Thursday, 

May 13, 2010 

Part II 

Department of the Treasury 

Internal Revenue Service 

26 CFR Parts 54 and 602 

Department of Labor 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

Department of Health and 

Human Services 

45 CFR Parts 144, 146, and 147 

Group Health Plans and Health Insurance 

Issuers Relating to Dependent Coverage 

of Children to Age 26 Under the Patient 

Protection and Affordable Care Act; 

Interim Final Rule and Proposed Rule 


srobinson on DSKHWCL6B1PROD with RULES2
27122 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Parts 54 and 602 

[TD 9482] 

RIN 1545–BJ46 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB41 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

[OCIIO–4150–IFC] 

45 CFR Parts 144, 146, and 147 

RIN 0991–AB66 

Interim Final Rules for Group Health 

Plans and Health Insurance Issuers 

Relating to Dependent Coverage of 

Children to Age 26 Under the Patient 

Protection and Affordable Care Act 

AGENCY: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Department of 

Health and Human Services. 

ACTION: Interim final rules with request 

for comments. 

SUMMARY: This document contains 

interim final regulations implementing 

the requirements for group health plans 

and health insurance issuers in the 

group and individual markets under 

provisions of the Patient Protection and 

Affordable Care Act regarding 

dependent coverage of children who 

have not attained age 26. 

DATES: Effective date. These interim 

final regulations are effective on July 12, 

2010. 

Comment date. Comments are due on 

or before August 11, 2010. 

Applicability date. These interim final 

regulations generally apply to group 

health plans and group health insurance 

issuers for plan years beginning on or 

after September 23, 2010. These interim 

final regulations generally apply to 

individual health insurance issuers for 

policy years beginning on or after 

September 23, 2010. 

ADDRESSES: Written comments may be 

submitted to any of the addresses 

specified below. Any comment that is 

submitted to any Department will be 

shared with the other Departments. 

Please do not submit duplicates. 

All comments will be made available 

to the public. Warning: Do not include 

any personally identifiable information 

(such as name, address, or other contact 

information) or confidential business 

information that you do not want 

publicly disclosed. All comments are 

posted on the Internet exactly as 

received, and can be retrieved by most 

Internet search engines. No deletions, 

modifications, or redactions will be 

made to the comments received, as they 

are public records. Comments may be 

submitted anonymously. 

Department of Labor. Comments to 

the Department of Labor, identified by 

RIN 1210–AB41, by one of the following 

methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• E-mail: E-OHPSCA.EBSA@dol.gov. 

• Mail or Hand Delivery: Office of 

Health Plan Standards and Compliance 

Assistance, Employee Benefits Security 

Administration, Room N–5653, U.S. 

Department of Labor, 200 Constitution 

Avenue NW., Washington, DC 20210, 

Attention: RIN 1210–AB41. 

Comments received by the 

Department of Labor will be posted 

without change to http:// 

www.regulations.gov and http:// 

www.dol.gov/ebsa, and available for 

public inspection at the Public 

Disclosure Room, N–1513, Employee 

Benefits Security Administration, 200 

Constitution Avenue, NW., Washington, 

DC 20210. 

Department of Health and Human 

Services. In commenting, please refer to 

file code OCIIO–4150–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the instructions under the ‘‘More Search 

Options’’ tab. 

2. By regular mail. You may mail 

written comments to the following 

address only: Office of Consumer 

Information and Insurance Oversight, 

Department of Health and Human 

Services, Attention: OCIIO–4150–IFC, 

P.O. Box 8016, Baltimore, MD 21244– 

1850. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Office of 

Consumer Information and Insurance 

Oversight, Department of Health and 

Human Services, Attention: OCIIO– 

4150–IFC, Mail Stop C4–26–05, 7500 

Security Boulevard, Baltimore, MD 

21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Office of Consumer Information and 

Insurance Oversight, Department of 

Health and Human Services, Room 445– 

G, Hubert H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201 (Because access 

to the interior of the Hubert H. 

Humphrey Building is not readily 

available to persons without Federal 

government identification, commenters 

are encouraged to leave their comments 

in the OCIIO drop slots located in the 

main lobby of the building. A stamp-in 

clock is available for persons wishing to 

retain a proof of filing by stamping in 

and retaining an extra copy of the 

comments being filed.). 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call (410) 786–7195 in advance to 

schedule your arrival with one of our 

staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this document. 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately three weeks after 

publication of a document, at the 

headquarters of the Centers for Medicare 

& Medicaid Services, 7500 Security 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27123 

1The term ‘‘group health plan’’ is used in title 

XXVII of the PHS Act, part 7 of ERISA, and chapter 

100 of the Code, and is distinct from the term 

‘‘health plan’’, as used in other provisions of title I 

of the Affordable Care Act. The term ‘‘health plan’’ 

does not include self-insured group health plans. 

2Code section 9815 incorporates the preemption 

provisions of PHS Act section 2724. Prior to the 

Affordable Care Act, there were no express 

preemption provisions in chapter 100 of the Code. 

3See section 1004 of the Affordable Care Act. 

4For purposes of these interim final regulations, 

dependent coverage means coverage of any 

individual under the terms of a group health plan, 

or group or individual health insurance coverage, 

because of the relationship to a participant (in the 

individual market, primary subscriber). 

Boulevard, Baltimore, Maryland 21244, 

Monday through Friday of each week 

from 8:30 a.m. to 4 p.m. EST. To 

schedule an appointment to view public 

comments, phone 1–800–743–3951. 

Internal Revenue Service. Comments 

to the IRS, identified by REG–114494– 

10, by one of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: CC:PA:LPD:PR (REG–114494– 

10), room 5205, Internal Revenue 

Service, P.O. Box 7604, Ben Franklin 

Station, Washington, DC 20044. 

• Hand or courier delivery: Monday 

through Friday between the hours of 8 

a.m. and 4 p.m. to: CC:PA:LPD:PR 

(REG–114494–10), Courier’s Desk, 

Internal Revenue Service, 1111 

Constitution Avenue, NW., Washington 

DC 20224. 

All submissions to the IRS will be 

open to public inspection and copying 

in room 1621, 1111 Constitution 

Avenue, NW., Washington, DC from 9 

a.m. to 4 p.m. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Beth Baum, Employee 

Benefits Security Administration, 

Department of Labor, at (202) 693–8335; 

Karen Levin, Internal Revenue Service, 

Department of the Treasury, at (202) 

622–6080; Jim Mayhew, Office of 

Consumer Information and Insurance 

Oversight, Department of Health and 

Human Services, at (410) 786–1565. 

Customer Service Information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (http://www.dol.gov/ebsa). In 

addition, information from HHS on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

Web site (http://www.cms.hhs.gov/ 

HealthInsReformforConsume/ 

01_Overview.asp). 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Patient Protection and Affordable 

Care Act (the Affordable Care Act), 

Public Law 111–148, was enacted on 

March 23, 2010; the Health Care and 

Education Reconciliation Act (the 

Reconciliation Act), Public Law 111– 

152, was enacted on March 30, 2010. 

The Affordable Care Act and the 

Reconciliation Act reorganize, amend, 

and add to the provisions of part A of 

title XXVII of the Public Health Service 

Act (PHS Act) relating to group health 

plans and health insurance issuers in 

the group and individual markets. The 

term ‘‘group health plan’’ includes both 

insured and self-insured group health 

plans.1 The Affordable Care Act adds 

section 715 to the Employee Retirement 

Income Security Act (ERISA) and 

section 9815 to the Internal Revenue 

Code (the Code) to make the provisions 

of part A of title XXVII of the PHS Act 

applicable under ERISA and the Code to 

group health plans, and health 

insurance issuers providing health 

insurance coverage in connection with 

group health plans, as if those 

provisions of the PHS Act were 

included in ERISA and the Code. The 

PHS Act sections incorporated by this 

reference are sections 2701 through 

2728. PHS Act sections 2701 through 

2719A are substantially new, though 

they incorporate some provisions of 

prior law. PHS Act sections 2722 

through 2728 are sections of prior law 

renumbered with some, mostly minor, 

changes. Section 1251 of the Affordable 

Care Act, as modified by section 10103 

of the Affordable Care Act and section 

2301 of the Reconciliation Act, specifies 

that certain plans or coverage existing as 

of the date of enactment (i.e., 

grandfathered health plans) are subject 

to only certain provisions. 

Subtitles A and C of title I of the 

Affordable Care Act amend the 

requirements of title XXVII of the PHS 

Act (changes to which are incorporated 

into ERISA section 715). The 

preemption provisions of ERISA section 

731 and PHS Act section 2724 2

(implemented in 29 CFR 2590.731(a) 

and 45 CFR 146.143(a)) apply so that the 

requirements of the Affordable Care Act 

are not to be ‘‘construed to supersede 

any provision of State law which 

establishes, implements, or continues in 

effect any standard or requirement 

solely relating to health insurance 

issuers in connection with group or 

individual health insurance coverage 

except to the extent that such standard 

or requirement prevents the application 

of a requirement’’ of the Affordable Care 

Act. Accordingly, State laws that 

impose on health insurance issuers 

stricter requirements than those 

imposed by the Affordable Care Act will 

not be superseded by the Affordable 

Care Act. 

The Departments of Health and 

Human Services, Labor, and the 

Treasury (the Departments) expect to 

issue regulations implementing the 

revised PHS Act sections 2701 through 

2719A in several phases. The first 

publication in this series was a Request 

for Information relating to the medical 

loss ratio provisions of PHS Act section 

2718, published in the Federal Register 

on April 14, 2010 (75 FR 19297). These 

interim final regulations are being 

published to implement PHS Act 

section 2714 (requiring dependent 

coverage of children to age 26). PHS Act 

section 2714 generally is effective for 

plan years (in the individual market, 

policy years) beginning on or after 

September 23, 2010, which is six 

months after the March 23, 2010 date of 

enactment of the Affordable Care Act.3

The implementation of other provisions 

of PHS Act sections 2701 through 

2719A and section 1251 of the 

Affordable Care Act will be addressed in 

future regulations. 

Because subtitles A and C of title I of 

the Affordable Care Act contain 

requirements that are applicable to both 

the group and individual health 

insurance markets, it would be 

duplicative to insert the requirements 

into both the existing 45 CFR part 146 

(Requirements for the Group Health 

Insurance Market) and 45 CFR part 148 

(Requirements for the Individual Health 

Insurance Market). Accordingly, these 

interim final regulations create a new 

part 147 in subchapter B of 45 CFR to 

implement the provisions of the 

Affordable Care Act. The provisions of 

the Affordable Care Act, to the extent 

that they apply to group health plans 

and group health insurance coverage, 

are also implemented under new 

regulations added to 29 CFR part 2590 

and 26 CFR part 54. 

II. Overview of the Regulations 

A. PHS Act Section 2714, Continued 

Eligibility of Children Until Age 26 (26 

CFR 54.9815–2714, 29 CFR 2590.715– 

2714, 45 CFR 147.120) 

Section 2714 of the PHS Act, as added 

by the Affordable Care Act (and 

amended by the Reconciliation Act), 

and these interim final regulations 

provide that a plan or issuer that makes 

available dependent coverage 4 of 

children must make such coverage 

available for children until attainment 


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27124 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

5Section 1251 of the Affordable Care Act, as 

modified by section 10103 of the Affordable Care 

Act and section 2301 of the Reconciliation Act, 

specifies that certain plans or coverage existing as 

of the March 23, 2010 date of enactment (i.e., 

grandfathered health plans) are subject to only 

certain provisions. 

6 In the group market, section 9802(a) of the Code, 

section 702(a) of ERISA, and section 2705 of the 

PHS Act provide that a plan or issuer cannot 

impose any rule for eligibility for benefits 

(including any rule excluding coverage) based on a 

health factor, including a preexisting condition. 

These rules were added by HIPAA and generally 

became applicable for group health plans for plan 

years beginning on or after July 1, 1997. Similar 

guidance regarding re-enrollment rights for 

individuals previously denied coverage due to a 

health factor was issued by the Departments of the 

Treasury, Labor, and HHS on December 29, 1997, 

at 62 FR 67689 and on January 8, 2001 at 66 FR 

1378, 1403, 1410, 1418. 

of 26 years of age. The statute also 

requires the issuance of regulations to 

‘‘define the dependents to which 

coverage shall be made available’’ under 

this rule. 

Many group health plans that provide 

dependent coverage limit the coverage 

to health coverage excludible from 

employees’ gross income for income tax 

purposes. Thus, dependent coverage is 

limited to employees’ spouses and 

employees’ children that qualify as 

dependents for income tax purposes. 

Consequently, these plans often 

condition dependent coverage, in 

addition to the age of the child, on 

student status, residency, and financial 

support or other factors indicating 

dependent status. However, with the 

expansion of dependent coverage 

required by the Affordable Care Act to 

children until age 26, conditioning 

coverage on whether a child is a tax 

dependent or a student, or resides with 

or receives financial support from the 

parent, is no longer appropriate in light 

of the correlation between age and these 

factors. Therefore, these interim final 

regulations do not allow plans or 

coverage to use these requirements to 

deny dependent coverage to children. 

Because the statute does not distinguish 

between coverage for minor children 

and coverage for adult children under 

age 26, these factors also may not be 

used to determine eligibility for 

dependent coverage for minor children. 

Accordingly, these interim final 

regulations clarify that, with respect to 

children who have not attained age 26, 

a plan or issuer may not define 

dependent for purposes of eligibility for 

dependent coverage of children other 

than in terms of the relationship 

between the child and the participant 

(in the individual market, the primary 

subscriber). Examples of factors that 

cannot be used for defining dependent 

for purposes of eligibility (or continued 

eligibility) include financial 

dependency on the participant or 

primary subscriber (or any other 

person), residency with the participant 

or primary subscriber (or any other 

person), student status, employment, 

eligibility for other coverage, or any 

combination of these. These interim 

final regulations also provide that the 

terms of the plan or policy for 

dependent coverage cannot vary based 

on the age of a child, except for children 

age 26 or older. Examples illustrate that 

surcharges for coverage of children 

under age 26 are not allowed except 

where the surcharges apply regardless of 

the age of the child (up to age 26) and 

that, for children under age 26, the plan 

cannot vary benefits based on the age of 

the child. The Affordable Care Act, as 

originally enacted, required plans and 

issuers to make dependent coverage 

available only to a child ‘‘who is not 

married.’’ This language was struck by 

section 2301(b) of the Reconciliation 

Act. Accordingly, under these interim 

final regulations, plans and issuers may 

not limit dependent coverage based on 

whether a child is married. (However, a 

plan or issuer is not required under 

these interim final regulations to cover 

the spouse of an eligible child). 

