expect the actual increase across
the entire individual market, if any, will be much smaller than these
estimates, because they expect that the costs largely will be borne by
the subscribers who are directly affected rather than distributed
across the entire individual market.
6. Enrollment Opportunity
These interim final regulations provide an enrollment opportunity
for children excluded from coverage because of age before the effective
date of the rule. The Departments estimate that this information
collection request will result in approximately 105,000,000 notices
being distributed with an hour burden of approximately 1,100,000 hours
and cost burden of approximately $2,010,500. For a discussion of this
enrollment opportunity, see the Paperwork Reduction Act section later
in this preamble.
7. Regulatory Alternatives
Section 6(a)(3)(C)(iii) of Executive Order 12866 requires an
economically significant regulation to include an assessment of the
costs and benefits of potentially effective and reasonable alternatives
to the planned regulation, and an explanation of why the planned
[[Page 27131]]
regulatory action is preferable to the potential alternatives. The
Departments carefully considered limiting the flexibility of plans and
policies to define who is a child. However, the Departments concluded,
as they have in other regulatory contexts, that plan sponsors and
issuers should be free to determine whether to cover children or which
children should be covered by their plans and policies (although they
must comply with other applicable Federal or State law mandating
coverage, such as ERISA section 609). Therefore, these interim final
regulations have not limited a plan's or policy's flexibility to define
who is a child for purposes of the determination of children to whom
coverage must be made available.
C. Regulatory Flexibility Act--Department of Labor and Department of
Health and Human Services
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to Federal rules that are subject to
the notice and comment requirements of section 553(b) of the APA (5
U.S.C. 551 et seq.) and that are likely to have a significant economic
impact on a substantial number of small entities. Under Section 553(b)
of the APA, a general notice of proposed rulemaking is not required
when an agency, for good cause, finds that notice and public comment
thereon are impracticable, unnecessary, or contrary to the public
interest. These interim final regulations are exempt from APA, because
the Departments made a good cause finding that a general notice of
proposed rulemaking is not necessary earlier in this preamble.
Therefore, the RFA does not apply and the Departments are not required
to either certify that the regulations would not have a significant
economic impact on a substantial number of small entities or conduct a
regulatory flexibility analysis.
Nevertheless, the Departments carefully considered the likely
impact of the regulations on small entities in connection with their
assessment under Executive Order 12866. Consistent with the policy of
the RFA, the Departments encourage the public to submit comments that
suggest alternative rules that accomplish the stated purpose of PHS Act
section 2714 and minimize the impact on small entities.
D. Special Analyses--Department of the Treasury
Notwithstanding the determinations of the Department of Labor and
Department of Health and Human Services, for purposes of the Department
of the Treasury, it has been determined that this Treasury decision is
not a significant regulatory action for purposes of Executive Order
12866. Therefore, a regulatory assessment is not required. It has also
been determined that section 553(b) of the APA (5 U.S.C. chapter 5)
does not apply to these interim final regulations. For the
applicability of the RFA, refer to the Special Analyses section in the
preamble to the cross-referencing notice of proposed rulemaking
published elsewhere in this issue of the Federal Register. Pursuant to
section 7805(f) of the Code, these temporary regulations have been
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small businesses.
E. Paperwork Reduction Act
1. Department of Labor and Department of the Treasury: Affordable Care
Act Enrollment Opportunity Notice Relating to Extended Dependent
Coverage
As part of their continuing efforts to reduce paperwork and
respondent burden, the Departments conduct a preclearance consultation
program to provide the general public and federal agencies with an
opportunity to comment on proposed and continuing collections of
information in accordance with the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps to ensure that requested
data can be provided in the desired format, reporting burden (time and
financial resources) is minimized, collection instruments are clearly
understood, and the impact of collection requirements on respondents
can be properly assessed.
As discussed earlier in this preamble, prior to the applicability
date of PHS Act section 2714, a child who was covered under a group
health plan (or group health insurance coverage) may have lost
eligibility for coverage under the plan due to age before age 26.
Moreover, if a child was under age 26 when a parent first became
eligible for coverage, but older than the age at which the plan stopped
covering children, the child would not have become eligible for
coverage. When the provisions of PHS Act section 2714 become applicable
to the plan (or coverage), the plan or coverage can no longer exclude
coverage for the individual until age 26.
Accordingly, these interim final regulations require plans to
provide a notice of an enrollment opportunity to individuals whose
coverage ended, or who were denied coverage (or were not eligible for
coverage) under a group health plan or health insurance coverage
because, under the terms of the plan or coverage, the availability of
dependent coverage of children ended before the attainment of age 26.
The enrollment opportunity must continue for at least 30 days,
regardless of whether the plan or coverage offers an open enrollment
period and regardless of when any open enrollment period might
otherwise occur. This enrollment opportunity must be presented not
later than the first day of the first plan year (in the individual
market, policy year) beginning on or after September 23, 2010 (which is
the applicability date of PHS Act section 2714). Coverage must begin
not later than the first day of the first plan year (in the individual
market, policy year) beginning on or after September 23, 2010.\19\
---------------------------------------------------------------------------
\19\ Any individual enrolling in coverage pursuant to this
enrollment right must be treated as a special enrollee, as provided
under HIPAA portability rules. Accordingly, the individual must be
offered all the benefit packages available to similarly situated
individuals who did not lose coverage by reason of cessation of
dependent status. The individual also cannot be required to pay more
for coverage than similarly situated individuals who did not lose
coverage by reason of cessation of dependent status.
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The Affordable Care Act dependent coverage enrollment opportunity
notice is an information collection request (ICR) subject to the PRA.
Currently, the Departments are soliciting public comments for 60 days
concerning these disclosures. The Departments have submitted a copy of
these interim final regulations to OMB in accordance with 44 U.S.C.
3507(d) for review of the information collections. The Departments and
OMB are particularly interested in comments that:
Evaluate whether the collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
Evaluate the accuracy of the agency's estimate of the
burden of the collection of information, including the validity of the
methodology and assumptions used;
Enhance the quality, utility, and clarity of the
information to be collected; and
Minimize the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technological collection
techniques or other forms of information technology, for example, by
permitting electronic submission of responses.
Comments should be sent to the Office of Information and Regulatory
Affairs, Attention: Desk Officer for the Employee Benefits Security
[[Page 27132]]
Administration either by fax to (202) 395-7285 or by e-mail to oira_
submission@omb.eop.gov. A copy of the ICR may be obtained by contacting
the PRA addressee: G. Christopher Cosby, Office of Policy and Research,
U.S. Department of Labor, Employee Benefits Security Administration,
200 Constitution Avenue, NW., Room N-5718, Washington, DC 20210.
Telephone: (202) 693-8410; Fax: (202) 219-4745. These are not toll-free
numbers. E-mail: ebsa.opr@dol.gov. ICRs submitted to OMB also are
available at reginfo.gov (http://www.reginfo.gov/public/do/PRAMain).
