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 Creative Health Benefits Solutions for Today, Strong Policy for Tomorrow 

 

August 11, 2010 

The Honorable Hilda L. Solis 

Secretary 

U.S. Department of Labor 

Employee Benefits Security Administration 

Office of Health Plan Standards and Compliance Assistance 

Attention: RIN 1210–AB41 

200 Constitution Avenue, N.W. 

Room N–5653 

Washington, DC 20210 

The Honorable Kathleen Sebelius 

Secretary 

U.S. Department of Health and Human Services 

Office of Consumer Information and Insurance Oversight 

Attention: OCIIO–4150–IFC 

RIN 0991–AB66 

Hubert H. Humphrey Building 

200 Independence Avenue, S.W. 

Room 445G 

Washington, DC 20201 

The Honorable Timothy F. Geithner 

Secretary 

U.S. Department of the Treasury 

Attention: REG–114494–10 

RIN 1545–BJ46 

Internal Revenue Service 

1111 Constitution Avenue, N.W. 

Room 5205 

Washington, DC 20224 

Re: 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 (Affordable Care Act). 

Dear Secretaries Solis, Sebelius and Geithner: 

The National Business Group on Health appreciates the opportunity to submit comments 

on the Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating 
NATIONAL BUSINESS GROUP ON HEALTH 

to Dependent Coverage of Children to Age 26 under the Patient Protection and 

Affordable Care Act (Affordable Care Act). We hope that our recommendations will 

assist you in your efforts to ease the transition, administrative burden and costs for group 

health plans and insurance providers to continue to provide affordable, high-quality 

coverage to beneficiaries and their adult dependent children up to age 26 under the 

Interim Final Rules. 

The National Business Group on Health represents approximately 294, primarily large, 

employers (including 64 of the Fortune 100) who voluntarily provide health benefits and 

other health programs to over 55 million American employees, retirees, and their 

families. 

In order to assist you with the administration of the Interim Final Rules, we make the 

following recommendations, which reflect the suggestions and concerns of our member 

companies: 

I. Reiterate that Plans Can Still Define Dependent Coverage; 

II. Allow Plans to Request that Adult Dependent Employers Complete Affidavits 

Acknowledging that They Do Not Offer Health Insurance; 

III. Clarify that Self-Funded Dental and Vision Plans are Exempt from the 

Requirement to Cover Dependents Up to Age 26; and 

IV. Exempt Employees Who Pay for Their Adult Dependents’ Out-of-Pocket 

Medical Expenses with Health Savings Accounts (HSAs) from Any Adverse 

Tax Consequences. 

I. Reiterate that Plans Can Still Define Dependent Coverage 

Recommendation: The Departments should reiterate that plans can define 

dependent coverage to ensure that the Interim Final Rules do not encourage plans 

to restrict dependent coverage offerings. 

The Interim Final Rules state that plans can only base coverage of dependents on: 

1. The terms of the relationship of a child to plan participants; and 

2. Whether or not the child is age 26 or older. 

However, the Interim Final Rules also state that the “plan sponsors and issuers should be 

free to determine whether to cover children or which children should be covered by their 

plans and policies.” Many employers and insurers have already used their flexibility 

under current law to define dependents and extend coverage to certain foster children, 

stepchildren, children of domestic partners (where permissible), etc. Ensuring that plans 

keep this flexibility is vital to covering the highest amount of dependents possible and 

avoiding the unintended consequence of encouraging plans to limit dependent coverage 

offerings to only adopted and biological children. 

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NATIONAL BUSINESS GROUP ON HEALTH 

II. Allow Plans to Request that Adult Dependent Employers Complete Affidavits 

Acknowledging that They Do Not Offer Health Insurance

Recommendation: The Departments should allow affidavits as proof that adult 

dependents do not have offers of other employer coverage, and are therefore eligible 

for their parents’ coverage to ensure people maintain their current coverage under 

the Affordable Care Act. 