The statute and these interim final 

regulations provide that nothing in PHS 

Act section 2714 requires a plan or 

issuer to make available coverage for a 

child of a child receiving dependent 

coverage. 

Under section 1004(d) of the 

Reconciliation Act and IRS Notice 

2010–38 (released to the public on April 

27, 2010 and scheduled to be published 

in 2010–20 Internal Revenue Bulletin, 

May 17, 2010), employers may exclude 

from the employee’s income the value of 

any employer-provided health coverage 

for an employee’s child for the entire 

taxable year the child turns 26 if the 

coverage continues until the end of that 

taxable year. This means that if a child 

turns 26 in March, but stays on the plan 

past December 31st (the end of most 

people’s taxable year), the health 

benefits up to December 31st can be 

excluded for tax purposes. 

Application to grandfathered health 

plans. Under the statute and these 

interim final regulations, the 

requirement to make available 

dependent coverage for children who 

have not attained age 26 generally 

applies to all group health plans and 

health insurance issuers offering group 

or individual health insurance coverage 

whether or not the plan or health 

insurance coverage qualifies as a 

grandfathered health plan 5 under 

section 1251 of the Affordable Care Act, 

for plan years (in the individual market, 

policy years) beginning on or after 

September 23, 2010. However, in 

accordance with section 2301(a) of the 

Reconciliation Act, for plan years 

beginning before January 1, 2014, these 

interim final regulations provide that a 

grandfathered health plan that is a 

group health plan that makes available 

dependent coverage of children may 

exclude an adult child who has not 

attained age 26 from coverage only if the 

child is eligible to enroll in an 

employer-sponsored health plan (as 

defined in section 5000A(f)(2) of the 

Code) other than a group health plan of 

a parent. In the case of an adult child 

who is eligible for coverage under the 

plans of the employers of both parents, 

neither plan may exclude the adult 

child from coverage based on the fact 

that the adult child is eligible to enroll 

in the plan of the other parent’s 

employer. 

Regulations relating to grandfathered 

health plans under section 1251 of the 

Affordable Care Act are expected to be 

published in the very near future. The 

Departments anticipate that the 

regulations will make clear that changes 

to plan or policy terms to comply with 

PHS Act section 2714 and these interim 

final regulations, including voluntary 

compliance before plan years (in the 

individual market, policy years) 

beginning on or after September 23, 

2010, will not cause a plan or health 

insurance coverage to lose 

grandfathered health plan status for any 

purpose under the Affordable Care Act, 

as amended. 

Transitional Rule. Prior to the 

applicability date of PHS Act section 

2714, a child who was covered under a 

group health plan or health insurance 

coverage as a dependent may have lost 

eligibility under the plan (or coverage) 

due to age prior to age 26. Moreover, if, 

when a parent first became eligible for 

coverage, a child was under age 26 but 

older than the age at which the plan (or 

coverage) stopped covering children, the 

child would not have become eligible 

for the plan (or coverage). When the 

provisions of section 2714 become 

applicable, a plan or issuer can no 

longer exclude coverage for the child 

prior to age 26 irrespective of whether 

or when that child was enrolled in the 

plan (or coverage). Also, a child of a 

primary subscriber with family coverage 

in the individual market may be entitled 

to an opportunity to enroll if the child 

previously lost coverage due to age 

while other family members retained 

the coverage.6

Accordingly, these interim final 

regulations provide transitional relief 

for a child whose coverage ended, or 

who was denied coverage (or was not 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27125 

7HIPAA is the Health Insurance Portability and 

Accountability Act of 1996 (Public Law 104–191). 

Regulations regarding the treatment of HIPAA 

special enrollees are included at 26 CFR 54.9801– 

6(d), 29 CFR 2590.701–6(d), and 45 CFR 146.117(d). 

eligible for coverage) under a group 

health plan or health insurance coverage 

because, under the terms of the plan or 

coverage, the availability of dependent 

coverage of children ended before the 

attainment of age 26. 

These interim final regulations 

require a plan or issuer to give such a 

child an opportunity to enroll that 

continues for at least 30 days (including 

written notice of the opportunity to 

enroll), regardless of whether the plan 

or coverage offers an open enrollment 

period and regardless of when any open 

enrollment period might otherwise 

occur. This enrollment opportunity 

(including the written notice) must be 

provided not later than the first day of 

the first plan year (in the individual 

market, policy year) beginning on or 

after September 23, 2010. Thus, many 

plans can use their existing annual 

enrollment periods (which commonly 

begin and end before the start of the 

plan year) to satisfy the enrollment 

opportunity requirement. If the child is 

enrolled, coverage must begin not later 

than the first day of the first plan year 

(in the individual market, policy year) 

beginning on or after September 23, 

2010, even if the request for enrollment 

is made after the first day of the plan 

year. In subsequent years, dependent 

coverage may be elected for an eligible 

child in connection with normal 

enrollment opportunities under the plan 

or coverage. 

Under these interim final regulations, 

the notice may be provided to an 

employee on behalf of the employee’s 

child (in the individual market, to a 

primary subscriber on behalf of the 

primary subscriber’s child). In addition, 

for a group health plan or group health 

insurance coverage, the notice may be 

included with other enrollment 

materials that a plan distributes to 

employees, provided the statement is 

prominent. For a group health plan or 

group health insurance coverage, if a 

notice satisfying these requirements is 

provided to an employee whose child is 

entitled to an enrollment opportunity, 

the obligation to provide the notice of 

enrollment opportunity with respect to 

that child is satisfied for both the plan 

and the issuer. 

Any child enrolling in group health 

plan coverage pursuant to this 

enrollment right must be treated as a 

special enrollee, as provided under the 

regulations interpreting the HIPAA 

portability provisions.7 Accordingly, the 

child must be offered all the benefit 

packages available to similarly situated 

individuals who did not lose coverage 

by reason of cessation of dependent 

status. The child also cannot be required 

to pay more for coverage than similarly 

situated individuals who did not lose 

coverage by reason of cessation of 

dependent status. 

The Departments have been informed 

that many health insurance issuers have 

announced that they will allow 

continued coverage of adult children 

before such coverage is required by the 

Affordable Care Act. A plan or issuer 

that allows continued coverage of adult 

children before being required to do so 

by the Affordable Care Act is not 

required to provide the enrollment 

opportunity with respect to children 

who do not lose coverage. 

Examples in these interim final 

regulations illustrate the application of 

these transitional rules. One example 

illustrates that, if a child qualifies for an 

enrollment opportunity under this 

section and the parent is not enrolled 

but is otherwise eligible for enrollment, 

the plan must provide an opportunity to 

enroll the parent, in addition to the 

child. Similarly, another example 

illustrates that, if a plan has more than 

one benefit package option, a child 

qualifies for enrollment under this 

section, and the parent is enrolled in 

one benefit package option, the plan 

must provide an opportunity to enroll 

the child in any benefit package option 

for which the child is otherwise eligible 

(thus allowing the parent to switch 

benefit package options). Another 

example illustrates that a child who 

qualifies for an enrollment opportunity 

under this section and who is covered 

under a COBRA continuation provision 

must be given the opportunity to enroll 

as a dependent of an active employee 

(i.e., other than as a COBRA-qualified 

beneficiary). In this situation, if the 

child loses eligibility for coverage due to 

a qualifying event (including aging out 

of coverage at age 26), the child has 

another opportunity to elect COBRA 

continuation coverage. (If the qualifying 

event is aging out, the COBRA 

continuation coverage could last 36 

months from the loss of eligibility that 

relates to turning age 26.) The final 

example in this section illustrates that 

an employee who joined a plan prior to 

the applicability date of PHS Act section 

2714, and has a child who never 

enrolled because the child was too old 

under the terms of the plan but has not 

yet turned 26, must be provided an 

opportunity to enroll the child under 

this section even though the child was 

not previously covered under the plan. 

If the parent is no longer eligible for 

coverage under the plan (for example, if 

the parent has ceased employment with 

the plan sponsor) as of the first date on 

which the enrollment opportunity 

would be required to be given, the plan 

would not be required to enroll the 

child. 

B. Conforming Changes Under the PHS 

Act 

1. References to the Public Health 

Service Act 

Conforming changes to references to 

sections of title XXVII of the PHS Act 

are made throughout parts 144 and 146 

of title 45 of the Code of Federal 

Regulations to reflect the renumbering 

of certain sections by the Affordable 

Care Act. 

2. Definitions (45 CFR 144.103) 

These interim final regulations define 

‘‘policy year’’ as the 12-month period 

that is designated in the policy 

documents of individual health 

insurance coverage. If the policy 

document does not designate a policy 

year (or no such document is available), 

then the policy year is the deductible or 

limit year used under the coverage. If 

deductibles or other limits are not 

imposed on a yearly basis, the policy 

year is the calendar year. The Affordable 

Care Act uses the term ‘‘plan year’’ in 

referring to the period of coverage in 

both the individual and group health 

insurance markets. The term ‘‘plan 

year’’, however, is generally used in the 

group health insurance market. 

Accordingly, these interim final 

regulations substitute the term ‘‘policy 

year’’ for ‘‘plan year’’ in defining the 

period of coverage in the individual 

health insurance market. 

III. Interim Final Regulations and 

Request for Comments 

Section 9833 of the Code, section 734 

of ERISA, and section 2792 of the PHS 

Act authorize the Secretaries of the 

Treasury, Labor, and HHS (collectively, 

the Secretaries) to promulgate any 

interim final rules that they determine 

are appropriate to carry out the 

provisions of chapter 100 of the Code, 

part 7 of subtitle B of title I of ERISA, 

and part A of title XXVII of the PHS Act, 

which include PHS Act sections 2701 

through 2728 and the incorporation of 

those sections into ERISA section 715 

and Code section 9815. 

In addition, under Section 553(b) of 

the Administrative Procedure Act (APA) 

(5 U.S.C. 551 et seq.) a general notice of 

proposed rulemaking is not required 

when an agency, for good cause, finds 

that notice and public comment thereon 

are impracticable, unnecessary, or 

contrary to the public interest. The 


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27126 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

8The Affordable Care Act adds section 715 and 

Code section to make the provisions of part A of 

title XXVII of the PHS Act applicable to group 

health plans, and health insurance issuers 

providing health insurance coverage in connection 

with group health plans, under ERISA and the Code 

as if those provisions of the PHS Act were included 

in ERISA and the Code. The PHS Act sections 

incorporated by this reference are sections 2701 

through 2728. Section 1251 of the Affordable Care 

Act provides rules for grandfathered health plans, 

and these rules are further clarified in section 10103 

of the Affordable Care Act and section 2301 of the 

Reconciliation Act. 

provisions of the APA that ordinarily 

require a notice of proposed rulemaking 

do not apply here because of the 

specific authority granted by section 

9833 of the Code, section 734 of ERISA, 

and section 2792 of the PHS Act. 

However, even if the APA was 

applicable, the Secretaries have 

determined that it would be 

impracticable and contrary to the public 

interest to delay putting the provisions 

in these interim final regulations in 

place until a full public notice and 

comment process is completed. The 

statutory requirement implemented in 

these interim final regulations was 

enacted on March 23, 2010, and applies 

for plan years (in the individual market, 

policy years) beginning on or after 

September 23, 2010. Having a binding 

rule in effect is critical to ensuring that 

individuals entitled to the new 

protections being implemented have 

these protections uniformly applied. 

Moreover, the provisions in these 

interim final regulations require lead 

time for implementation. These interim 

final regulations require that an 

enrollment period be provided no later 

than the first day the obligation to allow 

dependent children to enroll until 

attainment of age 26 takes effect. 

Preparations presumably would have to 

be made to put such an enrollment 

process in place. Group health plans 

and health insurance issuers also would 

have to take the cost associated with 

this new obligation into account in 

establishing their premiums, and in 

making other changes to the designs of 

plan or policy benefits, and any such 

premiums and changes would have to 

receive necessary approvals in advance 

of the plan or policy year in question. 

For the foregoing reasons, the 

Departments have determined that it is 

essential to provide certainty about 

what will be required of group health 

plans and health insurance issuers 

under the statutory requirements 

implemented in binding regulations as 

far in advance of September 23, 2010 as 

possible. This makes it impracticable to 

engage in full notice and comment 

rulemaking before putting regulations 

into effect, and in the public interest to 

do so through interim final regulations 

under which the public will have an 

opportunity for comment, but that 

opportunity will not delay putting rules 

in effect (a delay that could possibly last 

past September 23, 2010). 

Issuance of proposed regulations 

would not be sufficient because the 

proposed regulations would not be 

binding, and different group health 

plans or health insurance issuers could 

interpret the statutory language in 

different ways. Had the Departments 

published a notice of proposed 

rulemaking, provided for a 60-day 

comment period, and only then 

prepared final regulations, which would 

be subject to a 60-day delay in effective 

date, it is unlikely that it would have 

been possible to have final regulations 

in effect before late September, when 

these requirements could be in effect for 

some plans or policies. It therefore is in 

the public interest that these interim 

final regulations be in effect and apply 

when the statutory protections being 

implemented apply. 