The Departments assume that 2,800,000 ERISA covered plans will send
the enrollment opportunity notice to all 79,573,000 employees eligible
for group health insurance coverage. The Departments estimate that
preparing the enrollment notice will require 30 minutes of legal
professional time at a labor rate of $119 per hour \20\ and one minute
of clerical time at $26 per hour per paper notice to distribute the
notices.\21\ This results in an hour burden of nearly 822,000 hours and
an associated equivalent cost of nearly $21,513,000.
---------------------------------------------------------------------------
\20\ Hourly wage estimates are based on data from the Bureau of
Labor Statistics Occupational Employment Survey (May 2008) and the
Bureau of Labor Statistics Employment Cost Index (June 2009). All
hourly wage rates include wages and benefits. Clerical wage and
benefits estimates are based on metropolitan wage rates for
executive secretaries and administrative assistants. Legal
professional wage and benefits estimates are based on metropolitan
wage rates for lawyers.
\21\ While plans could prepare their own notice, the Departments
assume that the notices will be prepared by service providers. The
Departments have previously estimated that there are 630 health
insurers (460 providing coverage in the group market, and 490
providing coverage in the individual market.). These estimates are
from NAIC 2007 financial statements data and the California
Department of Managed Healthcare (2009), at http://wpso.dmhc.ca.gov/
hpsearch/viewall.aspx. Because the hour and cost burden is shared
between the Departments of Labor/Treasury and the Department of
Health and Human Services, the burden to prepare the notices is
calculated using half the number of insurers (315).
---------------------------------------------------------------------------
The Departments estimate that the cost burden associated with
distributing the approximately 79,573,000 notices will be approximately
$2,467,000 based on one minute of clerical time, and $.05 per page for
material and printing costs. The Departments assumed that 38 percent of
the notices would be sent electronically.\22\ In addition, plans can
send these notices with other plan documents, such as open enrollment
materials. Therefore, the Departments have not included postage costs
in this estimate. The Departments note that persons are not required to
respond to, and generally are not subject to any penalty for failing to
comply with, an ICR unless the ICR has a valid OMB control number.\23\
---------------------------------------------------------------------------
\22\ For purposes of this burden estimate, the Departments
assume that 38 percent of the disclosures will be provided through
electronic means in accordance with the Department of Labor's
standards for electronic communication of required information
provided under 29 CFR 2520.104b-1(c).
\23\ 5 CFR 1320.1 through 1320.18.
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These paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agencies: Employee Benefits Security Administration, Department of
Labor; Internal Revenue Service, U.S. Department of the Treasury.
Title: Affordable Care Act Enrollment Opportunity Notice Relating
to Extended Dependent Coverage.
OMB Number: 1210-0139; 1545-2172.
Affected Public: Business or other for-profit; not-for-profit
institutions.
Total Respondents: 2,800,000.
Total Responses: 79,573,000.
Frequency of Response: One-time.
Estimated Total Annual Burden Hours: 411,000 hours (Employee
Benefits Security Administration); 411,000 hours (Internal Revenue
Service).
Estimated Total Annual Burden Cost: $1,233,500 (Employee Benefits
Security Administration); $1,233,500 (Internal Revenue Service).
2. Department of Health and Human Services: Affordable Care Act
Enrollment Opportunity Notice Relating to Extended Dependent Coverage
We are soliciting public comment on the following sections of this
document that contain information collection requirements (ICR)
regarding the Affordable Care Act--ICR Relating to Enrollment
Opportunity Notice--Dependent Coverage. As discussed earlier in this
preamble, the Affordable Care Act and these interim final regulations
require issuers in the individual market and group health plans
sponsored by State and local governments to notify participants
regarding an enrollment opportunity related to the extension of
dependent coverage. Prior to the applicability date of PHS Act section
2714, a child who was covered under a group health plan (or group
health insurance coverage) as a dependent may have lost eligibility for
coverage under the plan due to age before age 26. Moreover, if, when a
parent first became eligible for coverage, a child was under age 26 but
older than the age at which the plan stopped covering children, the
child would not have become eligible for coverage. When the provisions
of PHS Act section 2714 become applicable to the plan (or coverage),
the plan or coverage can no longer exclude coverage for the individual
until age 26.
Accordingly, these interim final regulations require issuers in the
individual insurance market and group health plans sponsored by State
and local governments to provide a notice of an enrollment opportunity
to individuals whose coverage ended, or who was denied coverage (or was
not eligible for coverage) under a group health plan or group health
insurance coverage because, under the terms of the plan or coverage,
the availability of dependent coverage of children ended before the
attainment of age 26. The enrollment opportunity must continue for at
least 30 days, regardless of whether the plan or coverage offers an
open enrollment period and regardless of when any open enrollment
period might otherwise occur. This enrollment opportunity must be
presented not later than the first day of the first plan year (in the
individual market, policy year) beginning on or after September 23,
2010 (which is the applicability date of PHS Act section 2714).
Coverage must begin not later than the first day of the first plan year
(in the individual market, policy year) beginning on or after September
23, 2010.\24\
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\24\ Any individual enrolling in coverage pursuant to this
enrollment right must be treated as a special enrollee, as provided
under HIPAA portability rules. Accordingly, the individual must be
offered all the benefit packages available to similarly situated
individuals who did not lose coverage by reason of cessation of
dependent status. The individual also cannot be required to pay more
for coverage than similarly situated individuals who did not lose
coverage by reason of cessation of dependent status.
---------------------------------------------------------------------------
The Department estimates that 126,000 State and local governmental
plans would have to send 19,627,000 notices to eligible employees and
490 insurers in the individual market would have to send approximately
5,444,000 notices to individuals with policies covering dependents.\25\
For purposes of this estimate, the Department assumes that it will take
a legal professional, on average, 30 minutes to prepare the notice at a
labor rate of $119 per hour,\26\ and one minute, on average, of a
clerical professional's time at $26 per hour to copy and mail the
notice.\27\ While plans could prepare their own notice, the
[[Page 27133]]
Department assumes that the notices will be prepared by service
providers. The Department has previously estimated that there are 630
health insurers \28\ (460 providing coverage in the group market, and
490 providing coverage in the individual market). Because the hour and
cost burden is shared among the Departments of Labor/Treasury and the
Department of Health and Human Services, the burden to prepare the
notices is calculated using half the number of insurers (315). The
Department assumes that 38 percent of the notices would be sent
electronically.\29\ Notices that are sent electronically do not require
any of the clerical worker's time to mail the notice. This results in
an hour burden of approximately 259,000 hours and an associated
equivalent cost of about $6,791,000 to prepare and distribute
25,071,000 notices. The Department estimates that the cost burden
associated with distributing the notices will be approximately
$777,000.\30\ The Department assumes that 38 percent of the notices
would be sent electronically.\31\ In addition, plans and issuers can
send these notices with other plan documents (for example, during open
enrollment for the government plans, or other communication at
reenrollment in the individual market). Therefore, the Department did
not include postage costs in this estimate. The Department notes that
persons are not required to respond to, and generally are not subject
to any penalty for failing to comply with, an ICR unless the ICR has a
valid OMB control number.\32\
---------------------------------------------------------------------------
\25\ The number of individual insurance notices was based on the
number of individual policy holders with dependents on that policy
according to the 2009 March Current Population Survey (CPS).
