Question: When may an employee continue to cover a disabled child under the health plan after the child reaches age 26?

Compliance Team Response:

Most employer-sponsored group health plans permit employees to cover disabled children beyond age 26 under certain conditions.

Eligible Post-Age 26 Disabled Children: Fully Insured Plan

If the plan is fully insured, a number of states mandate post-age 26 coverage for disabled children.

For example, California’s state insurance mandate for fully insured plans requires that coverage continue for children beyond age 26 if the child is:

• Incapable of self-sustaining employment by reason of a physically or mentally disabling injury, illness, or condition; and

• Chiefly dependent upon the employee or member for support and maintenance.

Eligible Post-Age 26 Disabled Children: Self-Inured Plan

Plans that are not subject to a state insurance mandate (e.g., self-insured plans) often provide that post-age 26 children are eligible if they meet the tax definition of a disabled child.  That tax definition approach requires that the child be “permanently and totally disabled.”

The definition of “permanently and totally disabled” is a very restrictive one.  It requires that the individual be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months.

Additional Common Eligibility Conditions

Many plans that offer post-age 26 disabled child coverage include additional requirements for eligibility:

• Plans may require that the disabled child also have been enrolled in that plan prior to reaching age 26.  In other words, some plans provide that coverage would not be available to a new hire’s post-age 26 disabled child because that child was not covered under the employer’s plan prior to reaching age 26.

• Plans may require medical and/or financial documentation of the disability to verify that the child meets the definition of an eligible post-26 disabled child.

• Plans may require that the employee regularly update the disability documentation to confirm that the post-age 26 disabled child continues to meet the conditions for eligibility.  The California state insurance mandate provides that the carrier may request this information not more frequently than annually after the two-year period following the disabled child reaching age 26.

Summary

The following factors will determine whether an employee may continue to cover a post-age 26 disabled child:

1. Whether the plan offers coverage to post-age 26 disabled children;

2. The plan’s definition of “disabled” for purposes of post-age 26 child coverage;

3. Whether the plan requires the disabled child to have been covered by that plan upon reaching age 26;

4. What form of documentation the plan requires to confirm that the child meets the plan’s definition of disabled; and

5. What form of updated documentation the plan requires for the employee to substantiate the continuing disability—and how regularly the employee must provide such updates.

More Information Regarding Dependent Eligibility

Other Newfront Compliance FASTs discussing dependent eligibility issues include:

• The ACA Age 26 Mandate

• Health Plan Eligibility for Legal Guardianship Children

• Legal Separation vs. Divorce

• Why Parents are Not Eligible for Group Health Coverage

• Removal of Spouse In Anticipation of Divorce

Regulations

California Insurance Code §10277:

(a) A group health insurance policy that provides that coverage of a dependent child of an employee or other member of the covered group shall terminate upon attainment of the limiting age for dependent children specified in the policy, shall also provide that attainment of the limiting age shall not operate to terminate the coverage of the child while the child is and continues to meet both of the following criteria:

(1) Incapable of self-sustaining employment by reason of a physically or mentally disabling injury, illness, or condition.

(2) Chiefly dependent upon the employee or member for support and maintenance.

…

(c) The insurer may subsequently request information about a dependent child whose coverage is continued beyond the limiting age under subdivision (a), but not more frequently than annually after the two-year period following the child’s attainment of the limiting age.

IRC §152(c)(3)(B):

(B)  Special rule for disabled. In the case of an individual who is permanently and totally disabled (as defined in section 22(e)(3)) at any time during such calendar year, the requirements of subparagraph (A) shall be treated as met with respect to such individual.

IRC §22(e)(3):

(3) Permanent and total disability defined.

An individual is permanently and totally disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual shall not be considered to be permanently and totally disabled unless he furnishes proof of the existence thereof in such form and manner, and at such times, as the Secretary may require.