IV. Economic Impact and Paperwork 

Burden 

A. Summary—Department of Labor and 

Department of Health and Human 

Services 

As stated earlier in this preamble, 

these interim final regulations 

implement PHS Act section 2714, which 

requires plans or issuers that make 

dependent coverage available for 

children to continue to make such 

coverage available for an adult child 

until the attainment of age 26. The 

regulation also provides an enrollment 

opportunity to individuals who lost or 

were not eligible for dependent coverage 

before age 26.8 This provision generally 

is effective for plan years (in the 

individual market, policy years) 

beginning on or after September 23, 

2010, which is six months after the 

March 23, 2010 date of enactment of the 

Affordable Care Act. 

The Departments have crafted these 

interim final regulations to secure the 

protections intended by Congress in the 

most economically efficient manner 

possible. The Departments have 

quantified costs where possible and 

provided a qualitative discussion of the 

economic benefits and some of the 

transfers and costs that may stem from 

these interim final regulations. 

B. Executive Order 12866—Department 

of Labor and Department of Health and 

Human Services 

Under Executive Order 12866 (58 FR 

51735), this regulatory action has been 

determined ‘‘significant’’ and therefore 

subject to review by the Office of 

Management and Budget (OMB). 

Section 3(f) of the Executive Order 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

rule (1) having an annual effect on the 

economy of $100 million or more in any 

one year, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

a serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. OMB 

has determined that this regulation is 

economically significant within the 

meaning of section 3(f)(1) of the 

Executive Order, because it is likely to 

have an annual effect on the economy 

of $100 million in any one year. 

Accordingly, OMB has reviewed these 

rules pursuant to the Executive Order. 

The Departments provide an assessment 

of the potential costs, benefits, and 

transfers associated with the regulatory 

provision below. The Departments 

invite comments on this assessment and 

its conclusions. 

1. Need for Regulatory Action 

PHS Act section 2714, as added by the 

Affordable Care Act and amended by 

the Reconciliation Act requires group 

health plans and health insurance 

issuers offering group or individual 

health insurance coverage that make 

dependent coverage available for 

children to continue to make coverage 

available to such children until the 

attainment of age 26. With respect to a 

child receiving dependent coverage, 

coverage does not have to be extended 

to a child or children of the child or a 

spouse of the child. In addition, as 

provided by the Reconciliation Act, 

grandfathered group health plans are 

not required to offer dependent coverage 

to a child under 26 who is otherwise 

eligible for employer-sponsored 

insurance other than a group health 

plan of a parent for plan years beginning 

before January 1, 2014. PHS Act section 

2714 generally is effective for plan years 

(in the individual market, policy years) 

beginning on or after September 23, 

2010. Thus, these interim final 

regulations are necessary to amend the 

Departments’ existing regulations to 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27127 

9Available at http://www.whitehouse.gov/omb/ 

circulars/a004/a-4.pdf. 

implement these statutorily mandated 

changes. 

2. Summary of Impacts 

In this section, the Departments 

estimate the number of individuals 

affected by these interim final 

regulations, and the impact of the 

regulations on health insurance 

premiums in the group and individual 

markets. Beginning with the population 

of individuals age 19–25, the number of 

individuals potentially affected is 

estimated by applying several criteria 

including whether their parents have 

existing employer-sponsored insurance 

(ESI) or an individual market policy; 

and whether the individuals are 

themselves uninsured, have ESI, 

individual market policies or other 

forms of coverage. A range of 

assumptions concerning the percentage 

of the potentially affected individuals 

that will accept the offer of new 

dependent coverage—‘‘take-up’’ rates— 

is then applied to estimate the number 

of newly covered individuals. The 

premium impact is calculated by using 

an estimated incremental insurance cost 

per newly-covered individual as a 

percent of average family premiums. 

In accordance, with OMB Circular 

A–4,9 Table 1 below depicts an 

accounting statement showing the 

Departments’ assessment of the benefits, 

costs, and transfers associated with this 

regulatory action. 

TABLE 1—ACCOUNTING TABLE

Benefits: 

Annualized Quantified: low estimate 0.19 million previously uninsured individuals gain coverage in 2011. 

mid-range estimate ........................... 0.65 million previously uninsured individuals gain coverage in 2011. 

high estimate .................................... 1.64 million previously uninsured individuals gain coverage in 2011. 

Qualitative: Expanding coverage options of the 19–25 population should decrease the number uninsured, which in turn should decrease the 

cost-shifting of uncompensated care onto those with insurance, increase the receipt of preventive health care and provide more timely access 

to high quality care, resulting in a healthier population. Allowing extended dependent coverage will also permit greater job mobility for this 

population as their insurance coverage will no longer be tied to their own jobs or student status. Dependents aged 19–25 that have chronic or 

other serious health conditions would still be able to continue their current coverage through a parent’s plan. To the extent there is an increase in beneficial utilization of healthcare, health could improve. 

Costs10 Low 

estimate 

Mid-range 

estimate 

High 

estimate 

Year 

dollar 

Discount 

rate 

percent 

Period 

covered 11

Annualized Monetized ($millions/year) ............................ 11.2 11.2 11.2 2010 7 2011–2013 

10.4 10.4 10.4 2010 3 2011–2013 

A one-time notice of right to enroll must be sent to those affected. 

Qualitative: To the extent additional coverage increases utilization of health care services, there will be additional costs incurred to achieve the 

health benefits. 

Transfer: 12

Annualized Monetized ($millions/year) ..................... 3,459.3 5,250.2 6,893.9 2010 7 2011–2013 

3,482.5 5,274.5 6,895.4 2010 3 2011–2013 

Qualitative: If the rule causes family health insurance premiums to increase, there will be a transfer from individuals with family health insurance 

coverage who do not have dependents aged 19–25 to those individuals with family health insurance coverage that have dependents aged 

19–25. To the extent that these higher premiums result in lower profits or higher prices for the employer’s product, then the higher premiums 

will result in a transfer either from stockholders or consumers. 

10The cost estimates are annualize across the years 2011–2013, and reflects a single point estimate of the cost to send out a notice in the 

first year only. 11The Departments limited the period covered by the RIA to 2011–2013, because it only has reliable data to make projections over this period 

due to the fact that in 2014, things will change drastically when the subsidies and tax credits to offset premium increases and the exchanges are 

in effect. 12The estimates in this table reflect the annualized discounted value in 2010 of the additional premium costs for family policies calculated as 

the product of the newly covered dependents in each year from 2011–2013 (see below) and an incremental cost per newly-covered person in 

those years (see below). 

3. Estimated Number of Affected 

Individuals 

The Departments’ estimates in this 

section are based on the 2004–2006 

Medical Expenditure Panel Survey 

Household Component (MEPS–HC) 

which was projected and calibrated to 

2010 to be consistent with the National 

Health Accounts projections. The 

Departments estimate that in 2010, there 

are approximately 29.5 million 

individuals aged 19–25 (young adults) 

in the United States. Of those 

individuals, 9.3 million young adults (of 

whom 3.1 million are uninsured) do not 

have a parent who has either ESI or nongroup insurance, and thus they have no 

access to dependent coverage. As shown 

in Table 2, among the remaining 20.2 

million young adults whose parents are 

covered either by ESI or by non-group 

insurance: 

• 3.44 million are currently 

uninsured, 

• 2.42 million are covered by their 

own non-group insurance, 

• 5.55 million are covered by their 

own ESI, 

• 5.73 million are already on their 

parent’s or spouse’s ESI, and 

• 3.01 million have some other form 

of coverage such as Medicaid or 

TRICARE. 


srobinson on DSKHWCL6B1PROD with RULES2
27128 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

13Restrictions include requirements for financial 

dependency, student status, and age limits. 

14As described in Kaiser Family Foundation, 

Definition of Dependency by Age, 2010, KFF State 

Health Facts, at http://www.statehealthfacts.org/ 

comparetable.jsp?ind=601&cat=7. 

TABLE 2—YOUNG ADULTS AGED 19–25 BY INSURANCE STATUS

Uninsured* Non-group Own ESI ESI as a 

dependent Other Total 

Total U.S. Population Aged 19–25 .................................. 6.59 2.69 6.98 5.75 7.5 29.5 

All Young Adults in U.S. with a Parent with a Policy by Young Adult Insurance Status 

Parents have ESI ............................................................. 3.28 2.03 5.32 5.73 2.91 19.27 

Parents have non-group .................................................. 0.16 0.40 0.23 .................... 0.10 0.88 

Subtotal A ................................................................. 3.44 2.42 5.55 5.73 3.01 20.15 

*The bolded numbers are potentially affected by the regulation. 

Source: MEPS 2004–2006 HC Surveys, controlled to 2010 consistent with the National Health Accounts. Note: Total number of young adults, 

age 19–25 is 29.5 million; the 20.15 million in this Table are the subset whose parents have either ESI or non-group coverage. 

Initially, the subset of this group of 

young adults that will be affected by 

these interim final regulations are those 

who are either uninsured (3.44 million) 

or covered by individual coverage (2.42 

million). The statute does not require 

grandfathered group health plans to 

offer coverage to young adults who 

currently have their own ESI or an offer 

of an ESI. For the purposes of this 

analysis, it is assumed that all plans 

begin 2011 with grandfathered status. 

These impacts could change if plans 

lose their Grandfathered status. 

Of these 5.86 million young adults, as 

shown in Table 3, 3.49 million are also 

unlikely to switch to their parents’ 

coverage because: 

• They are already allowed to enroll 

in extended dependent coverage for 

young adults through their State’s 

existing laws, but have chosen not to 

(2.61 million). Thirty-seven states 

already have requirements concerning 

dependent coverage in the group 

market, although most of these are 

substantially more restrictive than those 

contained in this regulation.13 Using 

information about State laws obtained 

from the Kaiser Family Foundation,14 a 

State by State profile of State required 

coverage based on a person’s State of 

residence, age, student status, and living 

situation was developed. This profile 

was then overlaid on MEPS data to 

obtain an estimate of the number of 

individuals that would newly become 

eligible for coverage due to these 

interim final regulations. 

• They have an offer of ESI and have 

parents who are covered by ESI (0.48 

million). For the purposes of this 

regulatory impact statement, the 

Departments assume that the parents of 

these young adults will be in 

grandfathered group health plans, and 

thus that these young adults will not be 

affected by the provisions of these 

interim final regulations. To the extent 

that some of the coverage in which these 

parents are enrolled is not 

grandfathered, the effect of these interim 

final regulations will be larger than the 

estimates provided here. 

• Finally, there are 0.40 million 

young adults who have non-group 

coverage and whose parents have nongroup coverage. Because the parents’ 

non-group coverage is underwritten, 

there is not likely to be any financial 

benefit to the family in moving the 

young adult onto the parents’ coverage, 

and the Departments assume that these 

young adults will not be affected by the 

regulation. 

TABLE 3—‘‘UNINSURED’’ AND ‘‘NON-GROUP’’ YOUNG ADULTS UNLIKELY TO BE AFFECTED BY EXTENDING DEPENDENT

COVERAGE TO AGE 26 

Uninsured Non-Group 

coverage Total 

(1) Young adults potentially covered by parent ESI due to state law .................................................... 1.30 1.31 2.61 

(2) Young adults with an offer of ESI whose parents have ESI ............................................................. 0.31 0.17 0.48 

(3) Young adults with non-group coverage whose parents have non-group coverage .......................... .................... 0.40 0.40 

Subtotal B ......................................................................................................................................... 1.61 1.88 3.49 

As shown in Table 4, this leaves 

approximately 2.37 million young 

adults who might be affected by this 

provision, or approximately eight 

percent of the 29.5 million young adults 

in the age group. Among the 

approximately 2.37 million young 

adults who are estimated to be 

potentially affected by this provision, 

approximately 1.83 million are 

currently uninsured, and 0.55 million 

are currently covered by their own nongroup coverage. 

TABLE 4—YOUNG ADULTS POTENTIALLY AFFECTED BY EXTENDING DEPENDENT COVERAGE TO AGE 26 

Uninsured Non-group 

coverage Total 

Parents have ESI ..................................................................................................................................... 1.67 0.55 2.21 

Parents have non-group .......................................................................................................................... 0.16 .................... 0.16 


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Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27129 

15Monheit, A., J. Cantor, et al, ‘‘State Policies 

Expanding Dependent Coverage to Young Adults in 

Private Health Insurance Plans,’’ presented at the 

Academy Health State Health Research and Policy 

Interest Group Meeting, Chicago IL, June 27, 2009. 

16Bansak, Cynthia and Steven Raphael. ‘‘The 

Effects of State Policy Design Features on Take-Up 

and Crowd-out Rates fro the State Children’s Health 

Insurance Program.’’ Journal of Policy Analysis and 

Management, Vol. 26, No. 1, 149–175. 2006. Find 

that for the time period 1998–2002 take-up rates for 

SCHIP were about 10 percent. 

Currie, Janet and Jonathan Gruber. ‘‘Saving babies: 

The Efficacy and Cost of Recent Changes in 

Medicaid Eligibility of Pregnant Women.’’ The 

Journal of Political Economy, Vol. 104, No. 6, Dec. 

1996, pp. 1263–1296. Find for Medicaid expansions 

during the 1979–1992 period the take-up rate for 

eligible pregnant women was 34 percent. 

Cutler, David and Jonathan Gruber. ‘‘Does Public 

Insurance Crowd Out Private Insurance?’’ The 

Quarterly Journal of Economics, Vol. 111, No. 2, 

May 1996, pp. 391–430. Find that for the Medicaid 

expansions from 1987–1992 the take-up rate for the 

uninsured is close to 30 percent, while for pregnant 

women it was seven percent. 

Gruber, Jonathan and Kosali Simon. ‘‘Crowd-Out 

Ten years Later: Have Recent Public Insurance 

Expansions Crowded Out Private Health 

Insurance?’’ NBER Working Paper 12858. January 

2007. Find that for the Medicaid expansions during 

1996–2002 the take-up rate was 7 percent across all 

children, but nearly one-third for uninsured 

children. 

17Found at http://www.kff.org/insurance/ 

snapshot/chcm020707oth.cfm. 

TABLE 4—YOUNG ADULTS POTENTIALLY AFFECTED BY EXTENDING DEPENDENT COVERAGE TO AGE 26—Continued 

Uninsured Non-group 

coverage Total 

Total (Subtotal A–Subtotal B)* ......................................................................................................... 1.83 0.55 2.37 

Source: MEPS 2004–2006 HC Surveys, controlled to 2010 consistent with projections of the National Health Accounts. 