\26\ Estimates of labor rates include wages, other benefits, and
overhead based on the National Occupational Employment Survey (May
2008, Bureau of Labor Statistics) and the Employment Cost Index June
2009, Bureau of Labor Statistics).
\28\ These estimates are from NAIC 2007 financial statements
data and the California Department of Managed Healthcare (2009), at
http://wpso.dmhc.ca.gov/hpsearch/viewall.aspx.
\29\ For purposes of this burden estimate, the Department
assumes that 38 percent of the disclosures will be provided through
electronic means.
\30\ This estimate is based on an average document size of one
page and $.05 cents per page for material and printing costs.
\31\ For purposes of this burden estimate, the Department
assumes that 38 percent of the disclosures will be provided through
electronic means.
\32\ 5 CFR 1320.1 through 1320.18.
---------------------------------------------------------------------------
These paperwork burden estimates are summarized as follows:
Type of Review: New collection.
Agency: Department of Health and Human Services.
Title: Notice of Special Enrollment Opportunity under the
Affordable Care Act Relating to Dependent Coverage.
OMB Number: 0938-1089.
Affected Public: Business; State, Local, or Tribal Governments.
Respondents: 126,000.
Responses: 25,071,000.
Frequency of Response: One-time.
Estimated Total Annual Burden Hours: 259,000 hours.
Estimated Total Annual Burden Cost: $777,000.
If you comment on this information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget,
Attention: CMS Desk Officer, 4140-IFC
Fax: (202) 395-6974; or
E-mail: OIRA_submission@omb.eop.gov
F. Congressional Review Act
These interim final regulations are subject to the Congressional
Review Act provisions of the Small Business Regulatory Enforcement
Fairness Act of 1996 (5 U.S.C. 801 et seq.) and have been transmitted
to Congress and the Comptroller General for review.
G. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires
agencies to prepare several analytic statements before proposing any
rules that may result in annual expenditures of $100 million (as
adjusted for inflation) by State, local and tribal governments or the
private sector. These interim final regulations are not subject to the
Unfunded Mandates Reform Act, because they are being issued as an
interim final regulation. However, consistent with the policy embodied
in the Unfunded Mandates Reform Act, these interim final regulations
have been designed to be the least burdensome alternative for State,
local and tribal governments, and the private sector, while achieving
the objectives of the Affordable Care Act.
H. Federalism Statement--Department of Labor and Department of Health
and Human Services
Executive Order 13132 outlines fundamental principles of
federalism, and requires the adherence to specific criteria by Federal
agencies in the process of their formulation and implementation of
policies that have ``substantial direct effects'' on the States, the
relationship between the national government and States, or on the
distribution of power and responsibilities among the various levels of
government. Federal agencies promulgating regulations that have these
federalism implications must consult with State and local officials,
and describe the extent of their consultation and the nature of the
concerns of State and local officials in the preamble to the
regulation.
In the Departments' view, these interim final regulations have
federalism implications, because they have direct effects on the
States, the relationship between the national government and States, or
on the distribution of power and responsibilities among various levels
of government. However, in the Departments' view, the federalism
implications of these interim final regulations are substantially
mitigated because, with respect to health insurance issuers, the
Departments expect that the majority of States will enact laws or take
other appropriate action resulting in their meeting or exceeding the
Federal standard.
In general, through section 514, ERISA supersedes State laws to the
extent that they relate to any covered employee benefit plan, and
preserves State laws that regulate insurance, banking, or securities.
While ERISA prohibits States from regulating a plan as an insurance or
investment company or bank, the preemption provisions of ERISA section
731 and PHS Act section 2724 (implemented in 29 CFR 2590.731(a) and 45
CFR 146.143(a)) apply so that the HIPAA requirements (including those
of the Affordable Care Act) are not to be ``construed to supersede any
provision of State law which establishes, implements, or continues in
effect any standard or requirement solely relating to health insurance
issuers in connection with group health insurance coverage except to
the extent that such standard or requirement prevents the application
of a requirement'' of a federal standard. The conference report
accompanying HIPAA indicates that this is intended to be the
``narrowest'' preemption of State laws. (See House Conf. Rep. No. 104-
736, at 205, reprinted in 1996 U.S. Code Cong. & Admin. News 2018.)
States may continue to apply State law requirements except to the
extent that such requirements prevent the application of the Affordable
Care Act requirements that are the subject of this rulemaking. State
insurance laws that are more stringent than the Federal requirements
are unlikely to ``prevent the application of'' the Affordable Care Act,
and be preempted. Accordingly, States have significant latitude to
impose requirements on health
[[Page 27134]]
insurance issuers that are more restrictive than the Federal law.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the States, the
Departments have engaged in efforts to consult with and work
cooperatively with affected State and local officials, including
attending conferences of the National Association of Insurance
Commissioners and consulting with State insurance officials on an
individual basis. It is expected that the Departments will act in a
similar fashion in enforcing the Affordable Care Act requirements.
Throughout the process of developing these interim final regulations,
to the extent feasible within the specific preemption provisions of
HIPAA as it applies to the Affordable Care Act, the Departments have
attempted to balance the States' interests in regulating health
insurance issuers, and Congress' intent to provide uniform minimum
protections to consumers in every State. By doing so, it is the
Departments' view that they have complied with the requirements of
Executive Order 13132.
Pursuant to the requirements set forth in section 8(a) of Executive
Order 13132, and by the signatures affixed to these regulations, the
Departments certify that the Employee Benefits Security Administration
and the Office of Consumer Information and Insurance Oversight have
complied with the requirements of Executive Order 13132 for the
attached regulation in a meaningful and timely manner.
V. Statutory Authority
The Department of the Treasury temporary regulations are adopted
pursuant to the authority contained in sections 7805 and 9833 of the
Code.
