Grandfathered Plans Partially Exempted from Under 26 Coverage in 2014

In our very first comment to the Obama Administration on the Affordable Care Act we criticized the Secretary of Health and Human Services, Kathleen Sebelius, for defining the word “dependent” in a way that renders the word meaningless.

Obamacare requires that insurance plans that offer dependent coverage of children must continue to offer such insurance to those children until they reach the age of 26. Obamacare charged the Secretary of HHS with “defin[ing] the dependents to which coverage shall be made available.”

You would expect that no matter how Sebelius chose to define “dependent,” the definition would have to exclude those no longer dependent. Not so. Under Sebelius’s definition you can be independently wealthy working and living on the other side of the country but, if you’re under 26, your parents’ insurance must cover you.[1]

There is a quirky limited exception to this rule: After 2014, if your parents have a grandfathered plan (and assuming such plans still exist),[2] you won’t be able to stay on it if you’re qualified to get insurance from your employer—even though before 2014 such plans must cover such dependents.

Don't just take our word for it, look at the statues.

First, all plans that offer dependent coverage, must offer under-26 coverage to their beneficiaries children:

In general. A group health plan and a health insurance issuer offering group or individual health insurance coverage that provides dependent coverage of children shall continue to make such coverage available for an adult child until the child turns 26 years of age. Nothing in this section shall require a health plan or a health insurance issuer described in the preceding sentence to make coverage available for a child of a child receiving dependent coverage.[3]

Second, this applies to grandfathered plans too:

In general. The following provisions of the Public Health Service Act (as added by this title) shall apply to grandfathered health plans for plan years beginning with the first plan year to which such provisions would otherwise apply:
(iv) Section 2714 [42 U.S.C. § 300gg-14] (relating to extension of dependent coverage).[4]

Finally, while it applies to grandfathered plans now, come 2014 grandfathered plans will get a limited exemption for dependent children who are eligible to receive insurance from their own employers:

(ii) Adult child coverage. For plan years beginning before January 1, 2014, the provisions of section 2714 of the Public Health Service Act [42 U.S.C. § 300gg-14] (as added by this subtitle) shall apply in the case of an adult child with respect to a grandfathered health plan that is a group health plan only if such adult child is not eligible to enroll in an eligible employer-sponsored health plan (as defined in section 5000A(f)(2) of the Internal Revenue Code of 1986 [26 U.S.C. § 5000A(f)(2)]) other than such grandfathered health plan.[5]

Quirky but true. Obamacare gives grandfathered plans a limited exemption but not until 2014.

[1] 75 Fed. Reg. 27,122, 27,136 (May 13, 2010).
[2] A plan that existed before the passage of Obamacare and essentially has not changed since.
[3] 42 U.S.C. § 300gg-14(a).
[4] 42 U.S.C. § 18011(a)(4)(A).
[5] 42 U.S.C. § 18011(a)(4)(B)(ii).