*Subtotal A is in Table 2 and Subtotal B is in Table 3. 

It is difficult to estimate precisely 

what fraction of the 2.37 million young 

adults who might potentially be affected 

by the provision will actually enroll on 

their parents’ coverage. A study by 

Monheit and Cantor of the early 

experience in States that have extended 

coverage to dependents suggests that 

few uninsured children in these States 

shift to their parents’ policy.15 However, 

data and methodological difficulties 

inevitably lead to substantial 

uncertainty about the finding. 

The Departments considered two 

other points of reference to estimate 

take-up rates. One is the work that has 

analyzed take-up rates among people 

made newly eligible for public coverage 

by Medicaid expansions. These studies 

suggest take-up rates in the range of 10– 

34 percent.16 However, the populations 

eligible for these expansions have 

different socio-demographic 

compositions than those eligible for the 

dependent coverage provisions covered 

under these interim final regulations, 

and the decision to take-up Medicaid is 

clearly different than the decision to 

cover a child on a parent’s private 

insurance policy. A second point of 

reference are estimates from the Kaiser/ 

HRET Employer Health benefits 

Survey 17 which suggest that, depending 

on the size of the worker contribution, 

between 77 percent and 90 percent of 

employees accept offers of family 

policies. Again, these estimates would 

be based on a group that differs in 

characteristics from those eligible for 

new dependent coverage. These 

concerns notwithstanding, the analyses 

of Medicaid expansions and employee 

take-up of employer sponsored coverage 

provide useful points of reference. 

Recognizing the uncertainty in the 

area, the Departments produced a range 

of assumptions concerning take-up 

rates. In developing the range of take-up 

rates, the Departments assume that these 

rates will vary by the following factors: 

(1) The young adult’s current health 

coverage status (uninsured young adults 

are less likely to take advantage of the 

dependent coverage option than young 

adults already covered by non-group 

insurance, because young adults who 

have purchased non-group insurance 

have shown a strong preference for 

coverage, and can almost always save 

money and get better coverage by 

switching to their parents’ policy); (2) 

the young adult’s health status (young 

adults in fair or poor health are more 

likely to take advantage of the option 

than those in excellent, very good or 

good health), and (3) the young adult’s 

living situation (those living with their 

parents are more likely to take up the 

option than those not living with their 

parents). 

The almost fully covered or ‘‘high’’ 

take-up rate scenario assumes that 

regardless of health or insurance status, 

95 percent of young adults living at 

home and 85 percent of those not living 

at home would move to dependent 

coverage. For the mid-range scenario, 

the Departments assume that relative to 

the high take-up rate scenario, 90 

percent of the uninsured whose health 

status was fair or poor health and 50 

percent of those in good to excellent 

health would move to dependent 

coverage. In the low take-up rate 

scenario, the Departments adjusted the 

percentages to 80 percent and 10 

percent of the high take-up rate 

scenario. In all three scenarios, the same 

assumptions apply to individuals with 

non-group policies whose parents have 

ESI—95 percent of those living at home 

and 85 percent of those living elsewhere 

would move to dependent coverage. 

In the low take-up rate scenario, the 

assumptions lead to the result that 

approximately 30 percent of eligibles 

will enroll in dependent coverage. In 

the mid-range scenario, they result in an 

approximate 50 percent take-up rate, 

and in the high take-up scenario, they 

result in an approximate 90 percent 

take-up rate. The Departments are 

uncertain regarding which of these 

scenarios is most likely but are 

confident that they bracket the expected 

outcome. 

TABLE 5—NUMBER OF INDIVIDUALS WITH NEW DEPENDENT COVERAGE AND IMPACT ON GROUP INSURANCE PREMIUMS, 

2011–2013 

Low estimate Mid-range estimate High estimate 

2011 2012 2013 2011 2012 2013 2011 2012 2013 

Individuals with New Dependent Coverage (millions) ..... 0.68 0.97 1.08 1.24 1.60 1.65 2.12 2.07 1.98 

From Uninsured (millions) ................................................ 0.19 0.29 0.33 0.65 0.94 0.91 1.64 1.42 1.21 

Incremental Premium Cost Per Individual Coverage ...... $3,670 $3,800 $4,000 $3,380 $3,500 $3,690 $3,220 $3,340 $3,510 

Impact on Group Insurance Premiums (%) ..................... 0.5 0.7 0.7 0.7 1.0 1.0 1.2 1.2 1.1 


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27130 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

18For purposes of this regulatory impact analysis, 

the Departments assume that there would be no 

effect on premiums for employee-only policies. 

These take-up rate assumptions are 

then applied to the number of 

potentially affected individuals 

displayed in Table 3. The resulting 

number of individuals with new 

dependent coverage is summarized in 

Table 5. Under the mid-range take-up 

rate assumption, the Departments 

estimate that in 2011, 1.24 million 

young adults will newly be covered by 

their parents’ ESI or non-group market 

policies, of whom 0.65 million were 

previously uninsured, and 0.6 million 

were previously covered by non-group 

coverage. The number of individuals 

newly covered by their parents’ plans 

would be 0.7 and 2.12 million under the 

high and low take-up rate assumptions 

respectively, with 0.2 and 1.64 million 

of these individuals being previously 

uninsured. Relative to the individuals 

covered under the high take-up rate 

assumption, higher proportions of the 

low- and mid-range assumption groups 

are accounted for by people who 

previously had non-group coverage (72 

percent and 48 percent respectively in 

contrast to 23 percent for the high takeup rate group). This difference is a 

result of the Departments’ assumption 

for the low- and mid-range take-up rates 

that people with non-group coverage 

will be more likely than healthy people 

who were uninsured to take advantage 

of the dependent coverage option. 

Under the mid-range take-up rate 

assumptions, the estimated number of 

young adults covered by their parents’ 

plans in 2012 increases somewhat over 

the 2011 estimate to 1.6 million in total, 

of whom approximately 0.9 million 

would have been uninsured. The 

increase in the estimate for 2012 results 

from the assumption that as children 

reach the age that would have caused 

them to be excluded from their parents’ 

policy before the implementation of 

these interim final regulations, a large 

fraction of them now will remain on 

their parents’ policy. Similarly, the 

estimated number of young adults 

enrolling in their parents’ non-group 

policy increases from just under 75,000 

in 2011 to approximately 100,000 in 

2012, and 120,000 in 2013. 

4. Benefits 

The benefits of these interim final 

regulations are expected to outweigh the 

costs to the regulated community. In the 

mid-range take-up rate assumption, the 

Departments estimate that in 2011, 0.65 

million previously uninsured 

individuals will now be covered on 

their parent’s policies due to these 

interim final regulations and 1.24 

million individuals total will now be 

covered on their parent’s coverage. 

Expanding coverage options for the 

19–25 population should decrease the 

number uninsured, which in turn 

should decrease the cost-shifting of 

uncompensated care onto those with 

coverage, increase the receipt of 

preventive health care and provide more 

timely access to high quality care, 

resulting in a healthier population. In 

particular, children with chronic 

conditions or other serious health issues 

will be able to continue coverage 

through a parent’s plan until age 26. 

Allowing extended dependent coverage 

also will permit greater job mobility for 

this population as their health coverage 

will no longer be tied to their own jobs 

or student status. 

5. Costs and Transfers Associated With 

the Rule 

Estimates for the incremental annual 

premium costs for the newly covered 

individuals are developed based on 

expenditure data from MEPS and vary 

based on the take-up rate assumptions. 

These incremental costs are lowest for 

the high take-up rate assumption since 

the newly covered group would contain 

a relatively high percentage of 

individuals whose health status was 

good to excellent. Conversely, the low 

take-up rate assumption results in the 

highest incremental costs because a 

higher percentage of the newly covered 

individuals would be those whose 

health status was fair to poor. For those 

enrolling in their parents’ ESI, the 

expected annual premium cost under 

the mid-range take-up rate assumption 

would be $3,380 in 2011, $3,500 in 2012 

and $3,690 in 2013. If these costs were 

distributed among all family ESI plans, 

family premiums would be expected to 

rise by 0.7 percent in 2011, 1.0 percent 

in 2012, and 1.0 percent in 2013 due to 

these interim final regulations.18 The 

comparable incremental costs and 

premium effects for the low and high 

take-up rate assumptions are 

summarized in Table 5. To the extent 

that these increases are passed on to 

workers in the form of higher premiums 

for all workers purchasing family 

policies or in the form of lower wages 

for all workers, there will be a transfer 

from workers who do not have newly 

covered dependents to those who do. To 

the extent that these higher premiums 

result in lower profits or higher prices 

for the employer’s product, the higher 

premiums will result in a transfer either 

from stockholders or consumers. 

In addition, to the extent that these 

interim final regulations result in a 

decrease in the number of uninsured, 

the Departments expect a reduction in 

uncompensated care, and a reduction in 

liability for those who fund 

uncompensated care, including public 

programs (primarily Medicaid and State 

and local general revenue support for 

public hospitals), as well as the portion 

of uncompensated care that is paid for 

by the cost shift from private premium 

payers. Such effects would lead to lower 

premiums for the insured population, 

both with or without newly covered 

children. 

For the small number of children 

(75,000 in 2011) enrolling in their 

parents’ non-group insurance policy 

under the mid-range take-up 

assumption, the Departments expect 

estimated annual premium cost to be 

$2,360 in 2011, $2,400 in 2012 and 

$2,480 in 2013. To a large extent, 

premiums in the non-group market are 

individually underwritten, and the 

Departments expect that most of the 

premium cost will be borne by the 

parents who are purchasing the policy 

to which their child is added. If, 

instead, these costs were distributed 

over the entire individual market (as 

would be the case in a pure communityrated market), then individual 

premiums would be expected to rise 0.7 

percent in 2011, 1.0 percent in 2012, 

and 1.2 percent in 2013 due to these 

interim final regulations. However, the 

Departments expect the actual increase 

across the entire individual market, if 

any, will be much smaller than these 

estimates, because they expect that the 

costs largely will be borne by the 

subscribers who are directly affected 

rather than distributed across the entire 

individual market. 

6. Enrollment Opportunity 

These interim final regulations 

provide an enrollment opportunity for 

children excluded from coverage 

because of age before the effective date 

of the rule. The Departments estimate 

that this information collection request 

will result in approximately 

105,000,000 notices being distributed 

with an hour burden of approximately 

1,100,000 hours and cost burden of 

approximately $2,010,500. For a 

discussion of this enrollment 

opportunity, see the Paperwork 

Reduction Act section later in this 

preamble. 

7. Regulatory Alternatives 

Section 6(a)(3)(C)(iii) of Executive 

Order 12866 requires an economically 

significant regulation to include an 

assessment of the costs and benefits of 

potentially effective and reasonable 

alternatives to the planned regulation, 

and an explanation of why the planned 


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19Any individual enrolling in coverage pursuant 

to this enrollment right must be treated as a special 

enrollee, as provided under HIPAA portability 

rules. Accordingly, the individual must be offered 

all the benefit packages available to similarly 

situated individuals who did not lose coverage by 

reason of cessation of dependent status. The 

individual also cannot be required to pay more for 

coverage than similarly situated individuals who 

did not lose coverage by reason of cessation of 

dependent status. 

regulatory action is preferable to the 

potential alternatives. The Departments 

carefully considered limiting the 

flexibility of plans and policies to define 

who is a child. However, the 

Departments concluded, as they have in 

other regulatory contexts, that plan 

sponsors and issuers should be free to 

determine whether to cover children or 

which children should be covered by 

their plans and policies (although they 

must comply with other applicable 

Federal or State law mandating 

coverage, such as ERISA section 609). 

Therefore, these interim final 

regulations have not limited a plan’s or 

policy’s flexibility to define who is a 

child for purposes of the determination 

of children to whom coverage must be 

made available. 

C. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) imposes 

certain requirements with respect to 

Federal rules that are subject to the 

notice and comment requirements of 

section 553(b) of the APA (5 U.S.C. 551 

et seq.) and that are likely to have a 

significant economic impact on a 

substantial number of small entities. 

Under Section 553(b) of the APA, a 

general notice of proposed rulemaking 

is not required when an agency, for 

good cause, finds that notice and public 

comment thereon are impracticable, 

unnecessary, or contrary to the public 

interest. These interim final regulations 

are exempt from APA, because the 

Departments made a good cause finding 

that a general notice of proposed 

rulemaking is not necessary earlier in 

this preamble. Therefore, the RFA does 

not apply and the Departments are not 

required to either certify that the 

regulations would not have a significant 

economic impact on a substantial 

number of small entities or conduct a 

regulatory flexibility analysis. 

Nevertheless, the Departments 

carefully considered the likely impact of 

the regulations on small entities in 

connection with their assessment under 

Executive Order 12866. Consistent with 

the policy of the RFA, the Departments 

encourage the public to submit 

comments that suggest alternative rules 

that accomplish the stated purpose of 

PHS Act section 2714 and minimize the 

impact on small entities. 

D. Special Analyses—Department of the 

Treasury 

Notwithstanding the determinations 

of the Department of Labor and 

Department of Health and Human 

Services, for purposes of the Department 

of the Treasury, it has been determined 

that this Treasury decision is not a 

significant regulatory action for 

purposes of Executive Order 12866. 

Therefore, a regulatory assessment is not 

required. It has also been determined 

that section 553(b) of the APA (5 U.S.C. 

chapter 5) does not apply to these 

interim final regulations. For the 

applicability of the RFA, refer to the 

Special Analyses section in the 

preamble to the cross-referencing notice 

of proposed rulemaking published 

elsewhere in this issue of the Federal 

Register. Pursuant to section 7805(f) of 

the Code, these temporary regulations 

have been submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on their impact on small businesses. 