The Department of Labor interim final regulations are adopted
pursuant to the authority contained in 29 U.S.C. 1027, 1059, 1135,
1161-1168, 1169, 1181-1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a,
1191b, and 1191c; sec. 101(g), Pub. L. 104-191, 110 Stat. 1936; sec.
401(b), Pub. L. 105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec.
512(d), Pub. L. 110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e),
Pub. L. 111-148, 124 Stat. 119, as amended by Pub. L. 111-152, 124
Stat. 1029; Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7,
2009).
The Department of Health and Human Services interim final
regulations are adopted pursuant to the authority contained in sections
2701 through 2763, 2791, and 2792 of the PHS Act (42 USC 300gg through
300gg-63, 300gg-91, and 300gg-92), as amended.
List of Subjects
26 CFR Part 54
Excise taxes, Health care, Health insurance, Pensions, Reporting
and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
29 CFR Part 2590
Continuation coverage, Disclosure, Employee benefit plans, Group
health plans, Health care, Health insurance, Medical child support,
Reporting and recordkeeping requirements.
45 CFR Parts 144, 146, and 147
Health care, Health insurance, Reporting and recordkeeping
requirements, and State regulation of health insurance.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement, Internal Revenue
Service.
Approved: May 7, 2010.
Michael F. Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
Signed this 6th day of May 2010.
Phyllis C. Borzi,
Assistant Secretary, Employee Benefits Security Administration,
Department of Labor.
Approved: May 4, 2010.
Jay Angoff,
Director, Office of Consumer Information and Insurance Oversight.
Approved: May 7, 2010.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
Internal Revenue Service
26 CFR Chapter 1
0
Accordingly, 26 CFR Parts 54 and 602 are amended as follows:
PART 54--PENSION EXCISE TAXES
0
Paragraph 1. The authority citation for part 54 continues to read in
part as follows:
Authority: 26 U.S.C. 7805. * * *
0
Par. 2. Section 54.9815-2714T is added to read as follows:
Sec. 54.9815-2714T Eligibility of children until at least age 26
(temporary).
(a) In general--(1) A group health plan, or a health insurance
issuer offering group health insurance coverage, that makes available
dependent coverage of children must make such coverage available for
children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1,
2011, a group health plan provides health coverage for employees,
employees' spouses, and employees' children until the child turns
26. On the birthday of a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers the child is July 16,
2011.
(ii) Conclusion. In this Example, the plan satisfies the
requirement of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent. With respect to a
child who has not attained age 26, a plan or issuer may not define
dependent for purposes of eligibility for dependent coverage of
children other than in terms of a relationship between a child and the
participant. Thus, for example, a plan or issuer may not deny or
restrict 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 any other person), residency with the participant or
with any other person, student status, employment, or any combination
of those factors. In addition, a plan or issuer may not deny or
restrict coverage of a child based on eligibility for other coverage,
except that paragraph (g) of this section provides a special rule for
plan years beginning before January 1, 2014 for grandfathered health
plans that are group health plans. (Other requirements of Federal or
State law, including section 609 of ERISA or section 1908 of the Social
Security Act, may mandate coverage of certain children.)
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of
self-only or family health coverage. Dependent coverage is provided
under family health coverage for children of participants who have
not attained age 26. The plan imposes an additional premium
surcharge for children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies
the terms
[[Page 27135]]
for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among
the following tiers of health coverage: self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more. The cost of coverage
increases based on the number of covered individuals. The plan
provides dependent coverage of children who have not attained age
26.
(ii) Conclusion. In this Example 2, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. Although the
cost of coverage increases for tiers with more covered individuals,
the increase applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage
is provided for children of participants who have not attained age
26. The plan limits children who are older than age 18 to the HMO
option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option,
varies the terms for dependent coverage of children based on age.
(f) Transitional rules for individuals whose coverage ended by
reason of reaching a dependent eligibility threshold--(1) In general.
The relief provided in the transitional rules of this paragraph (f)
applies with respect to any child--
(i) Whose coverage ended, or who was denied coverage (or was not
eligible for coverage) under a group health plan or group health
insurance coverage because, under the terms of the plan or coverage,
the availability of dependent coverage of children ended before the
attainment of age 26 (which, under this section, is no longer
permissible); and
(ii) Who becomes eligible (or is required to become eligible) for
coverage under a group health plan or group health insurance coverage
on the first day of the first plan year beginning on or after September
23, 2010 by reason of the application of this section.
(2) Opportunity to enroll required. (i) If a group health plan, or
group health insurance coverage, in which a child described in
paragraph (f)(1) of this section is eligible to enroll (or is required
to become eligible to enroll) is the plan or coverage in which the
child's coverage ended (or did not begin) for the reasons described in
paragraph (f)(1)(i) of this section, and if the plan, or the issuer of
such coverage, is subject to the requirements of this section, the plan
and the issuer are required to give the child an opportunity to enroll
that continues for at least 30 days (including written notice of the
opportunity to enroll). This opportunity (including the written notice)
must be provided beginning not later than the first day of the first
plan year beginning on or after September 23, 2010.
(ii) The written notice must include a statement that children
whose coverage ended, or who were denied coverage (or were not eligible
for coverage), because the availability of dependent coverage of
children ended before attainment of age 26 are eligible to enroll in
the plan or coverage. The notice may be provided to an employee on
behalf of the employee's child. In addition, the notice may be included
with other enrollment materials that a plan distributes to employees,
provided the statement is prominent. If a notice satisfying the
requirements of this paragraph (f)(2) is provided to an employee whose
child is entitled to an enrollment opportunity under this paragraph
(f), the obligation to provide the notice of enrollment opportunity
under this paragraph (f)(2) with respect to that child is satisfied for
both the plan and the issuer.
(3) Effective date of coverage. In the case of an individual who
enrolls under paragraph (f)(2) of this section, coverage must take
effect not later than the first day of the first plan year beginning on
or after September 23, 2010.
(4) Treatment of enrollees in a group health plan. Any child
enrolling in a group health plan pursuant to paragraph (f)(2) of this
section must be treated as if the child were a special enrollee, as
provided under the rules of Sec. 54.9801-6(d). Accordingly, the child
(and, if the child would not be a participant once enrolled in the
plan, the participant through whom the child is otherwise eligible for
coverage under the plan) must be offered all the benefit packages
available to similarly situated individuals who did not lose coverage
by reason of cessation of dependent status. For this purpose, any
difference in benefits or cost-sharing requirements constitutes a
different benefit package. The child also cannot be required to pay
more for coverage than similarly situated individuals who did not lose
coverage by reason of cessation of dependent status.
