Your child with a disability on your health care plan

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The Law Office of Edward L. Stepnowski 
The Law Office of Frank E. Stepnowski 

Please do not use this article as definitive advice, as your situation may vary.  Consult your attorney or tax professional.  Nothing on this page creates an attorney-client relationship.

Whether your child with a disability can be added to your health-care plan cannot be given a one size fits all answer.  Where you get your plan will affect how your child is covered, and the laws have changed with the "Affordable Care Act."

1.  Illinois Insurance Policies

Illinois laws require that for an insured plan, the insurance company must cover the children of the policyholder up until the age of 26. (215 ILCS 5/356z.12.)  If the child is disabled, the insurer must carry the child past the age of 26.  The statute is legally-worded, and states as follows:

(215 ILCS 5/356b).  "If a policy provides that coverage of a dependent person terminates upon attainment of the limiting age for dependent persons specified in the policy, the attainment of such limiting age does not operate to terminate the hospital and medical coverage of a person who, because of a handicapped condition that occurred before attainment of the limiting age, is incapable of self-sustaining employment and is dependent on his or her parents or other care providers for lifetime care and supervision.
    (c) For purposes of subsection (b), "dependent on other care providers" is defined as requiring a Community Integrated Living Arrangement, group home, supervised apartment, or other residential services licensed or certified by the Department of Human Services (as successor to the Department of Mental Health and Developmental Disabilities), the Department of Public Health, or the Department of Healthcare and Family Services (formerly Department of Public Aid).
    (d) The insurer may inquire of the policyholder 2 months prior to attainment by a dependent of the limiting age set forth in the policy, or at any reasonable time thereafter, whether such dependent is in fact a disabled and dependent person and, in the absence of proof submitted within 60 days of such inquiry that such dependent is a disabled and dependent person may terminate coverage of such person at or after attainment of the limiting age. In the absence of such inquiry, coverage of any disabled and dependent person shall continue through the term of such policy or any extension or renewal thereof. "

This law does not apply to all policies:
  • Individual or group health insurance policies or HMO contracts that do not otherwise include dependent coverage.
  • Short-term travel, disability income, long-term care, accident only, or limited (including dental and vision) or specified disease policies.
  • Business employer plans which are self-insured and non-public.
  • Self-insured health and welfare plans, such as union plans.
  • Insurance policies or trusts issued in other states, except for HMO contracts written outside of Illinois, if the HMO member is an Illinois resident and the HMO has established a provider network in Illinois.
Most health plans of large companies are self-insured, meaning they can cover their own health costs, even if they uese a major health-care insurer to process their bills. If so, the Illinois statute does not apply.  If the employer purchases a policy from a Illinois health insurance company, then the Illinois law does applies.

2.  Self Insured company plans and union plans.

If your company provides your health coverage, ERISA, a Federal law, preempts the Illinois laws.  However, Department of Labor regulations prohibit discrimination based on health factors, so children with disabilities cannot be excluded from the policies.  See BenefitsDiscrimination.html
The Affordable Care Act (ACA) has also recently required employer plans to include children up to the age of 26.  29 CFR 2590.715:
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.
 "Grandfathered" plans, which had restrictions on age prior to the ACA, may continue to apply the restrictions but only if the adult child is eligible to enroll in an eligible employer-sponsored health plan other than a group health plan of a parent.
Many corporate and union plans already had coverage of dependent children to the age of 24 or 26 prior to the ACA, but each plan would have to read on its own to determine coverage.
An ERISA plan may also be subject to qualified child support orders by a domestic relations court.  (29 USC 1169.) Note Illinois law provides in Section 513 of the Marriage and Dissolution of Marriage Act:   
 "(a) The court may award sums of money out of the property and income of either or both parties or the estate of a deceased parent, as equity may require, for the support of the child or children of the parties who have attained majority in the following instances:
        (1) When the child is mentally or physically disabled and not otherwise emancipated, an application for support may be made before or after the child has attained majority"

3.  The Exchange and Medicaid.

Despite public statements about the ACA which promised your children could be added to your policy, the reverse is often true. 

Children with disabilities below the age of 18 usually do not qualify for Medicaid because the assets of their parents are imputed to the children.  This imputation means the children are considered to have too many assets to meet the income qualification of Medicaid.  After the age of 18, the child is considered to have his or her own household, and then may qualify for Medicaid.

Since 2014, the ACA has required States to set up Exchanges for private individuals to purchase a health plan from a private health insurance company.  If your child qualifies for Medicaid or CHIP, and you purchase your policy on the government-run Exchange, the Exchange will find your child not eligible for coverage.  The source of this rule is murky, but is being enforced against parents trying to get coverage for their children. 

One possible alternative is to purchase a plan for your child  outside of the exchange.  This method has some disadvantages: the cost of the policy will not qualify for premium subsidies, will require a separate monthly premium in addition to your family premium, and will mean having to incur another set of family deductibles before any claims are paid.  Many of the bronze, silver and gold plans have high deductibles which must be paid before the plan pays a claim.  The plans may also have a narrow network of hospitals and physicians who the plan will pay. While many health insurance companies refused to cover individuals with disabilities in the past, the ACA now requires insurers to take all applicants without regard to preexisting conditions (2590.715-2704) and at normalized rates.  This method may work for parents trying to find alternatives to Medicaid.  The success rate is not known since their is little research on this subject.

4. COBRA Continuation Coverage

COBRA is a law which allows you to stay on your company's health plan after you terminate your job.  Generally, the coverage runs for up to 18 months and you must pay 102% of the cost of the coverage.  Most active employees pay only 20% of the cost of coverage.  If you are entitled to an 18 month maximum period of continuation coverage, you may become eligible for an extension of the maximum time period when a qualified beneficiary is disabled.

Disability - If any one of the qualified beneficiaries in your family is disabled and meets certain requirements, all of the qualified beneficiaries receiving continuation coverage due to a single qualifying event (e.g., layoffs, termination) are entitled to an 11-month extension of the maximum period of continuation coverage (for a total maximum period of 29 months of continuation coverage). The plan can charge qualified beneficiaries an increased premium, up to 150 percent of the cost of coverage, during the 11-month disability extension.

The requirements are:

  1. that the Social Security Administration (SSA) determines that the disabled qualified beneficiary is disabled before the 60th day of continuation coverage; and
  2. that the disability continues during the rest of the 18-month period of continuation coverage.

The disabled qualified beneficiary or another person on his or her behalf also must notify the plan of the SSA determination. The plan can set a time limit for providing this notice of disability, but the time limit cannot be shorter than 60 days, starting from the latest of: (1) the date on which SSA issues the disability determination; (2) the date on which the qualifying event occurs; (3) the date on which the qualified beneficiary loses (or would lose) coverage under the plan as a result of the qualifying event; or (4) the date on which the qualified beneficiary is informed, through the furnishing of the Summary Plan Description (SPD) or the COBRA general notice, of the responsibility to notify the plan and the procedures for doing so.

The right to the disability extension may be terminated if the SSA determines that the disabled qualified beneficiary is no longer disabled. The plan can require qualified beneficiaries receiving the disability extension to notify it if the SSA makes such a determination, although the plan must give the qualified beneficiaries at least 30 days after the SSA determination to do so.

The rules for how to give a disability notice and a notice of no longer being disabled should be described in the plan's SPD (and in the election notice if you are offered an 18-month maximum period of continuation coverage).

IRS Circular 230 Disclosure
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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