New law allows children to stay on their parents’ policies until age 26, but there’s a catch

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A new law takes effect January 1, 2009 that allows children to stay on their parent’s health policies to age 26. As young adults are at highest risk of being uninsured, this will be an important option to reduce CT’s uninsured. Previously, children were only covered on their parent’s policies until age 19 or 23 for full-time students. Under the law, unmarried children living in CT (not necessarily living with their parents) or out of state as full time students, without group coverage through employment can stay on their parents’ health insurance until the policy anniversary date after they turn 26.

However, there are few caveats families need to be aware of. The law only applies to the 49.5% of CT residents covered by state-regulated, fully-insured health plans. Consumers should check with their employers to see if their plan is covered by the law. It does include the state employee plan including medical and prescription coverage but not dental. The other big catch is that parents may be taxed, for both federal and state taxes, on the value of their child’s coverage. For state employees that value varies between $4,533.60 and $7,199.76/year for one child. There are five tests to determine if a child’s benefits will be taxable. While this is an important new option for young adults to remain insured, families need to consult with their employer, their tax advisor, and to research other coverage options to be sure they are getting the best deal.
Ellen Andrews