(5) Examples. The rules of this paragraph (f) are illustrated by
the following examples:
Example 1. (i) Facts. Employer Y maintains a group health plan
with a calendar year plan year. The plan has a single benefit
package. For the 2010 plan year, the plan allows children of
employees to be covered under the plan until age 19, or until age 23
for children who are full-time students. Individual B, an employee
of Y, and Individual C, B's child and a full-time student, were
enrolled in Y's group health plan at the beginning of the 2010 plan
year. On June 10, 2010, C turns 23 years old and loses dependent
coverage under Y's plan. On or before January 1, 2011, Y's group
health plan gives B written notice that individuals who lost
coverage by reason of ceasing to be a dependent before attainment of
age 26 are eligible to enroll in the plan, and that individuals may
request enrollment for such children through February 14, 2011 with
enrollment effective retroactively to January 1, 2011.
(ii) Conclusion. In this Example 1, the plan has complied with
the requirements of this paragraph (f) by providing an enrollment
opportunity to C that lasts at least 30 days.
Example 2. (i) Facts. Employer Z maintains a group health plan
with a plan year beginning October 1 and ending September 30. Prior
to October 1, 2010, the group health plan allows children of
employees to be covered under the plan until age 22. Individual D,
an employee of Z, and Individual E, D's child, are enrolled in
family coverage under Z's group health plan for the plan year
beginning on October 1, 2008. On May 1, 2009, E turns 22 years old
and ceases to be eligible as a dependent under Z's plan and loses
coverage. D drops coverage but remains an employee of Z.
(ii) Conclusion. In this Example 2, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll
(including written notice of an opportunity to enroll) that
continues for at least 30 days, with enrollment effective not later
than October 1, 2010.
Example 3. (i) Facts. Same facts as Example 2, except that D did
not drop coverage. Instead, D switched to a lower-cost benefit
package option.
(ii) Conclusion. In this Example 3, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll in any
benefit package available to similarly situated individuals who
enroll when first eligible.
Example 4. (i) Facts. Same facts as Example 2, except that E
elected COBRA continuation coverage.
(ii) Conclusion. In this Example 4, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll other
than as a COBRA qualified beneficiary (and must provide, by that
date, written notice of the opportunity to enroll) that continues
for at least 30 days, with enrollment effective not later than
October 1, 2010.
Example 5. (i) Facts. Employer X maintains a group health plan
with a calendar year plan year. Prior to 2011, the plan allows
children of employees to be covered under the plan until the child
attains age 22. During the 2009 plan year, an individual with a 22-
year old child joins the plan; the child is denied coverage because
the child is 22.
(ii) Conclusion. In this Example 5, notwithstanding that the
child was not previously covered under the plan, the plan must
provide the child, not later than January 1, 2011, an opportunity to
enroll (including written notice to the employee of an opportunity
to enroll the child) that continues for at least 30 days, with
enrollment effective not later than January 1, 2011.
(g) Special rule for grandfathered group health plans--(1) For plan
years
[[Page 27136]]
beginning before January 1, 2014, a group health plan that qualifies as
a grandfathered health plan under section 1251 of the Patient
Protection and Affordable Care Act and that makes available dependent
coverage of children may exclude an adult child who has not attained
age 26 from coverage only if the adult child is eligible to enroll in
an eligible employer-sponsored health plan (as defined in section
5000A(f)(2)) other than a group health plan of a parent.
(2) For plan years beginning on or after January 1, 2014, a group
health plan that qualifies as a grandfathered health plan under section
1251 of the Patient Protection and Affordable Care Act must comply with
the requirements of paragraphs (a) through (f) of this section.
(h) Applicability date. The provisions of this section apply for
plan years beginning on or after September 23, 2010.
(i) Expiration date. This section expires on or before May 13,
2013.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
0
Par. 5. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
0
Par. 6. In Sec. 602.101, paragraph (b) is amended by adding the
following entry in numerical order to the table:
Sec. 602.101 OMB Control numbers.
* * * * *
(b) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
* * * * *
54.9815-2714T............................................. 1545-2172
* * * * *
------------------------------------------------------------------------
Employee Benefits Security Administration
29 CFR Chapter XXV
0
29 CFR Part 2590 is amended as follows:
PART 2590--RULES AND REGULATIONS FOR GROUP HEALTH PLANS
0
1. The authority citation for Part 2590 is revised to read as follows:
Authority: 29 U.S.C. 1027, 1059, 1135, 1161-1168, 1169, 1181-
1183, 1181 note, 1185, 1185a, 1185b, 1191, 1191a, 1191b, and 1191c;
sec. 101(g), Pub. L.104-191, 110 Stat. 1936; sec. 401(b), Pub. L.
105-200, 112 Stat. 645 (42 U.S.C. 651 note); sec. 512(d), Pub. L.
110-343, 122 Stat. 3881; sec. 1001, 1201, and 1562(e), Pub. L. 111-
148, 124 Stat. 119, as amended by Pub. L. 111-152, 124 Stat. 1029;
Secretary of Labor's Order 6-2009, 74 FR 21524 (May 7, 2009).
0
2. Section 2590.715-2714 is added to Subpart C to read as follows:
Sec. 2590.715-2714 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group health insurance coverage, that makes available
dependent coverage of children must make such coverage available for
children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1, 2011,
a group health plan provides health coverage for employees,
employees' spouses, and employees' children until the child turns
26. On the birthday of a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers the child is July 16,
2011.
(ii) Conclusion. In this Example, the plan satisfies the
requirement of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent. With respect to a
child who has not attained age 26, a plan or issuer may not define
dependent for purposes of eligibility for dependent coverage of
children other than in terms of a relationship between a child and the
participant. Thus, for example, a plan or issuer may not deny or
restrict 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 any other person), residency with the participant or
with any other person, student status, employment, or any combination
of those factors. In addition, a plan or issuer may not deny or
restrict coverage of a child based on eligibility for other coverage,
except that paragraph (g) of this section provides a special rule for
plan years beginning before January 1, 2014 for grandfathered health
plans that are group health plans. (Other requirements of Federal or
State law, including section 609 of ERISA or section 1908 of the Social
Security Act, may mandate coverage of certain children.)
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of
self-only or family health coverage. Dependent coverage is provided
under family health coverage for children of participants who have
not attained age 26. The plan imposes an additional premium
surcharge for children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies
the terms for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among
the following tiers of health coverage: self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more. The cost of coverage
increases based on the number of covered individuals. The plan
provides dependent coverage of children who have not attained age
26.
(ii) Conclusion. In this Example 2, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. Although the
cost of coverage increases for tiers with more covered individuals,
the increase applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage
is provided for children of participants who have not attained age
26. The plan limits children who are older than age 18 to the HMO
option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option,
varies the terms for dependent coverage of children based on age.
(f) Transitional rules for individuals whose coverage ended by
reason of reaching a dependent eligibility threshold--(1) In general.