E. Paperwork Reduction Act 

1. Department of Labor and Department 

of the Treasury: Affordable Care Act 

Enrollment Opportunity Notice Relating 

to Extended Dependent Coverage 

As part of their continuing efforts to 

reduce paperwork and respondent 

burden, the Departments conduct a 

preclearance consultation program to 

provide the general public and federal 

agencies with an opportunity to 

comment on proposed and continuing 

collections of information in accordance 

with the Paperwork Reduction Act of 

1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). 

This helps to ensure that requested data 

can be provided in the desired format, 

reporting burden (time and financial 

resources) is minimized, collection 

instruments are clearly understood, and 

the impact of collection requirements on 

respondents can be properly assessed. 

As discussed earlier in this preamble, 

prior to the applicability date of PHS 

Act section 2714, a child who was 

covered under a group health plan (or 

group health insurance coverage) may 

have lost eligibility for coverage under 

the plan due to age before age 26. 

Moreover, if a child was under age 26 

when a parent first became eligible for 

coverage, but older than the age at 

which the plan stopped covering 

children, the child would not have 

become eligible for coverage. When the 

provisions of PHS Act section 2714 

become applicable to the plan (or 

coverage), the plan or coverage can no 

longer exclude coverage for the 

individual until age 26. 

Accordingly, these interim final 

regulations require plans to provide a 

notice of an enrollment opportunity to 

individuals whose coverage ended, or 

who were denied coverage (or were not 

eligible for coverage) under a group 

health plan or health insurance coverage 

because, under the terms of the plan or 

coverage, the availability of dependent 

coverage of children ended before the 

attainment of age 26. The enrollment 

opportunity must continue for at least 

30 days, regardless of whether the plan 

or coverage offers an open enrollment 

period and regardless of when any open 

enrollment period might otherwise 

occur. This enrollment opportunity 

must be presented not later than the first 

day of the first plan year (in the 

individual market, policy year) 

beginning on or after September 23, 

2010 (which is the applicability date of 

PHS Act section 2714). Coverage must 

begin not later than the first day of the 

first plan year (in the individual market, 

policy year) beginning on or after 

September 23, 2010.19

The Affordable Care Act dependent 

coverage enrollment opportunity notice 

is an information collection request 

(ICR) subject to the PRA. Currently, the 

Departments are soliciting public 

comments for 60 days concerning these 

disclosures. The Departments have 

submitted a copy of these interim final 

regulations to OMB in accordance with 

44 U.S.C. 3507(d) for review of the 

information collections. The 

Departments and OMB are particularly 

interested in comments that: 

• Evaluate whether the collection of 

information is necessary for the proper 

performance of the functions of the 

agency, including whether the 

information will have practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

for example, by permitting electronic 

submission of responses. 

Comments should be sent to the 

Office of Information and Regulatory 

Affairs, Attention: Desk Officer for the 

Employee Benefits Security 


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20Hourly wage estimates are based on data from 

the Bureau of Labor Statistics Occupational 

Employment Survey (May 2008) and the Bureau of 

Labor Statistics Employment Cost Index (June 

2009). All hourly wage rates include wages and 

benefits. Clerical wage and benefits estimates are 

based on metropolitan wage rates for executive 

secretaries and administrative assistants. Legal 

professional wage and benefits estimates are based 

on metropolitan wage rates for lawyers. 

21While plans could prepare their own notice, 

the Departments assume that the notices will be 

prepared by service providers. The Departments 

have previously estimated that there are 630 health 

insurers (460 providing coverage in the group 

market, and 490 providing coverage in the 

individual market.). These estimates are from NAIC 

2007 financial statements data and the California 

Department of Managed Healthcare (2009), at 

http://wpso.dmhc.ca.gov/hpsearch/viewall.aspx. 

Because the hour and cost burden is shared 

between the Departments of Labor/Treasury and the 

Department of Health and Human Services, the 

burden to prepare the notices is calculated using 

half the number of insurers (315). 

22For purposes of this burden estimate, the 

Departments assume that 38 percent of the 

disclosures will be provided through electronic 

means in accordance with the Department of 

Labor’s standards for electronic communication of 

required information provided under 29 CFR 

2520.104b–1(c). 23 5 CFR 1320.1 through 1320.18. 

24Any individual enrolling in coverage pursuant 

to this enrollment right must be treated as a special 

enrollee, as provided under HIPAA portability 

rules. Accordingly, the individual must be offered 

all the benefit packages available to similarly 

situated individuals who did not lose coverage by 

reason of cessation of dependent status. The 

individual also cannot be required to pay more for 

coverage than similarly situated individuals who 

did not lose coverage by reason of cessation of 

dependent status. 25The number of individual insurance notices 

was based on the number of individual policy 

holders with dependents on that policy according 

to the 2009 March Current Population Survey 

(CPS). 

26Estimates of labor rates include wages, other 

benefits, and overhead based on the National 

Occupational Employment Survey (May 2008, 

Bureau of Labor Statistics) and the Employment 

Cost Index June 2009, Bureau of Labor Statistics). 

Administration either by fax to (202) 

395–7285 or by e-mail to 

oira_submission@omb.eop.gov. A copy 

of the ICR may be obtained by 

contacting the PRA addressee: G. 

Christopher Cosby, Office of Policy and 

Research, U.S. Department of Labor, 

Employee Benefits Security 

Administration, 200 Constitution 

Avenue, NW., Room N–5718, 

Washington, DC 20210. Telephone: 

(202) 693–8410; Fax: (202) 219–4745. 

These are not toll-free numbers. E-mail: 

ebsa.opr@dol.gov. ICRs submitted to 

OMB also are available at reginfo.gov 

(http://www.reginfo.gov/public/do/ 

PRAMain). 

The Departments assume that 

2,800,000 ERISA covered plans will 

send the enrollment opportunity notice 

to all 79,573,000 employees eligible for 

group health insurance coverage. The 

Departments estimate that preparing the 

enrollment notice will require 30 

minutes of legal professional time at a 

labor rate of $119 per hour 20 and one 

minute of clerical time at $26 per hour 

per paper notice to distribute the 

notices.21 This results in an hour burden 

of nearly 822,000 hours and an 

associated equivalent cost of nearly 

$21,513,000. 

The Departments estimate that the 

cost burden associated with distributing 

the approximately 79,573,000 notices 

will be approximately $2,467,000 based 

on one minute of clerical time, and $.05 

per page for material and printing costs. 

The Departments assumed that 38 

percent of the notices would be sent 

electronically.22 In addition, plans can 

send these notices with other plan 

documents, such as open enrollment 

materials. Therefore, the Departments 

have not included postage costs in this 

estimate. The Departments note that 

persons are not required to respond to, 

and generally are not subject to any 

penalty for failing to comply with, an 

ICR unless the ICR has a valid OMB 

control number.23

These paperwork burden estimates 

are summarized as follows: 

Type of Review: New collection. 

Agencies: Employee Benefits Security 

Administration, Department of Labor; 

Internal Revenue Service, U.S. 

Department of the Treasury. 

Title: Affordable Care Act Enrollment 

Opportunity Notice Relating to 

Extended Dependent Coverage. 

OMB Number: 1210–0139; 

1545–2172. 

Affected Public: Business or other forprofit; not-for-profit institutions. 

Total Respondents: 2,800,000. 

Total Responses: 79,573,000. 

Frequency of Response: One-time. 

Estimated Total Annual Burden 

Hours: 411,000 hours (Employee 

Benefits Security Administration); 

411,000 hours (Internal Revenue 

Service). 

Estimated Total Annual Burden Cost: 

$1,233,500 (Employee Benefits Security 

Administration); $1,233,500 (Internal 

Revenue Service). 

2. Department of Health and Human 

Services: Affordable Care Act 

Enrollment Opportunity Notice Relating 

to Extended Dependent Coverage 

We are soliciting public comment on 

the following sections of this document 

that contain information collection 

requirements (ICR) regarding the 

Affordable Care Act—ICR Relating to 

Enrollment Opportunity Notice— 

Dependent Coverage. As discussed 

earlier in this preamble, the Affordable 

Care Act and these interim final 

regulations require issuers in the 

individual market and group health 

plans sponsored by State and local 

governments to notify participants 

regarding an enrollment opportunity 

related to the extension of dependent 

coverage. Prior to the applicability date 

of PHS Act section 2714, a child who 

was covered under a group health plan 

(or group health insurance coverage) as 

a dependent may have lost eligibility for 

coverage under the plan due to age 

before age 26. Moreover, if, when a 

parent first became eligible for coverage, 

a child was under age 26 but older than 

the age at which the plan stopped 

covering children, the child would not 

have become eligible for coverage. 

When the provisions of PHS Act section 

2714 become applicable to the plan (or 

coverage), the plan or coverage can no 

longer exclude coverage for the 

individual until age 26. 

Accordingly, these interim final 

regulations require issuers in the 

individual insurance market and group 

health plans sponsored by State and 

local governments to provide a notice of 

an enrollment opportunity to 

individuals whose coverage ended, or 

who was denied coverage (or was not 

eligible for coverage) under a group 

health plan or group health insurance 

coverage because, under the terms of the 

plan or coverage, the availability of 

dependent coverage of children ended 

before the attainment of age 26. The 

enrollment opportunity must continue 

for at least 30 days, regardless of 

whether the plan or coverage offers an 

open enrollment period and regardless 

of when any open enrollment period 

might otherwise occur. This enrollment 

opportunity must be presented not later 

than the first day of the first plan year 

(in the individual market, policy year) 

beginning on or after September 23, 

2010 (which is the applicability date of 

PHS Act section 2714). Coverage must 

begin not later than the first day of the 

first plan year (in the individual market, 

policy year) beginning on or after 

September 23, 2010.24

The Department estimates that 

126,000 State and local governmental 

plans would have to send 19,627,000 

notices to eligible employees and 490 

insurers in the individual market would 

have to send approximately 5,444,000 

notices to individuals with policies 

covering dependents.25 For purposes of 

this estimate, the Department assumes 

that it will take a legal professional, on 

average, 30 minutes to prepare the 

notice at a labor rate of $119 per hour,26

and one minute, on average, of a clerical 

professional’s time at $26 per hour to 

copy and mail the notice.27 While plans 

could prepare their own notice, the 


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28These estimates are from NAIC 2007 financial 

statements data and the California Department of 

Managed Healthcare (2009), at http:// 

wpso.dmhc.ca.gov/hpsearch/viewall.aspx. 

29For purposes of this burden estimate, the 

Department assumes that 38 percent of the 

disclosures will be provided through electronic 

means. 

30This estimate is based on an average document 

size of one page and $.05 cents per page for material 

and printing costs. 

31For purposes of this burden estimate, the 

Department assumes that 38 percent of the 

disclosures will be provided through electronic 

means. 

32 5 CFR 1320.1 through 1320.18. 

Department assumes that the notices 

will be prepared by service providers. 

The Department has previously 

estimated that there are 630 health 

insurers 28 (460 providing coverage in 

the group market, and 490 providing 

coverage in the individual market). 

Because the hour and cost burden is 

shared among the Departments of Labor/ 

Treasury and the Department of Health 

and Human Services, the burden to 

prepare the notices is calculated using 

half the number of insurers (315). The 

Department assumes that 38 percent of 

the notices would be sent 

electronically.29 Notices that are sent 

electronically do not require any of the 

clerical worker’s time to mail the notice. 

This results in an hour burden of 

approximately 259,000 hours and an 

associated equivalent cost of about 

$6,791,000 to prepare and distribute 

25,071,000 notices. The Department 

estimates that the cost burden 

associated with distributing the notices 

will be approximately $777,000.30 The 

Department assumes that 38 percent of 

the notices would be sent 

electronically.31 In addition, plans and 

issuers can send these notices with 

other plan documents (for example, 

during open enrollment for the 

government plans, or other 

communication at reenrollment in the 

individual market). Therefore, the 

Department did not include postage 

costs in this estimate. The Department 

notes that persons are not required to 

respond to, and generally are not subject 

to any penalty for failing to comply 

with, an ICR unless the ICR has a valid 

OMB control number.32

These paperwork burden estimates 

are summarized as follows: 

Type of Review: New collection. 

Agency: Department of Health and 

Human Services. 

Title: Notice of Special Enrollment 

Opportunity under the Affordable Care 

Act Relating to Dependent Coverage. 

OMB Number: 0938–1089. 

Affected Public: Business; State, 

Local, or Tribal Governments. 

Respondents: 126,000. 

Responses: 25,071,000. 

Frequency of Response: One-time. 

Estimated Total Annual Burden 

Hours: 259,000 hours. 

Estimated Total Annual Burden Cost: 

$777,000. 

If you comment on this information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, 

Attention: CMS Desk Officer, 4140– 

IFC 

Fax: (202) 395–6974; or 

E-mail: 

OIRA_submission@omb.eop.gov 

F. Congressional Review Act 

These interim final regulations are 

subject to the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and have 

been transmitted to Congress and the 

Comptroller General for review. 

G. Unfunded Mandates Reform Act 

The Unfunded Mandates Reform Act 

of 1995 (Pub. L. 104–4) requires 

agencies to prepare several analytic 

statements before proposing any rules 

that may result in annual expenditures 

of $100 million (as adjusted for 

inflation) by State, local and tribal 

governments or the private sector. These 

interim final regulations are not subject 

to the Unfunded Mandates Reform Act, 

because they are being issued as an 

interim final regulation. However, 

consistent with the policy embodied in 

the Unfunded Mandates Reform Act, 

these interim final regulations have 

been designed to be the least 

burdensome alternative for State, local 

and tribal governments, and the private 

sector, while achieving the objectives of 

the Affordable Care Act. 

H. Federalism Statement—Department 

of Labor and Department of Health and 

Human Services 

Executive Order 13132 outlines 

fundamental principles of federalism, 

and requires the adherence to specific 

criteria by Federal agencies in the 

process of their formulation and 

implementation of policies that have 

‘‘substantial direct effects’’ on the States, 

the relationship between the national 

government and States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with State and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of State and local officials in 

the preamble to the regulation. 

