With all the difficulties in the economy it seems the government wants to ramp up health coverage for adult children through age 26 … at the expense of you, the business owner. It sure is easy to spend someone else’s money.

The Health Care Act has expanded the definition of dependent coverage under health plans to include the employee’s unmarried children through age 26. A child is defined to be a son, daughter, stepson, stepdaughter, or certain foster children. The child need not be a dependent of the employee for tax purposes though.

Remember, you aren’t required to provide health insurance coverage for anyone, including dependents of employees. But if you do provide dependent coverage, the Health Care Act requires that it continue until the child turns 27, as long as they aren’t married.

For some children struggling to find decent jobs, this may create an incentive not to marry in order to maintain health benefits under their parent’s employer provided plan.

Another likely consequence of this legislation may be a reduction in the number of businesses providing dependent coverage as rates will undoubtedly increase overall. There are no free rides.

This new law is effective 3/30/2010 for businesses that cover dependents. However coverage doesn’t have to be provided until plan years beginning after 9/30/2010. Thus, most employees will have to wait until 2011 before they will have the opportunity to cover their adult children.

There were many errors in the legislation but I expect that technical corrections will be passed shortly to fix them. Now if only legislation would be introduced to correct the ease with which Congress burdens small business with further taxes and regulation. Didn’t they get the memo about the economy??


by Steven Schlagel