The relief provided in the transitional rules of this paragraph (f)
applies with respect to any child--
(i) Whose coverage ended, or who was denied coverage (or was not
eligible for coverage) under a group health plan or group health
insurance coverage because, under the terms of the plan or coverage,
the availability of dependent coverage of children ended before the
attainment of age 26 (which, under this section, is no longer
permissible); and
(ii) Who becomes eligible (or is required to become eligible) for
coverage under a group health plan or group health insurance coverage
on the first day of the first plan year beginning on or after September
23, 2010 by reason of the application of this section.
(2) Opportunity to enroll required--(i) If a group health plan, or
group health
[[Page 27137]]
insurance coverage, in which a child described in paragraph (f)(1) of
this section is eligible to enroll (or is required to become eligible
to enroll) is the plan or coverage in which the child's coverage ended
(or did not begin) for the reasons described in paragraph (f)(1)(i) of
this section, and if the plan, or the issuer of such coverage, is
subject to the requirements of this section, the plan and the issuer
are required to give the child an opportunity to enroll that continues
for at least 30 days (including written notice of the opportunity to
enroll). This opportunity (including the written notice) must be
provided beginning not later than the first day of the first plan year
beginning on or after September 23, 2010.
(ii) The written notice must include a statement that children
whose coverage ended, or who were denied coverage (or were not eligible
for coverage), because the availability of dependent coverage of
children ended before attainment of age 26 are eligible to enroll in
the plan or coverage. The notice may be provided to an employee on
behalf of the employee's child. In addition, the notice may be included
with other enrollment materials that a plan distributes to employees,
provided the statement is prominent. If a notice satisfying the
requirements of this paragraph (f)(2) is provided to an employee whose
child is entitled to an enrollment opportunity under this paragraph
(f), the obligation to provide the notice of enrollment opportunity
under this paragraph (f)(2) with respect to that child is satisfied for
both the plan and the issuer.
(3) Effective date of coverage. In the case of an individual who
enrolls under paragraph (f)(2) of this section, coverage must take
effect not later than the first day of the first plan year beginning on
or after September 23, 2010.
(4) Treatment of enrollees in a group health plan. Any child
enrolling in a group health plan pursuant to paragraph (f)(2) of this
section must be treated as if the child were a special enrollee, as
provided under the rules of Sec. 2590.701-6(d) of this Part.
Accordingly, the child (and, if the child would not be a participant
once enrolled in the plan, the participant through whom the child is
otherwise eligible for coverage under the plan) must be offered all the
benefit packages available to similarly situated individuals who did
not lose coverage by reason of cessation of dependent status. For this
purpose, any difference in benefits or cost-sharing requirements
constitutes a different benefit package. The child also cannot be
required to pay more for coverage than similarly situated individuals
who did not lose coverage by reason of cessation of dependent status.
(5) Examples. The rules of this paragraph (f) are illustrated by
the following examples:
Example 1. (i) Facts. Employer Y maintains a group health plan
with a calendar year plan year. The plan has a single benefit
package. For the 2010 plan year, the plan allows children of
employees to be covered under the plan until age 19, or until age 23
for children who are full-time students. Individual B, an employee
of Y, and Individual C, B's child and a full-time student, were
enrolled in Y's group health plan at the beginning of the 2010 plan
year. On June 10, 2010, C turns 23 years old and loses dependent
coverage under Y's plan. On or before January 1, 2011, Y's group
health plan gives B written notice that individuals who lost
coverage by reason of ceasing to be a dependent before attainment of
age 26 are eligible to enroll in the plan, and that individuals may
request enrollment for such children through February 14, 2011 with
enrollment effective retroactively to January 1, 2011.
(ii) Conclusion. In this Example 1, the plan has complied with
the requirements of this paragraph (f) by providing an enrollment
opportunity to C that lasts at least 30 days.
Example 2. (i) Facts. Employer Z maintains a group health plan
with a plan year beginning October 1 and ending September 30. Prior
to October 1, 2010, the group health plan allows children of
employees to be covered under the plan until age 22. Individual D,
an employee of Z, and Individual E, D's child, are enrolled in
family coverage under Z's group health plan for the plan year
beginning on October 1, 2008. On May 1, 2009, E turns 22 years old
and ceases to be eligible as a dependent under Z's plan and loses
coverage. D drops coverage but remains an employee of Z.
(ii) Conclusion. In this Example 2, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll
(including written notice of an opportunity to enroll) that
continues for at least 30 days, with enrollment effective not later
than October 1, 2010.
Example 3. (i) Facts. Same facts as Example 2, except that D did
not drop coverage. Instead, D switched to a lower-cost benefit
package option.
(ii) Conclusion. In this Example 3, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll in any
benefit package available to similarly situated individuals who
enroll when first eligible.
Example 4. (i) Facts. Same facts as Example 2, except that E
elected COBRA continuation coverage.
(ii) Conclusion. In this Example 4, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll other
than as a COBRA qualified beneficiary (and must provide, by that
date, written notice of the opportunity to enroll) that continues
for at least 30 days, with enrollment effective not later than
October 1, 2010.
Example 5. (i) Facts. Employer X maintains a group health plan
with a calendar year plan year. Prior to 2011, the plan allows
children of employees to be covered under the plan until the child
attains age 22. During the 2009 plan year, an individual with a 22-
year old child joins the plan; the child is denied coverage because
the child is 22.
(ii) Conclusion. In this Example 5, notwithstanding that the
child was not previously covered under the plan, the plan must
provide the child, not later than January 1, 2011, an opportunity to
enroll (including written notice to the employee of an opportunity
to enroll the child) that continues for at least 30 days, with
enrollment effective not later than January 1, 2011.
(g) Special rule for grandfathered group health plans--(1) For plan
years beginning before January 1, 2014, a group health plan that
qualifies as a grandfathered health plan under section 1251 of the
Patient Protection and Affordable Care Act and that makes available
dependent coverage of children may exclude an adult child who has not
attained age 26 from coverage only if the adult child is eligible to
enroll in an eligible employer-sponsored health plan (as defined in
section 5000A(f)(2) of the Internal Revenue Code) other than a group
health plan of a parent.
(2) For plan years beginning on or after January 1, 2014, a group
health plan that qualifies as a grandfathered health plan under section
1251 of the Patient Protection and Affordable Care Act must comply with
the requirements of paragraphs (a) through (f) of this section.
(h) Applicability date. The provisions of this section apply for
plan years beginning on or after September 23, 2010.