In the Departments’ view, these 

interim final regulations have 

federalism implications, because they 

have direct effects on the States, the 

relationship between the national 

government and States, or on the 

distribution of power and 

responsibilities among various levels of 

government. However, in the 

Departments’ view, the federalism 

implications of these interim final 

regulations are substantially mitigated 

because, with respect to health 

insurance issuers, the Departments 

expect that the majority of States will 

enact laws or take other appropriate 

action resulting in their meeting or 

exceeding the Federal standard. 

In general, through section 514, 

ERISA supersedes State laws to the 

extent that they relate to any covered 

employee benefit plan, and preserves 

State laws that regulate insurance, 

banking, or securities. While ERISA 

prohibits States from regulating a plan 

as an insurance or investment company 

or bank, the preemption provisions of 

ERISA section 731 and PHS Act section 

2724 (implemented in 29 CFR 

2590.731(a) and 45 CFR 146.143(a)) 

apply so that the HIPAA requirements 

(including those of the Affordable Care 

Act) are not to be ‘‘construed to 

supersede any provision of State law 

which establishes, implements, or 

continues in effect any standard or 

requirement solely relating to health 

insurance issuers in connection with 

group health insurance coverage except 

to the extent that such standard or 

requirement prevents the application of 

a requirement’’ of a federal standard. 

The conference report accompanying 

HIPAA indicates that this is intended to 

be the ‘‘narrowest’’ preemption of State 

laws. (See House Conf. Rep. No. 104– 

736, at 205, reprinted in 1996 U.S. Code 

Cong. & Admin. News 2018.) States may 

continue to apply State law 

requirements except to the extent that 

such requirements prevent the 

application of the Affordable Care Act 

requirements that are the subject of this 

rulemaking. State insurance laws that 

are more stringent than the Federal 

requirements are unlikely to ‘‘prevent 

the application of’’ the Affordable Care 

Act, and be preempted. Accordingly, 

States have significant latitude to 

impose requirements on health 


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27134 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

insurance issuers that are more 

restrictive than the Federal law. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, the Departments have engaged in 

efforts to consult with and work 

cooperatively with affected State and 

local officials, including attending 

conferences of the National Association 

of Insurance Commissioners and 

consulting with State insurance officials 

on an individual basis. It is expected 

that the Departments will act in a 

similar fashion in enforcing the 

Affordable Care Act requirements. 

Throughout the process of developing 

these interim final regulations, to the 

extent feasible within the specific 

preemption provisions of HIPAA as it 

applies to the Affordable Care Act, the 

Departments have attempted to balance 

the States’ interests in regulating health 

insurance issuers, and Congress’ intent 

to provide uniform minimum 

protections to consumers in every State. 

By doing so, it is the Departments’ view 

that they have complied with the 

requirements of Executive Order 13132. 

Pursuant to the requirements set forth 

in section 8(a) of Executive Order 

13132, and by the signatures affixed to 

these regulations, the Departments 

certify that the Employee Benefits 

Security Administration and the Office 

of Consumer Information and Insurance 

Oversight have complied with the 

requirements of Executive Order 13132 

for the attached regulation in a 

meaningful and timely manner. 

V. Statutory Authority 

The Department of the Treasury 

temporary regulations are adopted 

pursuant to the authority contained in 

sections 7805 and 9833 of the Code. 

The Department of Labor interim final 

regulations are adopted pursuant to the 

authority contained in 29 U.S.C. 1027, 

1059, 1135, 1161–1168, 1169, 1181– 

1183, 1181 note, 1185, 1185a, 1185b, 

1191, 1191a, 1191b, and 1191c; sec. 

101(g), Pub. L. 104–191, 110 Stat. 1936; 

sec. 401(b), Pub. L. 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), 

Pub. L. 110–343, 122 Stat. 3881; sec. 

1001, 1201, and 1562(e), Pub. L. 111– 

148, 124 Stat. 119, as amended by Pub. 

L. 111–152, 124 Stat. 1029; Secretary of 

Labor’s Order 6–2009, 74 FR 21524 

(May 7, 2009). 

The Department of Health and Human 

Services interim final regulations are 

adopted pursuant to the authority 

contained in sections 2701 through 

2763, 2791, and 2792 of the PHS Act (42 

USC 300gg through 300gg–63, 300gg–91, 

and 300gg–92), as amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

26 CFR Part 602 

Reporting and recordkeeping 

requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Parts 144, 146, and 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

Steven T. Miller, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Approved: May 7, 2010. 

Michael F. Mundaca, 

Assistant Secretary of the Treasury (Tax 

Policy). 

Signed this 6th day of May 2010. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Approved: May 4, 2010. 

Jay Angoff, 

Director, Office of Consumer Information and 

Insurance Oversight. 

Approved: May 7, 2010. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

Internal Revenue Service 

26 CFR Chapter 1 

■ Accordingly, 26 CFR Parts 54 and 602 

are amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ Paragraph 1. The authority citation 

for part 54 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805. * * * 

■ Par. 2. Section 54.9815–2714T is 

added to read as follows: 

§ 54.9815–2714T Eligibility of children until 

at least age 26 (temporary). 

(a) In general—(1) A group health 

plan, or a health insurance issuer 

offering group health insurance 

coverage, that makes available 

dependent coverage of children must 

make such coverage available for 

children until attainment of 26 years of 

age. 

(2) The rule of this paragraph (a) is 

illustrated by the following example: 

Example. (i) Facts. For the plan year 

beginning January 1, 2011, a group health 

plan provides health coverage for employees, 

employees’ spouses, and employees’ children 

until the child turns 26. On the birthday of 

a child of an employee, July 17, 2011, the 

child turns 26. The last day the plan covers 

the child is July 16, 2011. 

(ii) Conclusion. In this Example, the plan 

satisfies the requirement of this paragraph (a) 

with respect to the child. 

(b) Restrictions on plan definition of 

dependent. With respect to a child who 

has not attained age 26, a plan or issuer 

may not define dependent for purposes 

of eligibility for dependent coverage of 

children other than in terms of a 

relationship between a child and the 

participant. Thus, for example, 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, except that paragraph (g) of 

this section provides a special rule for 

plan years beginning before January 1, 

2014 for grandfathered health plans that 

are group health plans. (Other 

requirements of Federal or State law, 

including section 609 of ERISA or 

section 1908 of the Social Security Act, 

may mandate coverage of certain 

children.) 

(c) Coverage of grandchildren not 

required. Nothing in this section 

requires a plan or issuer to make 

coverage available for the child of a 

child receiving dependent coverage. 

(d) Uniformity irrespective of age. The 

terms of the plan or health insurance 

coverage providing dependent coverage 

of children cannot vary based on age 

(except for children who are age 26 or 

older). 

(e) Examples. The rules of paragraph 

(d) of this section are illustrated by the 

following examples: 

Example 1. (i) Facts. A group health plan 

offers a choice of self-only or family health 

coverage. Dependent coverage is provided 

under family health coverage for children of 

participants who have not attained age 26. 

The plan imposes an additional premium 

surcharge for children who are older than age 

18. 

(ii) Conclusion. In this Example 1, the plan 

violates the requirement of paragraph (d) of 

this section because the plan varies the terms 


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Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27135 

for dependent coverage of children based on 

age. 

Example 2. (i) Facts. A group health plan 

offers a choice among the following tiers of 

health coverage: self-only, self-plus-one, selfplus-two, and self-plus-three-or-more. The 

cost of coverage increases based on the 

number of covered individuals. The plan 

provides dependent coverage of children 

who have not attained age 26. 

(ii) Conclusion. In this Example 2, the plan 

does not violate the requirement of paragraph 

(d) of this section that the terms of dependent 

coverage for children not vary based on age. 

Although the cost of coverage increases for 

tiers with more covered individuals, the 

increase applies without regard to the age of 

any child. 

Example 3. (i) Facts. A group health plan 

offers two benefit packages—an HMO option 

and an indemnity option. Dependent 

coverage is provided for children of 

participants who have not attained age 26. 

The plan limits children who are older than 

age 18 to the HMO option. 

(ii) Conclusion. In this Example 3, the plan 

violates the requirement of paragraph (d) of 

this section because the plan, by limiting 

children who are older than age 18 to the 

HMO option, varies the terms for dependent 

coverage of children based on age. 

(f) Transitional rules for individuals 

whose coverage ended by reason of 

reaching a dependent eligibility 

threshold—(1) In general. The relief 

provided in the transitional rules of this 

paragraph (f) applies with respect to any 

child— 

(i) Whose coverage ended, or who was 

denied coverage (or was not eligible for 

coverage) under a group health plan or 

group health insurance coverage 

because, under the terms of the plan or 

coverage, the availability of dependent 

coverage of children ended before the 

attainment of age 26 (which, under this 

section, is no longer permissible); and 

(ii) Who becomes eligible (or is 

required to become eligible) for coverage 

under a group health plan or group 

health insurance coverage on the first 

day of the first plan year beginning on 

or after September 23, 2010 by reason of 

the application of this section. 

(2) Opportunity to enroll required. (i) 

If a group health plan, or group health 

insurance coverage, in which a child 

described in paragraph (f)(1) of this 

section is eligible to enroll (or is 

required to become eligible to enroll) is 

the plan or coverage in which the 

child’s coverage ended (or did not 

begin) for the reasons described in 

paragraph (f)(1)(i) of this section, and if 

the plan, or the issuer of such coverage, 

is subject to the requirements of this 

section, the plan and the issuer are 

required to give the child an 

opportunity to enroll that continues for 

at least 30 days (including written 

notice of the opportunity to enroll). This 

opportunity (including the written 

notice) must be provided beginning not 

later than the first day of the first plan 

year beginning on or after September 23, 

2010. 

(ii) The written notice must include a 

statement that children whose coverage 

ended, or who were denied coverage (or 

were not eligible for coverage), because 

the availability of dependent coverage of 

children ended before attainment of age 

26 are eligible to enroll in the plan or 

coverage. The notice may be provided to 

an employee on behalf of the 

employee’s child. In addition, the notice 

may be included with other enrollment 

materials that a plan distributes to 

employees, provided the statement is 

prominent. If a notice satisfying the 

requirements of this paragraph (f)(2) is 

provided to an employee whose child is 

entitled to an enrollment opportunity 

under this paragraph (f), the obligation 

to provide the notice of enrollment 

opportunity under this paragraph (f)(2) 

with respect to that child is satisfied for 

both the plan and the issuer. 

(3) Effective date of coverage. In the 

case of an individual who enrolls under 

paragraph (f)(2) of this section, coverage 

must take effect not later than the first 

day of the first plan year beginning on 

or after September 23, 2010. 

(4) Treatment of enrollees in a group 

health plan. Any child enrolling in a 

group health plan pursuant to paragraph 

(f)(2) of this section must be treated as 

if the child were a special enrollee, as 

provided under the rules of § 54.9801– 

6(d). Accordingly, the child (and, if the 

child would not be a participant once 

enrolled in the plan, the participant 

through whom the child is otherwise 

eligible for coverage under the plan) 

must be offered all the benefit packages 

available to similarly situated 

individuals who did not lose coverage 

by reason of cessation of dependent 

status. For this purpose, any difference 

in benefits or cost-sharing requirements 

constitutes a different benefit package. 

The child also cannot be required to pay 

more for coverage than similarly 

situated individuals who did not lose 

coverage by reason of cessation of 

dependent status. 

(5) Examples. The rules of this 

paragraph (f) are illustrated by the 

following examples: 

Example 1. (i) Facts. Employer Y maintains 

a group health plan with a calendar year plan 

year. The plan has a single benefit package. 

For the 2010 plan year, the plan allows 

children of employees to be covered under 

the plan until age 19, or until age 23 for 

children who are full-time students. 

Individual B, an employee of Y, and 

Individual C, B’s child and a full-time 

student, were enrolled in Y’s group health 

plan at the beginning of the 2010 plan year. 

On June 10, 2010, C turns 23 years old and 

loses dependent coverage under Y’s plan. On 

or before January 1, 2011, Y’s group health 

plan gives B written notice that individuals 

who lost coverage by reason of ceasing to be 

a dependent before attainment of age 26 are 

eligible to enroll in the plan, and that 

individuals may request enrollment for such 

children through February 14, 2011 with 

enrollment effective retroactively to January 

1, 2011. 

(ii) Conclusion. In this Example 1, the plan 

has complied with the requirements of this 

paragraph (f) by providing an enrollment 

opportunity to C that lasts at least 30 days. 

Example 2. (i) Facts. Employer Z maintains 

a group health plan with a plan year 

beginning October 1 and ending September 

30. Prior to October 1, 2010, the group health 

plan allows children of employees to be 

covered under the plan until age 22. 

Individual D, an employee of Z, and 

Individual E, D’s child, are enrolled in family 

coverage under Z’s group health plan for the 

plan year beginning on October 1, 2008. On 

May 1, 2009, E turns 22 years old and ceases 

to be eligible as a dependent under Z’s plan 

and loses coverage. D drops coverage but 

remains an employee of Z. 

(ii) Conclusion. In this Example 2, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll (including 

written notice of an opportunity to enroll) 

that continues for at least 30 days, with 

enrollment effective not later than October 1, 

2010. 

Example 3. (i) Facts. Same facts as 

Example 2, except that D did not drop 

coverage. Instead, D switched to a lower-cost 

benefit package option. 

(ii) Conclusion. In this Example 3, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll in any 

benefit package available to similarly situated 

individuals who enroll when first eligible. 

Example 4. (i) Facts. Same facts as 

Example 2, except that E elected COBRA 

continuation coverage. 

(ii) Conclusion. In this Example 4, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll other than 

as a COBRA qualified beneficiary (and must 

provide, by that date, written notice of the 

opportunity to enroll) that continues for at 

least 30 days, with enrollment effective not 

later than October 1, 2010. 

Example 5. (i) Facts. Employer X maintains 

a group health plan with a calendar year plan 

year. Prior to 2011, the plan allows children 

of employees to be covered under the plan 

until the child attains age 22. During the 

2009 plan year, an individual with a 22-year 

old child joins the plan; the child is denied 

coverage because the child is 22. 

