How Old Can You Be to Stay on Your Parents' Health Insurance?

Until recently, most children disappeared from the family health insurance plan when they reached their 19th birthdays. Rules that allowed the removal changed with passage of groundbreaking health care legislation signed into law on March 30, 2010. Under the Affordable Care Act, as of Sept. 23, 2010, most health insurance plans must extend coverage to adult children up to age 26.

Regulation

• This new health care regulation allows children the option of remaining on their parents' health insurance until they turn 26 years of age. Adult children can join a parent's policy or remain on the insurance plan if they are single or married, live away from or at home, are in or out of school, are financially dependent on their parents or are financially independent.

Background

• The age-extension provision appeared in the final draft of the Affordable Care Act primarily because research indicated 30 percent of young people in the 19-to-26 age group are uninsured. Additionally, it was determined that when leaving academia, most young adults take entry-level positions, which historically do not provide insurance. Government surveys also suggest that half of all uninsured young people acknowledge problems paying medical bills, and one in six of these young adults have chronic illnesses.

Enrollment Details

• Plans must allow parents the opportunity to enroll their adult children no later that the first day of the policy year that begins after the law goes into effect, Sept. 23, 2010. The law reads that the provider must notify policyholders of the enrollment opportunity in writing, and if the young adult is then enrolled, must cover the adult child from the first day of the plan year.

Exceptions

• There is a temporary exception to the law allowing older adult children access to their parents' health insurance. The government grandfathered certain plans against certain regulations imposed by the Affordable Care Act, and the age extension is one of them. The law says that if a young person is eligible for group coverage outside the parents' plan, such as through an employer, she must seek insurance through that plan. This exception from the law expires in 2014. If the present policy does not offer dependent coverage, there is no requirement in the new law that calls for the insurance company to offer dependent coverage to satisfy this age-extension portion of the health care initiative. The spouse and children of a young person carried under his parents' health insurance plan do not qualify for health insurance coverage.

Tax Benefits

• The expanded health care tax benefits available through the Affordable Care Act applies to many situations, including self-employed taxpayers who qualify for the self-employed health insurance deduction available when filing a federal income tax return. If a parent's plan allows coverage to an adult child beyond the age of 26, all benefits paid for the adult child may be excluded from income until the end of the tax year in which the child turns 26. Those who participate in a cafeteria plan may also make pretax contributions for adult children's health insurance coverage. All tax benefits associated with this aspect of health care reform are effective March 30, 2010.