Illinois Extends Dependent Coverage for Group Health Insurance

On September 12, 2008, the Illinois House and Senate accepted Governor Rod Blagojevich’s amendatory veto of House Bill 5285 which will create the new dependent coverage provisions for health plans, (Public Act 095-0958).  It amends the Illinois Insurance Code by adding new Sections 356z.11 and 356z.12.  The following is a review of the new provisions.

What is the change?

Group or individual health insurance policies will be permitted to cover unmarried dependents until they reach age 26, regardless of student status and to age 30 for dependents who are veterans and have not been dishonorably discharged.

When is this change effective?

This change applies to any policies amended, delivered, issued or renewed after June 1, 2009. Families must be provided a 90 day period after their policy is renewed, to add the dependent to an existing policy.  Each year thereafter, parents will be able to enroll dependent during the normal open enrollment period.  For calendar year plans, the change is not effective until January 1, 2010.

An employer may deny coverage for any dependent who has been without creditable coverage for more than 63 days.  Remember, if a dependent does not this gap in creditable coverage, an employer may not be able to impose preexisting condition provisions on the individual.

Will employers be required to provide this new coverage?

Yes, if the employer provides dependent coverage to its workforce, the employer will be required to provide the coverage specified under the new law.

Is an employer required to pay for dependent’s coverage?

No

Which employer health plans can avoid making this change?

Employers whose health benefits are either self-insured or provided under a health insurance policy not written in the state of Illinois will not have to make the change.

Can the premium for this dependent health coverage be paid by an employee under cafeteria plan on a nontaxable basis?

Yes. If the individual qualifies as a dependent under Internal Revenue Code (Code) Section 105(b). the dependent health coverage may be paid under the a cafeteria plan on a nontaxable basis. To be to a dependent under Code Section 105(b), an individual must meet most, but not all of the requirements for a “qualifying child” or a “qualifying relative” under Code Section 152. Someone who cannot meet the requirements to be a qualifying child because he or she fails the age test (he  or she is not under 19, under 24 and a full-time student, or permanently and totally disabled) can still qualify as a qualifying relative if the parents provide more than half of his or her support.

Can an employee receive a reimbursement for an eligible medical expense under an employer’s Health Flexible Spending Account (Health FSA) if the dependent does not qualify as a qualifying child?

Yes.  For employer’s Health FSA to reimburse an employee for the expenses of a dependent who does not qualify as a qualifying child, that dependent must meet the requirements for being a qualifying relative.  If he or she does not, the Health FSA cannot reimburse the expense because it would be taxable.