(ii) Conclusion. In this Example 5, 

notwithstanding that the child was not 

previously covered under the plan, the plan 

must provide the child, not later than January 

1, 2011, an opportunity to enroll (including 

written notice to the employee of an 

opportunity to enroll the child) that 

continues for at least 30 days, with 

enrollment effective not later than January 1, 

2011. 

(g) Special rule for grandfathered 

group health plans—(1) For plan years 


srobinson on DSKHWCL6B1PROD with RULES2
27136 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

beginning before January 1, 2014, a 

group health plan that qualifies as a 

grandfathered health plan under section 

1251 of the Patient Protection and 

Affordable Care Act and that makes 

available dependent coverage of 

children may exclude an adult child 

who has not attained age 26 from 

coverage only if the adult child is 

eligible to enroll in an eligible 

employer-sponsored health plan (as 

defined in section 5000A(f)(2)) other 

than a group health plan of a parent. 

(2) For plan years beginning on or 

after January 1, 2014, a group health 

plan that qualifies as a grandfathered 

health plan under section 1251 of the 

Patient Protection and Affordable Care 

Act must comply with the requirements 

of paragraphs (a) through (f) of this 

section. 

(h) Applicability date. The provisions 

of this section apply for plan years 

beginning on or after September 23, 

2010. 

(i) Expiration date. This section 

expires on or before May 13, 2013. 

PART 602—OMB CONTROL NUMBERS 

UNDER THE PAPERWORK 

REDUCTION ACT 

■ Par. 5. The authority citation for part 

602 continues to read as follows: 

Authority: 26 U.S.C. 7805. 

■ Par. 6. In § 602.101, paragraph (b) is 

amended by adding the following entry 

in numerical order to the table: 

§ 602.101 OMB Control numbers. 

* * * * * 

(b) * * * 

CFR part or section where 

identified and described 

Current OMB 

control No. 

* * * * * 

54.9815–2714T ....................... 1545–2172 

* * * * * 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

■ 29 CFR Part 2590 is amended as 

follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 1. The authority citation for Part 2590 

is revised to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1191, 1191a, 1191b, and 

1191c; sec. 101(g), Pub. L.104–191, 110 Stat. 

1936; sec. 401(b), Pub. L. 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), Pub. L. 

110–343, 122 Stat. 3881; sec. 1001, 1201, and 

1562(e), Pub. L. 111–148, 124 Stat. 119, as 

amended by Pub. L. 111–152, 124 Stat. 1029; 

Secretary of Labor’s Order 6–2009, 74 FR 

21524 (May 7, 2009). 

■ 2. Section 2590.715–2714 is added to 

Subpart C to read as follows: 

§ 2590.715–2714 Eligibility of children until 

at least age 26. 

(a) In general—(1) A group health 

plan, or a health insurance issuer 

offering group health insurance 

coverage, that makes available 

dependent coverage of children must 

make such coverage available for 

children until attainment of 26 years of 

age. 

(2) The rule of this paragraph (a) is 

illustrated by the following example: 

Example. (i) Facts. For the plan year 

beginning January 1, 2011, a group health 

plan provides health coverage for employees, 

employees’ spouses, and employees’ children 

until the child turns 26. On the birthday of 

a child of an employee, July 17, 2011, the 

child turns 26. The last day the plan covers 

the child is July 16, 2011. 

(ii) Conclusion. In this Example, the plan 

satisfies the requirement of this paragraph (a) 

with respect to the child. 

(b) Restrictions on plan definition of 

dependent. With respect to a child who 

has not attained age 26, a plan or issuer 

may not define dependent for purposes 

of eligibility for dependent coverage of 

children other than in terms of a 

relationship between a child and the 

participant. Thus, for example, 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, except that paragraph (g) of 

this section provides a special rule for 

plan years beginning before January 1, 

2014 for grandfathered health plans that 

are group health plans. (Other 

requirements of Federal or State law, 

including section 609 of ERISA or 

section 1908 of the Social Security Act, 

may mandate coverage of certain 

children.) 

(c) Coverage of grandchildren not 

required. Nothing in this section 

requires a plan or issuer to make 

coverage available for the child of a 

child receiving dependent coverage. 

(d) Uniformity irrespective of age. The 

terms of the plan or health insurance 

coverage providing dependent coverage 

of children cannot vary based on age 

(except for children who are age 26 or 

older). 

(e) Examples. The rules of paragraph 

(d) of this section are illustrated by the 

following examples: 

Example 1. (i) Facts. A group health plan 

offers a choice of self-only or family health 

coverage. Dependent coverage is provided 

under family health coverage for children of 

participants who have not attained age 26. 

The plan imposes an additional premium 

surcharge for children who are older than age 

18. 

(ii) Conclusion. In this Example 1, the plan 

violates the requirement of paragraph (d) of 

this section because the plan varies the terms 

for dependent coverage of children based on 

age. 

Example 2. (i) Facts. A group health plan 

offers a choice among the following tiers of 

health coverage: self-only, self-plus-one, selfplus-two, and self-plus-three-or-more. The 

cost of coverage increases based on the 

number of covered individuals. The plan 

provides dependent coverage of children 

who have not attained age 26. 

(ii) Conclusion. In this Example 2, the plan 

does not violate the requirement of paragraph 

(d) of this section that the terms of dependent 

coverage for children not vary based on age. 

Although the cost of coverage increases for 

tiers with more covered individuals, the 

increase applies without regard to the age of 

any child. 

Example 3. (i) Facts. A group health plan 

offers two benefit packages—an HMO option 

and an indemnity option. Dependent 

coverage is provided for children of 

participants who have not attained age 26. 

The plan limits children who are older than 

age 18 to the HMO option. 

(ii) Conclusion. In this Example 3, the plan 

violates the requirement of paragraph (d) of 

this section because the plan, by limiting 

children who are older than age 18 to the 

HMO option, varies the terms for dependent 

coverage of children based on age. 

(f) Transitional rules for individuals 

whose coverage ended by reason of 

reaching a dependent eligibility 

threshold—(1) In general. The relief 

provided in the transitional rules of this 

paragraph (f) applies with respect to any 

child— 

(i) Whose coverage ended, or who was 

denied coverage (or was not eligible for 

coverage) under a group health plan or 

group health insurance coverage 

because, under the terms of the plan or 

coverage, the availability of dependent 

coverage of children ended before the 

attainment of age 26 (which, under this 

section, is no longer permissible); and 

(ii) Who becomes eligible (or is 

required to become eligible) for coverage 

under a group health plan or group 

health insurance coverage on the first 

day of the first plan year beginning on 

or after September 23, 2010 by reason of 

the application of this section. 

(2) Opportunity to enroll required—(i) 

If a group health plan, or group health 


srobinson on DSKHWCL6B1PROD with RULES2
Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27137 

insurance coverage, in which a child 

described in paragraph (f)(1) of this 

section is eligible to enroll (or is 

required to become eligible to enroll) is 

the plan or coverage in which the 

child’s coverage ended (or did not 

begin) for the reasons described in 

paragraph (f)(1)(i) of this section, and if 

the plan, or the issuer of such coverage, 

is subject to the requirements of this 

section, the plan and the issuer are 

required to give the child an 

opportunity to enroll that continues for 

at least 30 days (including written 

notice of the opportunity to enroll). This 

opportunity (including the written 

notice) must be provided beginning not 

later than the first day of the first plan 

year beginning on or after September 23, 

2010. 

(ii) The written notice must include a 

statement that children whose coverage 

ended, or who were denied coverage (or 

were not eligible for coverage), because 

the availability of dependent coverage of 

children ended before attainment of age 

26 are eligible to enroll in the plan or 

coverage. The notice may be provided to 

an employee on behalf of the 

employee’s child. In addition, the notice 

may be included with other enrollment 

materials that a plan distributes to 

employees, provided the statement is 

prominent. If a notice satisfying the 

requirements of this paragraph (f)(2) is 

provided to an employee whose child is 

entitled to an enrollment opportunity 

under this paragraph (f), the obligation 

to provide the notice of enrollment 

opportunity under this paragraph (f)(2) 

with respect to that child is satisfied for 

both the plan and the issuer. 

(3) Effective date of coverage. In the 

case of an individual who enrolls under 

paragraph (f)(2) of this section, coverage 

must take effect not later than the first 

day of the first plan year beginning on 

or after September 23, 2010. 

(4) Treatment of enrollees in a group 

health plan. Any child enrolling in a 

group health plan pursuant to paragraph 

(f)(2) of this section must be treated as 

if the child were a special enrollee, as 

provided under the rules of § 2590.701– 

6(d) of this Part. Accordingly, the child 

(and, if the child would not be a 

participant once enrolled in the plan, 

the participant through whom the child 

is otherwise eligible for coverage under 

the plan) must be offered all the benefit 

packages available to similarly situated 

individuals who did not lose coverage 

by reason of cessation of dependent 

status. For this purpose, any difference 

in benefits or cost-sharing requirements 

constitutes a different benefit package. 

The child also cannot be required to pay 

more for coverage than similarly 

situated individuals who did not lose 

coverage by reason of cessation of 

dependent status. 

(5) Examples. The rules of this 

paragraph (f) are illustrated by the 

following examples: 

Example 1. (i) Facts. Employer Y maintains 

a group health plan with a calendar year plan 

year. The plan has a single benefit package. 

For the 2010 plan year, the plan allows 

children of employees to be covered under 

the plan until age 19, or until age 23 for 

children who are full-time students. 

Individual B, an employee of Y, and 

Individual C, B’s child and a full-time 

student, were enrolled in Y’s group health 

plan at the beginning of the 2010 plan year. 

On June 10, 2010, C turns 23 years old and 

loses dependent coverage under Y’s plan. On 

or before January 1, 2011, Y’s group health 

plan gives B written notice that individuals 

who lost coverage by reason of ceasing to be 

a dependent before attainment of age 26 are 

eligible to enroll in the plan, and that 

individuals may request enrollment for such 

children through February 14, 2011 with 

enrollment effective retroactively to January 

1, 2011. 

(ii) Conclusion. In this Example 1, the plan 

has complied with the requirements of this 

paragraph (f) by providing an enrollment 

opportunity to C that lasts at least 30 days. 

Example 2. (i) Facts. Employer Z maintains 

a group health plan with a plan year 

beginning October 1 and ending September 

30. Prior to October 1, 2010, the group health 

plan allows children of employees to be 

covered under the plan until age 22. 

Individual D, an employee of Z, and 

Individual E, D’s child, are enrolled in family 

coverage under Z’s group health plan for the 

plan year beginning on October 1, 2008. On 

May 1, 2009, E turns 22 years old and ceases 

to be eligible as a dependent under Z’s plan 

and loses coverage. D drops coverage but 

remains an employee of Z. 

(ii) Conclusion. In this Example 2, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll (including 

written notice of an opportunity to enroll) 

that continues for at least 30 days, with 

enrollment effective not later than October 1, 

2010. 

Example 3. (i) Facts. Same facts as 

Example 2, except that D did not drop 

coverage. Instead, D switched to a lower-cost 

benefit package option. 

(ii) Conclusion. In this Example 3, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll in any 

benefit package available to similarly situated 

individuals who enroll when first eligible. 

Example 4. (i) Facts. Same facts as 

Example 2, except that E elected COBRA 

continuation coverage. 

(ii) Conclusion. In this Example 4, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll other than 

as a COBRA qualified beneficiary (and must 

provide, by that date, written notice of the 

opportunity to enroll) that continues for at 

least 30 days, with enrollment effective not 

later than October 1, 2010. 

Example 5. (i) Facts. Employer X maintains 

a group health plan with a calendar year plan 

year. Prior to 2011, the plan allows children 

of employees to be covered under the plan 

until the child attains age 22. During the 

2009 plan year, an individual with a 22-year 

old child joins the plan; the child is denied 

coverage because the child is 22. 

(ii) Conclusion. In this Example 5, 

notwithstanding that the child was not 

previously covered under the plan, the plan 

must provide the child, not later than January 

1, 2011, an opportunity to enroll (including 

written notice to the employee of an 

opportunity to enroll the child) that 

continues for at least 30 days, with 

enrollment effective not later than January 1, 

2011. 

(g) Special rule for grandfathered 

group health plans—(1) For plan years 

beginning before January 1, 2014, a 

group health plan that qualifies as a 

grandfathered health plan under section 

1251 of the Patient Protection and 

Affordable Care Act and that makes 

available dependent coverage of 

children may exclude an adult child 

who has not attained age 26 from 

coverage only if the adult child is 

eligible to enroll in an eligible 

employer-sponsored health plan (as 

defined in section 5000A(f)(2) of the 

Internal Revenue Code) other than a 

group health plan of a parent. 

(2) For plan years beginning on or 

after January 1, 2014, a group health 

plan that qualifies as a grandfathered 

health plan under section 1251 of the 

Patient Protection and Affordable Care 

Act must comply with the requirements 

of paragraphs (a) through (f) of this 

section. 

(h) Applicability date. The provisions 

of this section apply for plan years 

beginning on or after September 23, 

2010. 

Department of Health and Human 

Services 

45 CFR Subtitle A 

■ For reasons set forth in the preamble, 

the Department of Health and Human 

Services is amending 45 CFR Subtitle A, 

Subchapter B as follows: 

PART 144—REQUIREMENTS 

RELATING TO HEALTH INSURANCE 

COVERAGE 

Subpart A—General Provisions 

■ 1. Section 144.101 is amended by- 

■ A. Revising paragraph (a). 

■ B. Redesignating paragraphs (b), (c) 

and (d) as paragraphs (c), (d) and (e), 

respectively. 

■ C. Adding a new paragraph (b). 

■ D. Revising the first sentence of newly 

redesignated paragraph (c). 

■ E. Amending newly redesignated 

paragraph (d) by removing ‘‘2722’’ and 

adding in its place ‘‘2723’’. 

The revisions and additions read as 

follows: 


srobinson on DSKHWCL6B1PROD with RULES2
27138 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

§ 144.101 Basis and purpose. 