The Interim Final Regulations state that for plan years beginning before January 1, 2014, 

“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 other 

than a group health plan of a parent.” The Departments may also want to consider 

expanding this exemption for grandfathered plans beyond 2014 in order to ensure the 

greatest amount of beneficiaries “maintain their current coverage” under Section 1251 of 

the Affordable Care Act, a priority of the President, and reduce the administrative burden 

and costs on these plans and beneficiaries as the state insurance exchanges begin to 

operate in 2014. The Interim Final Rules do not currently define what proof is acceptable 

to verify when adult children are offered other employer-sponsored coverage. Employers 

and employees need clarification to ensure that adult dependents are not offered coverage 

when they are eligible under another employer-sponsored plan before January 1, 2014 in 

order to avoid dual enrollments, fraud and unnecessary penalties on either party. 

III. Clarify that Self-Funded Dental and Vision Plans are Exempt from the 

Requirement to Cover Dependents Up to Age 26

Recommendation: The Departments should clarify that self-funded dental and 

vision plans are exempt from the requirements of grandfathered plans, including 

the requirement to cover adult dependents under age 26, if employees can 

separately elect coverage and pay separate premiums for dental and vision 

coverage. 

Plans do not have to offer HIPAA excepted benefits to adult dependents under age 26, 

such as separate premium dental and vision plans, even when they offer them to 

dependents when these benefits are provided under a separate policy, certificate, or 

contract of coverage; are not an integral part of the health plan; and are not coordinated 

with any other benefits provided by the group health plan. Though the law exempts 

separate premium vision and dental plans from this requirement, it is unclear whether 

self-funded dental and vision plans are exempt even if the plans pay separately and have 

separate premium surcharges. 

IV. Exempt Employees Who Pay for Their Adult Dependents’ Out-of-Pocket 

Medical Expenses with Health Savings Accounts (HSAs) from Any Adverse Tax 

Consequences 

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NATIONAL BUSINESS GROUP ON HEALTH 

Recommendation: The Departments should ensure that employees who use HSAs to 

pay for their adult dependents out-of-pocket medical expenses do not face any 

adverse tax consequences which will raise costs for parents that are only offered 

coverage under high-deductible health plans (HDHPs) coupled with HSAs. 

Under earlier guidance on the Tax Treatment of Health Care Benefits Provided With 

Respect to Children Under Age 27 (Notice 2010-38), the IRS stated that employees can 

use Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements 

(HRAs) to pay for the out-of-pocket medical expenses of adult dependents up to age 26 

without any adverse tax consequences. However, employees must pay taxes if they use 

Health Savings Accounts (HSAs) to pay for the out-of-pocket medical expenses of adult 

dependent children up to age 26, unless the adult dependents are otherwise considered 

dependents by the IRS for income tax purposes. The unintended consequence of the 

difference between this new definition and the existing income tax definition of 

dependents will punish the increasing number of Americans covered by HSAs and their 

dependents. Moreover, when there are different rules for features that seem very similar, 

the differences greatly complicate administration, confuse plan participants and 

undermine policy goals, including usefulness, and consumer-friendlyness of health plans 

and plan documents. 

A recent survey by America’s Health Insurance Plans confirmed that more than 10 

million Americans are covered by HSAs and that HSA ownership increased 25 percent 

since last year and every year since 2005. The Departments can ensure that parents and 

families enrolled in the increasingly popular HDHP and HSA market are treated equally 

with non-HSA eligible plans and are not penalized with additional taxes. In particular, the 

taxes on parents’ HSA distributions for their adult dependents’ out-of-pocket expenses 

will significantly impact those families who only have access to HDHP coverage coupled 

with HSAs. 

Thank you for considering our comments and recommendations on the Interim Final 

Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent 

Coverage of Children to Age 26 under the Affordable Care Act. We look forward to 

continuing to work with you as you implement the various provisions of the new law. 

Please contact me or Steven Wojcik, the National Business Group on Health’s Vice 

President of Public Policy, at (202) 585-1812, if you would like to discuss our comments 

in more detail. 

Sincerely, 

Helen Darling 

President 

cc: The Honorable Phyllis C. Borzi, Assistant Secretary, Employee Benefits and 

Security Administration 

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NATIONAL BUSINESS GROUP ON HEALTH 

 Mr. Jay Angoff, Director, Office of Consumer and Insurance Oversight 

 The Honorable Douglas H. Shulman, Commissioner, Internal Revenue Service 

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