Department of Health and Human Services
45 CFR Subtitle A
0
For reasons set forth in the preamble, the Department of Health and
Human Services is amending 45 CFR Subtitle A, Subchapter B as follows:
PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE
Subpart A--General Provisions
0
1. Section 144.101 is amended by-
0
A. Revising paragraph (a).
0
B. Redesignating paragraphs (b), (c) and (d) as paragraphs (c), (d) and
(e), respectively.
0
C. Adding a new paragraph (b).
0
D. Revising the first sentence of newly redesignated paragraph (c).
0
E. Amending newly redesignated paragraph (d) by removing ``2722'' and
adding in its place ``2723''.
The revisions and additions read as follows:
[[Page 27138]]
Sec. 144.101 Basis and purpose.
(a) Part 146 of this subchapter implements requirements of Title
XXVII of the Public Health Service Act (PHS Act, 42 U.S.C. 300gg, et
seq.) that apply to group health plans and group health insurance
issuers.
(b) Part 147 of this subchapter implements the provisions of the
Patient Protection and Affordable Care Act that apply to both group
health plans and health insurance issuers in the Group and Individual
Markets.
(c) Part 148 of this subchapter implements Individual Health
Insurance Market requirements of the PHS Act. * * *
* * * * *
0
2. Section 144.103 is amended by adding the definition of ``Policy
Year'' to read as follows:
Sec. 144.103 Defintions.
* * * * *
Policy Year means in the individual health insurance market the 12-
month period that is designated as the policy year in the policy
documents of the individual health insurance coverage. If there is no
designation of a policy year in the policy document (or no such policy
document is available), then the policy year is the deductible or limit
year used under the coverage. If deductibles or other limits are not
imposed on a yearly basis, the policy year is the calendar year.
* * * * *
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
3. Section 146.101 is amended by--
0
A. Revising the first sentence of paragraph (a).
0
B. Revising paragraph (b)(4).
The revisions read as follows:
Sec. 146.101 Basis and Scope.
(a) Statutory basis. This part implements the Group Market
requirements of the PHS Act.* * *
(b) * * *
(4) Subpart E. Subpart E of this part implements requirements
relating to group health plans and issuers in the Group Health
Insurance Market.
* * * * *
Sec. 146.115 [Amended]
0
4. Section 146.115 is amended by removing ``2721(b)'' wherever it
appears in paragraph (a)(6) and adding in its place ``2722(a)''.
Sec. 146.130 [Amended]
0
5. Section 146.130 is amended by--
0
A. Removing ``2704'' wherever it appears in paragraphs (e) and (f),
including the examples in paragraph (e)(4), and adding in its place
``2725''.
0
B. Removing ``2723'' wherever it appears in paragraph (e)(3), including
the paragraph heading, and adding in its place ``2724''.
0
6. A new Part 147 is added to read as follows:
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
Authority: Secs 2701 through 2763, 2791, and 2792 of the Public
Health Service Act (42 USC 300gg through 300gg-63, 300gg-91, and
300gg-92), as amended.
Sec. 147.100 Basis and scope.
Part 147 of this subchapter implements the requirements of the
Patient Protection and Affordable Care Act that apply to group health
plans and health insurance issuers in the Group and Individual markets.
Sec. 147.120 Eligibility of children until at least age 26.
(a) In general--(1) A group health plan, or a health insurance
issuer offering group or individual health insurance coverage, that
makes available dependent coverage of children must make such coverage
available for children until attainment of 26 years of age.
(2) The rule of this paragraph (a) is illustrated by the following
example:
Example. (i) Facts. For the plan year beginning January 1,
2011, a group health plan provides health coverage for employees,
employees' spouses, and employees' children until the child turns
26. On the birthday of a child of an employee, July 17, 2011, the
child turns 26. The last day the plan covers the child is July 16,
2011.
(ii) Conclusion. In this Example, the plan satisfies the
requirement of this paragraph (a) with respect to the child.
(b) Restrictions on plan definition of dependent. With respect to a
child who has not attained age 26, a plan or issuer may not define
dependent for purposes of eligibility for dependent coverage of
children other than in terms of a relationship between a child and the
participant (in the individual market, the primary subscriber). Thus,
for example, a plan or issuer may not deny or restrict 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 (in
the individual market, the primary subscriber) or with any other
person, student status, employment, or any combination of those
factors. In addition, a plan or issuer may not deny or restrict
coverage of a child based on eligibility for other coverage, except
that paragraph (g) of this section provides a special rule for plan
years beginning before January 1, 2014 for grandfathered health plans
that are group health plans. (Other requirements of Federal or State
law, including section 609 of ERISA or section 1908 of the Social
Security Act, may mandate coverage of certain children.)
(c) Coverage of grandchildren not required. Nothing in this section
requires a plan or issuer to make coverage available for the child of a
child receiving dependent coverage.
(d) Uniformity irrespective of age. The terms of the plan or health
insurance coverage providing dependent coverage of children cannot vary
based on age (except for children who are age 26 or older).
(e) Examples. The rules of paragraph (d) of this section are
illustrated by the following examples:
Example 1. (i) Facts. A group health plan offers a choice of
self-only or family health coverage. Dependent coverage is provided
under family health coverage for children of participants who have
not attained age 26. The plan imposes an additional premium
surcharge for children who are older than age 18.
(ii) Conclusion. In this Example 1, the plan violates the
requirement of paragraph (d) of this section because the plan varies
the terms for dependent coverage of children based on age.
Example 2. (i) Facts. A group health plan offers a choice among
the following tiers of health coverage: Self-only, self-plus-one,
self-plus-two, and self-plus-three-or-more. The cost of coverage
increases based on the number of covered individuals. The plan
provides dependent coverage of children who have not attained age
26.
(ii) Conclusion. In this Example 2, the plan does not violate
the requirement of paragraph (d) of this section that the terms of
dependent coverage for children not vary based on age. Although the
cost of coverage increases for tiers with more covered individuals,
the increase applies without regard to the age of any child.
Example 3. (i) Facts. A group health plan offers two benefit
packages--an HMO option and an indemnity option. Dependent coverage
is provided for children of participants who have not attained age
26. The plan limits children who are older than age 18 to the HMO
option.
(ii) Conclusion. In this Example 3, the plan violates the
requirement of paragraph (d) of this section because the plan, by
limiting children who are older than age 18 to the HMO option,
varies the terms for dependent coverage of children based on age.
(f) Transitional rules for individuals whose coverage ended by
reason of reaching a dependent eligibility
[[Page 27139]]
threshold--(1) In general. The relief provided in the transitional
rules of this paragraph (f) applies with respect to any child--
(i) Whose coverage ended, or who was denied coverage (or was not
eligible for coverage) under a group health plan or group or individual
health insurance coverage because, under the terms of the plan or
coverage, the availability of dependent coverage of children ended
before the attainment of age 26 (which, under this section, is no
longer permissible); and
(ii) Who becomes eligible (or is required to become eligible) for
coverage under a group health plan or group or individual health
insurance coverage on the first day of the first plan year (in the
individual market, the first day of the first policy year) beginning on
or after September 23, 2010 by reason of the application of this
section.