(a) Part 146 of this subchapter 

implements requirements of Title XXVII 

of the Public Health Service Act (PHS 

Act, 42 U.S.C. 300gg, et seq.) that apply 

to group health plans and group health 

insurance issuers. 

(b) Part 147 of this subchapter 

implements the provisions of the Patient 

Protection and Affordable Care Act that 

apply to both group health plans and 

health insurance issuers in the Group 

and Individual Markets. 

(c) Part 148 of this subchapter 

implements Individual Health Insurance 

Market requirements of the PHS Act. 

* * * 

* * * * * 

■ 2. Section 144.103 is amended by 

adding the definition of ‘‘Policy Year’’ to 

read as follows: 

§ 144.103 Defintions. 

* * * * * 

Policy Year means in the individual 

health insurance market the 12-month 

period that is designated as the policy 

year in the policy documents of the 

individual health insurance coverage. If 

there is no designation of a policy year 

in the policy document (or no such 

policy document is available), then the 

policy year is the deductible or limit 

year used under the coverage. If 

deductibles or other limits are not 

imposed on a yearly basis, the policy 

year is the calendar year. 

* * * * * 

PART 146—REQUIREMENTS FOR THE 

GROUP HEALTH INSURANCE 

MARKET 

■ 3. Section 146.101 is amended by— 

■ A. Revising the first sentence of 

paragraph (a). 

■ B. Revising paragraph (b)(4). 

The revisions read as follows: 

§ 146.101 Basis and Scope. 

(a) Statutory basis. This part 

implements the Group Market 

requirements of the PHS Act.* * * 

(b) * * * 

(4) Subpart E. Subpart E of this part 

implements requirements relating to 

group health plans and issuers in the 

Group Health Insurance Market. 

* * * * * 

§ 146.115 [Amended] 

■ 4. Section 146.115 is amended by 

removing ‘‘2721(b)’’ wherever it appears 

in paragraph (a)(6) and adding in its 

place ‘‘2722(a)’’. 

§ 146.130 [Amended] 

■ 5. Section 146.130 is amended by— 

■ A. Removing ‘‘2704’’ wherever it 

appears in paragraphs (e) and (f), 

including the examples in paragraph 

(e)(4), and adding in its place ‘‘2725’’. 

■ B. Removing ‘‘2723’’ wherever it 

appears in paragraph (e)(3), including 

the paragraph heading, and adding in its 

place ‘‘2724’’. 

■ 6. A new Part 147 is added to read as 

follows: 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

Authority: Secs 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

USC 300gg through 300gg–63, 300gg–91, and 

300gg–92), as amended. 

§ 147.100 Basis and scope. 

Part 147 of this subchapter 

implements the requirements of the 

Patient Protection and Affordable Care 

Act that apply to group health plans and 

health insurance issuers in the Group 

and Individual markets. 

§ 147.120 Eligibility of children until at 

least age 26. 

(a) In general—(1) A group health 

plan, or a health insurance issuer 

offering group or individual health 

insurance coverage, that makes available 

dependent coverage of children must 

make such coverage available for 

children until attainment of 26 years of 

age. 

(2) The rule of this paragraph (a) is 

illustrated by the following example: 

Example. (i) Facts. For the plan year 

beginning January 1, 2011, a group health 

plan provides health coverage for employees, 

employees’ spouses, and employees’ children 

until the child turns 26. On the birthday of 

a child of an employee, July 17, 2011, the 

child turns 26. The last day the plan covers 

the child is July 16, 2011. 

(ii) Conclusion. In this Example, the plan 

satisfies the requirement of this paragraph (a) 

with respect to the child. 

(b) Restrictions on plan definition of 

dependent. With respect to a child who 

has not attained age 26, a plan or issuer 

may not define dependent for purposes 

of eligibility for dependent coverage of 

children other than in terms of a 

relationship between a child and the 

participant (in the individual market, 

the primary subscriber). Thus, for 

example, 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 primary subscriber, or any 

other person), residency with the 

participant (in the individual market, 

the primary subscriber) 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, except that paragraph (g) of 

this section provides a special rule for 

plan years beginning before January 1, 

2014 for grandfathered health plans that 

are group health plans. (Other 

requirements of Federal or State law, 

including section 609 of ERISA or 

section 1908 of the Social Security Act, 

may mandate coverage of certain 

children.) 

(c) Coverage of grandchildren not 

required. Nothing in this section 

requires a plan or issuer to make 

coverage available for the child of a 

child receiving dependent coverage. 

(d) Uniformity irrespective of age. The 

terms of the plan or health insurance 

coverage providing dependent coverage 

of children cannot vary based on age 

(except for children who are age 26 or 

older). 

(e) Examples. The rules of paragraph 

(d) of this section are illustrated by the 

following examples: 

Example 1. (i) Facts. A group health plan 

offers a choice of self-only or family health 

coverage. Dependent coverage is provided 

under family health coverage for children of 

participants who have not attained age 26. 

The plan imposes an additional premium 

surcharge for children who are older than age 

18. 

(ii) Conclusion. In this Example 1, the plan 

violates the requirement of paragraph (d) of 

this section because the plan varies the terms 

for dependent coverage of children based on 

age. 

Example 2. (i) Facts. A group health plan 

offers a choice among the following tiers of 

health coverage: Self-only, self-plus-one, selfplus-two, and self-plus-three-or-more. The 

cost of coverage increases based on the 

number of covered individuals. The plan 

provides dependent coverage of children 

who have not attained age 26. 

(ii) Conclusion. In this Example 2, the plan 

does not violate the requirement of paragraph 

(d) of this section that the terms of dependent 

coverage for children not vary based on age. 

Although the cost of coverage increases for 

tiers with more covered individuals, the 

increase applies without regard to the age of 

any child. 

Example 3. (i) Facts. A group health plan 

offers two benefit packages—an HMO option 

and an indemnity option. Dependent 

coverage is provided for children of 

participants who have not attained age 26. 

The plan limits children who are older than 

age 18 to the HMO option. 

(ii) Conclusion. In this Example 3, the plan 

violates the requirement of paragraph (d) of 

this section because the plan, by limiting 

children who are older than age 18 to the 

HMO option, varies the terms for dependent 

coverage of children based on age. 

(f) Transitional rules for individuals 

whose coverage ended by reason of 

reaching a dependent eligibility 


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Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 27139 

threshold—(1) In general. The relief 

provided in the transitional rules of this 

paragraph (f) applies with respect to any 

child— 

(i) Whose coverage ended, or who was 

denied coverage (or was not eligible for 

coverage) under a group health plan or 

group or individual health insurance 

coverage because, under the terms of the 

plan or coverage, the availability of 

dependent coverage of children ended 

before the attainment of age 26 (which, 

under this section, is no longer 

permissible); and 

(ii) Who becomes eligible (or is 

required to become eligible) for coverage 

under a group health plan or group or 

individual health insurance coverage on 

the first day of the first plan year (in the 

individual market, the first day of the 

first policy year) beginning on or after 

September 23, 2010 by reason of the 

application of this section. 

(2) Opportunity to enroll required—(i) 

If a group health plan, or group or 

individual health insurance coverage, in 

which a child described in paragraph 

(f)(1) of this section is eligible to enroll 

(or is required to become eligible to 

enroll) is the plan or coverage in which 

the child’s coverage ended (or did not 

begin) for the reasons described in 

paragraph (f)(1)(i) of this section, and if 

the plan, or the issuer of such coverage, 

is subject to the requirements of this 

section, the plan and the issuer are 

required to give the child an 

opportunity to enroll that continues for 

at least 30 days (including written 

notice of the opportunity to enroll). This 

opportunity (including the written 

notice) must be provided beginning not 

later than the first day of the first plan 

year (in the individual market, the first 

day of the first policy year) beginning on 

or after September 23, 2010. 

(ii) The written notice must include a 

statement that children whose coverage 

ended, or who were denied coverage (or 

were not eligible for coverage), because 

the availability of dependent coverage of 

children ended before attainment of age 

26 are eligible to enroll in the plan or 

coverage. The notice may be provided to 

an employee on behalf of the 

employee’s child (in the individual 

market, to the primary subscriber on 

behalf of the primary subscriber’s child). 

In addition, for a group health plan or 

group health insurance coverage, the 

notice may be included with other 

enrollment materials that a plan 

distributes to employees, provided the 

statement is prominent. For a group 

health plan or group health insurance 

coverage, if a notice satisfying the 

requirements of this paragraph (f)(2) is 

provided to an employee whose child is 

entitled to an enrollment opportunity 

under this paragraph (f), the obligation 

to provide the notice of enrollment 

opportunity under this paragraph (f)(2) 

with respect to that child is satisfied for 

both the plan and the issuer. 

(3) Effective date of coverage. In the 

case of an individual who enrolls under 

paragraph (f)(2) of this section, coverage 

must take effect not later than the first 

day of the first plan year (in the 

individual market, the first day of the 

first policy year) beginning on or after 

September 23, 2010. 

(4) Treatment of enrollees in a group 

health plan. For purposes of this Part, 

any child enrolling in a group health 

plan pursuant to paragraph (f)(2) of this 

section must be treated as if the child 

were a special enrollee, as provided 

under the rules of 45 CFR 146.117(d). 

Accordingly, the child (and, if the child 

would not be a participant once 

enrolled in the plan, the participant 

through whom the child is otherwise 

eligible for coverage under the plan) 

must be offered all the benefit packages 

available to similarly situated 

individuals who did not lose coverage 

by reason of cessation of dependent 

status. For this purpose, any difference 

in benefits or cost-sharing requirements 

constitutes a different benefit package. 

The child also cannot be required to pay 

more for coverage than similarly 

situated individuals who did not lose 

coverage by reason of cessation of 

dependent status. 

(5) Examples. The rules of this 

paragraph (f) are illustrated by the 

following examples: 

Example 1. (i) Facts. Employer Y maintains 

a group health plan with a calendar year plan 

year. The plan has a single benefit package. 

For the 2010 plan year, the plan allows 

children of employees to be covered under 

the plan until age 19, or until age 23 for 

children who are full-time students. 

Individual B, an employee of Y, and 

Individual C, B’s child and a full-time 

student, were enrolled in Y’s group health 

plan at the beginning of the 2010 plan year. 

On June 10, 2010, C turns 23 years old and 

loses dependent coverage under Y’s plan. On 

or before January 1, 2011, Y’s group health 

plan gives B written notice that individuals 

who lost coverage by reason of ceasing to be 

a dependent before attainment of age 26 are 

eligible to enroll in the plan, and that 

individuals may request enrollment for such 

children through February 14, 2011 with 

enrollment effective retroactively to January 

1, 2011. 

(ii) Conclusion. In this Example 1, the plan 

has complied with the requirements of this 

paragraph (f) by providing an enrollment 

opportunity to C that lasts at least 30 days. 

Example 2. (i) Facts. Employer Z maintains 

a group health plan with a plan year 

beginning October 1 and ending September 

30. Prior to October 1, 2010, the group health 

plan allows children of employees to be 

covered under the plan until age 22. 

Individual D, an employee of Z, and 

Individual E, D’s child, are enrolled in family 

coverage under Z’s group health plan for the 

plan year beginning on October 1, 2008. On 

May 1, 2009, E turns 22 years old and ceases 

to be eligible as a dependent under Z’s plan 

and loses coverage. D drops coverage but 

remains an employee of Z. 

(ii) Conclusion. In this Example 2, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll (including 

written notice of an opportunity to enroll) 

that continues for at least 30 days, with 

enrollment effective not later than October 1, 

2010. 

Example 3. (i) Facts. Same facts as 

Example 2, except that D did not drop 

coverage. Instead, D switched to a lower-cost 

benefit package option. 

(ii) Conclusion. In this Example 3, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll in any 

benefit package available to similarly situated 

individuals who enroll when first eligible. 

Example 4. (i) Facts. Same facts as 

Example 2, except that E elected COBRA 

continuation coverage. 

(ii) Conclusion. In this Example 4, not later 

than October 1, 2010, the plan must provide 

D and E an opportunity to enroll other than 

as a COBRA qualified beneficiary (and must 

provide, by that date, written notice of the 

opportunity to enroll) that continues for at 

least 30 days, with enrollment effective not 

later than October 1, 2010. 

Example 5. (i) Facts. Employer X 

maintains a group health plan with a 

calendar year plan year. Prior to 2011, the 

plan allows children of employees to be 

covered under the plan until the child attains 

age 22. During the 2009 plan year, an 

individual with a 22-year old child joins the 

plan; the child is denied coverage because 

the child is 22. 

(ii) Conclusion. In this Example 5, 

notwithstanding that the child was not 

previously covered under the plan, the plan 

must provide the child, not later than January 

1, 2011, an opportunity to enroll (including 

written notice to the employee of an 

opportunity to enroll the child) that 

continues for at least 30 days, with 

enrollment effective not later than January 1, 

2011. 

(g) Special rule for grandfathered 

group health plans—(1) For plan years 

beginning before January 1, 2014, a 

group health plan that qualifies as a 

grandfathered health plan under section 

1251 of the Patient Protection and 

Affordable Care Act and that makes 

available dependent coverage of 

children may exclude an adult child 

who has not attained age 26 from 

coverage only if the adult child is 

eligible to enroll in an eligible 

employer-sponsored health plan (as 

defined in section 5000A(f)(2) of the 

Internal Revenue Code) other than a 

group health plan of a parent. 

(2) For plan years beginning on or 

after January 1, 2014, a group health 

plan that qualifies as a grandfathered 


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27140 Federal Register / Vol. 75, No. 92 / Thursday, May 13, 2010 / Rules and Regulations 

health plan under section 1251 of the 

Patient Protection and Affordable Care 

Act must comply with the requirements 

of paragraphs (a) through (f) of this 

section. 

(h) Applicability date. The provisions 

of this section apply for plan years (in 

the individual market, policy years) 

beginning on or after September 23, 

2010. 

[FR Doc. 2010–11391 Filed 5–10–10; 4:15 pm] 

BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P 


srobinson on DSKHWCL6B1PROD with RULES2