News Flash

Family Coverage Expansion Act

The State of Maryland recently passed the Family Coverage Expansion Act (Maryland House Bill 1057) which was designed to extend health benefits to a larger class of child dependents by changing the eligibility class to accommodate unmarried children under the age of 25, regardless of student status. Please note that this new law does not apply to groups enrolled under Maryland Small Group Reform.

If you are currently offering – or you plan to offer – dependent coverage as part of your employee benefits plan, you are encouraged to seek legal and/or tax counsel to ensure that both you and your employees are informed of any possible tax implications resulting from this legislation.

To ensure that you understand how this law might affect you, I am providing answers to some frequently asked questions.

When does this law become effective?
These provisions are effective beginning January 1, 2008 for new accounts and upon renewal beginning January 1, 2008 for existing accounts, and apply to Maryland HMO and indemnity fully insured groups. These provisions do not apply to Maryland Small Group Reform groups.

Am I required to offer dependent coverage as part of my employee benefits?
No, this law does not require you to offer dependent coverage. However, if you do offer dependent coverage, this law requires that such coverage be extended to the age of 25.

I have employees who live in Washington, DC. Does this law impact them as well?
Yes, this law applies to health benefit coverage issued in Maryland, regardless of where the employee lives.

What if an employee’s dependent has already been termed from the policy due to the previous age restriction?
Provided that the dependent is still under age 25 and meets all criteria stated under the State of Maryland’s definition of dependent, they may re-apply for coverage. Dependents who are now active on an employee’s policy will automatically have their age limit increased to 25.

Should I notify my online-enrollment vendor of this change?
Yes, to ensure that your account is compliant with these new business rules, you should notify all vendors who may be impacted.

Will this change affect my rates?
There is no appreciable rate impact as a result of this legislation. However, member premiums would be impacted if their coverage level changed. (from individual to parent and child, for example).

Does this new law apply to ancillary benefits as well?
While the new law does not address ancillary benefits, CareFirst has made a business decision to apply the dependent age limit to 25 for dental, vision and prescription drug so that an account’s medical age limit is the same as their ancillary benefits.

When will dependents be removed from the employee’s policy?
Provided that they are not removed voluntarily before that time, all dependents will be removed from the subscriber’s policy at the end of the month in which they turn 25, unless their group contract has a different provision. Prior to their removal from the plan, they will be notified of the other options available to them.

Do you notify impacted employees of their options once a child turns 18?
Yes. At least 60 days before a child who is covered under a parent’s individual, or group medical policy turns 18 years of age, notification must be made to the parent of the criteria under which a child may remain eligible for coverage as a dependent under the policy; and information must be provided regarding any other policies that may be available to the child.

Is health benefit coverage taxable for dependents over the age of 19?
Extending coverage to a member of the household that does not meet the definition of Dependent or Qualified Relative, in accordance with the Internal Revenue Code, may have tax consequences to the taxpayer and result in additional reporting or other administrative requirements for the subscriber’s employer. CareFirst urges employers and employees affected by this legislation to consult with their tax advisors to assure the proper tax treatment of coverage is offered to persons over the age of 19.

What specifically is the definition of a Dependent Child?
To qualify as a dependent under a CareFirst health plan, the individual must be:

• The natural child, stepchild, adopted child, or grandchild of the Subscriber or the Subscriber’s covered spouse;
• A child (including a grandchild) placed with the Subscriber or the Subscriber’s covered spouse for legal adoption;
• A child under testamentary or court appointed guardianship, other than temporary guardianship for less than 12 months duration, of the Subscriber or the Subscriber’s covered spouse; or
• A child who is the subject of a Medical Child Support Order or a Qualified Medical Support Order (“QMSO”) that creates or recognizes the right of the child to receive benefits under the health insurance coverage of the Subscriber or the Subscriber’s covered spouse.

In addition, the individual must have the same place of residence as the Subscriber for more than one-half of the previous calendar year; and not have provided over one-half of his or her own support for the previous calendar year and be unmarried. Finally, foster children are not eligible to enroll as dependents.

If you have any additional questions regarding your health plan coverage, please contact your broker or CareFirst account representative.

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