(2) Opportunity to enroll required--(i) If a group health plan, or
group or individual health insurance coverage, in which a child
described in paragraph (f)(1) of this section is eligible to enroll (or
is required to become eligible to enroll) is the plan or coverage in
which the child's coverage ended (or did not begin) for the reasons
described in paragraph (f)(1)(i) of this section, and if the plan, or
the issuer of such coverage, is subject to the requirements of this
section, the plan and the issuer are required to give the child an
opportunity to enroll that continues for at least 30 days (including
written notice of the opportunity to enroll). This opportunity
(including the written notice) must be provided beginning not later
than the first day of the first plan year (in the individual market,
the first day of the first policy year) beginning on or after September
23, 2010.
(ii) The written notice must include a statement that children
whose coverage ended, or who were denied coverage (or were not eligible
for coverage), because the availability of dependent coverage of
children ended before attainment of age 26 are eligible to enroll in
the plan or coverage. The notice may be provided to an employee on
behalf of the employee's child (in the individual market, to the
primary subscriber on behalf of the primary subscriber's child). In
addition, for a group health plan or group health insurance coverage,
the notice may be included with other enrollment materials that a plan
distributes to employees, provided the statement is prominent. For a
group health plan or group health insurance coverage, if a notice
satisfying the requirements of this paragraph (f)(2) is provided to an
employee whose child is entitled to an enrollment opportunity under
this paragraph (f), the obligation to provide the notice of enrollment
opportunity under this paragraph (f)(2) with respect to that child is
satisfied for both the plan and the issuer.
(3) Effective date of coverage. In the case of an individual who
enrolls under paragraph (f)(2) of this section, coverage must take
effect not later than the first day of the first plan year (in the
individual market, the first day of the first policy year) beginning on
or after September 23, 2010.
(4) Treatment of enrollees in a group health plan. For purposes of
this Part, any child enrolling in a group health plan pursuant to
paragraph (f)(2) of this section must be treated as if the child were a
special enrollee, as provided under the rules of 45 CFR 146.117(d).
Accordingly, the child (and, if the child would not be a participant
once enrolled in the plan, the participant through whom the child is
otherwise eligible for coverage under the plan) must be offered all the
benefit packages available to similarly situated individuals who did
not lose coverage by reason of cessation of dependent status. For this
purpose, any difference in benefits or cost-sharing requirements
constitutes a different benefit package. The child also cannot be
required to pay more for coverage than similarly situated individuals
who did not lose coverage by reason of cessation of dependent status.
(5) Examples. The rules of this paragraph (f) are illustrated by
the following examples:
Example 1. (i) Facts. Employer Y maintains a group health plan
with a calendar year plan year. The plan has a single benefit
package. For the 2010 plan year, the plan allows children of
employees to be covered under the plan until age 19, or until age 23
for children who are full-time students. Individual B, an employee
of Y, and Individual C, B's child and a full-time student, were
enrolled in Y's group health plan at the beginning of the 2010 plan
year. On June 10, 2010, C turns 23 years old and loses dependent
coverage under Y's plan. On or before January 1, 2011, Y's group
health plan gives B written notice that individuals who lost
coverage by reason of ceasing to be a dependent before attainment of
age 26 are eligible to enroll in the plan, and that individuals may
request enrollment for such children through February 14, 2011 with
enrollment effective retroactively to January 1, 2011.
(ii) Conclusion. In this Example 1, the plan has complied with
the requirements of this paragraph (f) by providing an enrollment
opportunity to C that lasts at least 30 days.
Example 2. (i) Facts. Employer Z maintains a group health plan
with a plan year beginning October 1 and ending September 30. Prior
to October 1, 2010, the group health plan allows children of
employees to be covered under the plan until age 22. Individual D,
an employee of Z, and Individual E, D's child, are enrolled in
family coverage under Z's group health plan for the plan year
beginning on October 1, 2008. On May 1, 2009, E turns 22 years old
and ceases to be eligible as a dependent under Z's plan and loses
coverage. D drops coverage but remains an employee of Z.
(ii) Conclusion. In this Example 2, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll
(including written notice of an opportunity to enroll) that
continues for at least 30 days, with enrollment effective not later
than October 1, 2010.
Example 3. (i) Facts. Same facts as Example 2, except that D did
not drop coverage. Instead, D switched to a lower-cost benefit
package option.
(ii) Conclusion. In this Example 3, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll in any
benefit package available to similarly situated individuals who
enroll when first eligible.
Example 4. (i) Facts. Same facts as Example 2, except that E
elected COBRA continuation coverage.
(ii) Conclusion. In this Example 4, not later than October 1,
2010, the plan must provide D and E an opportunity to enroll other
than as a COBRA qualified beneficiary (and must provide, by that
date, written notice of the opportunity to enroll) that continues
for at least 30 days, with enrollment effective not later than
October 1, 2010.
Example 5. (i) Facts. Employer X maintains a group health plan
with a calendar year plan year. Prior to 2011, the plan allows
children of employees to be covered under the plan until the child
attains age 22. During the 2009 plan year, an individual with a 22-
year old child joins the plan; the child is denied coverage because
the child is 22.
(ii) Conclusion. In this Example 5, notwithstanding that the
child was not previously covered under the plan, the plan must
provide the child, not later than January 1, 2011, an opportunity to
enroll (including written notice to the employee of an opportunity
to enroll the child) that continues for at least 30 days, with
enrollment effective not later than January 1, 2011.
(g) Special rule for grandfathered group health plans--(1) For plan
years beginning before January 1, 2014, a group health plan that
qualifies as a grandfathered health plan under section 1251 of the
Patient Protection and Affordable Care Act and that makes available
dependent coverage of children may exclude an adult child who has not
attained age 26 from coverage only if the adult child is eligible to
enroll in an eligible employer-sponsored health plan (as defined in
section 5000A(f)(2) of the Internal Revenue Code) other than a group
health plan of a parent.
(2) For plan years beginning on or after January 1, 2014, a group
health plan that qualifies as a grandfathered
[[Page 27140]]
health plan under section 1251 of the Patient Protection and Affordable
Care Act must comply with the requirements of paragraphs (a) through
(f) of this section.
(h) Applicability date. The provisions of this section apply for
plan years (in the individual market, policy years) beginning on or
after September 23, 2010.
[FR Doc. 2010-11391 Filed 5-10-10; 4:15 pm]
BILLING CODE 4830-01-P; 4510-29-P; 4120-01-P