Preexisting Exclusion Provisions for Children
and Dependent Coverage under the Patient
Protection and Affordable Care Act (PPACA)
Hinda Chaikind
Specialist in Health Care Financing
Bernadette Fernandez
Analyst in Health Care Financing
May 4, 2010
Congressional Research Service
7-5700
www.crs.gov
R41220
CRS Report for Congress
P
repared for Members and Committees of Congress
Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
Summary
Under the Patient Protection and Affordable Care Act (P.L. 111-148, PPACA, as amended by the
Health Care and Education Act, P.L. 111-152), a number of provisions directly affect access to
health insurance coverage. Hereafter, PPACA will refer to PPACA as amended by the
reconciliation act. This report provides a description of two of the provisions in PPACA that are
targeted toward younger individuals, for plan years beginning six months after date of enactment
(i.e., the plan year beginning after September 23, 2010). PPACA does not allow preexisting
condition exclusions for children under age 19, and the law also requires plans to continue to
make dependent coverage available up to age 26.
Congressional Research Service
Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
Contents
No Preexisting Exclusion for Children up to Age 19.................................................................... 1
Dependent Coverage ................................................................................................................... 3
Tables
Table 1. Medically Underwritten Policies in the Individual Market, 2008 .................................... 2
Contacts
Author Contact Information ........................................................................................................ 5
Congressional Research Service
Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
nder the Patient Protection and Affordable Care Act (P.L. 111-148, PPACA, as amended
by the Health Care and Education Act, P.L. 111-152), a number of provisions directly
U affect access to health insurance coverage.1 Most of the insurance reforms in PPACA
amend Title XXVII of the Public Health Service Act (PHSA, 42 U.S.C. 300gg et seq.). Title
XXVII includes requirements on health insurance coverage for both the group and nongroup
markets, enforcement applicable to such requirements, relevant definitions, and other provisions.
This report provides a description of two of the provisions in PPACA that are targeted toward
younger individuals, for plan years beginning six months after date of enactment (i.e., the plan
year beginning after September 23, 2010).2 PPACA does not allow preexisting condition
exclusions for children under age 19, and the law also requires plans to continue to make
dependent coverage available under age 26.
This report includes a description of the law and relevant information about the implementation
of these two provisions.
No Preexisting Exclusion for Children up to Age 19
PPACA will prohibit preexisting health condition exclusions for children under 19, effective for
plan years beginning after September 23, 2010.3 This provision applies to all grandfathered4 and
new group plans (including self-insured plans)5 and all new individual plans. In other words, such
plans may not exclude benefits based on health conditions for qualifying children.6
A strict interpretation of the legislative language would appear to separate the guarantee for the
issuance of a health insurance policy from the prohibition against coverage exclusions for
preexisting conditions once a policy has been issued.7 Such an interpretation would mean that
children could be denied the offer of coverage altogether until 2014, but that if they are offered
coverage,8 they would have access to all covered benefits to treat their health conditions for plan
years beginning after September 23, 2010.
1 PPACA will refer to PPACA as amended by the reconciliation act.
2 As an example, if a plan year begins on January 1 of each year, as many plans do, these provisions would take effect
on January 1, 2011.
3 §1201 of P.L. 111-148 (new PHSA §2704), as amended by §2301 of P.L. 111-152.
4 Grandfathered plans are defined as those individual and group plans that an individual or family was enrolled in on
the date of enactment. A plan that provides group coverage on the date of enactment may provide for the enrolling of
new employees (and their families) in such plan. For additional information about grandfathered plans, see CRS Report
R41166, Grandfathered Health Plans Under the Patient Protection and Affordable Care Act (PPACA), by Bernadette
Fernandez.
5 The definitions for group health plans and health insurance coverage refer to definitions in the Public Health Service
Act (PHSA). Under PHSA, group health plans include self-insured plans. For additional information about self-insured
plans, see CRS Report R41069, Self-Insured Health Insurance Coverage, by Bernadette Fernandez.
6 Beginning January 1, 2014, the provision would be expanded to include those individuals aged 19 and older.
7 PPACA first addresses guaranteed issue in 2014. For plan years beginning after January 1, 2014, PPACA will require
insurance carriers that offer new health insurance policies in the group or individual market to accept any applicant for
coverage who is willing to accept the terms of such coverage (guaranteed issue). Guaranteed issue generally does not
define what benefits must be covered under the offered insurance policy, nor does it specify the premium charged.
8 This will apply in cases when a child receives dependent coverage on a parent’s policy, or when a child is covered
under her own policy in the individual market.
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Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
However, the law gives the Secretary of Health and Human Services (the Secretary) wide latitude
with respect to implementation of the insurance reforms and other provisions. In multiple
instances, the law specifies that the Secretary will promulgate regulations to implement various
provisions affecting private health coverage. In addition, the inclusion of the insurance reforms
under Title XXVII of PHSA indicates the intent for the Secretary to exercise broad rulemaking
and enforcement authority. Finally, Secretary Sebelius has issued public statements indicating her
intent to implement the preexisting condition provision in tandem with the guaranteed issue
provision, with respect to children’s coverage. The Secretary, in a letter to the President of
America’s Health Insurance Plans, stated that she will issue regulations to
confirm that beginning in September, 2010:
• Children with pre-existing conditions may not be denied access to their parents’
health insurance plan;
• Insurance companies will no longer be allowed to insure a child, but exclude
treatments for that child’s pre-existing condition.9
Analysis of existing surveys of the individual market may provide rough estimates of the size of
the population that may be affected by this provision.10 According to one ongoing survey of the
individual market,11 almost 13% of medically underwritten applications for health insurance were
denied in 2008, representing over 220,000 applicants. Of those applications for children (under
age 18), nearly 5% were denied that year, equivalent to more than 20,000 applicants.
Moreover, of those individuals offered insurance, some applicants were offered policies that
excluded coverage for certain conditions (“condition waiver”), and other applicants were offered
policies with both a condition waiver and higher premium (see Table 1).
Table 1. Medically Underwritten Policies in the Individual Market, 2008
Offered Policies, Condition Waivers, and Higher Premiums
Policies Offered with
Medically Underwritten
Policies Offered with
Condition Waiver and
Applicants by Age Range
Policies Offered
Condition Waiver
Higher Premium
All non-elderly (under 65 years of age)
Number of applicants
1,540,127
92,914
23,569
Percentage 100% 6.0% 1.5%
Under 18 years of age
Number of applicants
408,990
10,948
7,408
Percentage 100% 2.7% 1.8%
Source: America’s Health Insurance Plans, “Individual Health Insurance 2009: A Comprehensive Survey of
Premiums, Availability, and Benefits,” October 2009.
9 Kathleen Sebelius, Secretary of Health and Human Services, letter to Ms. Karen Ignagni, March 29, 2010, p. 1.
10 Precise estimates of the population that potentially could be affected by this provision are difficult to calculate given
limitations of existing, publicly available data sources.
11 America’s Health Insurance Plans (AHIP) conducted its latest survey of member companies offering insurance
products in the individual market during the summer of 2009.
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Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
Given the Secretary’s intention to apply the preexisting condition coverage requirements to both
the issuance of insurance and scope of covered benefits for children, the provision will affect
instances when insurance was denied altogether, and when insurance was offered but excluded
coverage for certain health conditions. In addition, this data does not include those individuals
who choose not to even apply for health insurance, because they assumed they would be rejected
based on their health history.
Dependent Coverage
The requirement relating to coverage of adult children will also take effect for the plan years
beginning after September 23, 2010.12 The statute requires that if a plan provides for dependent
coverage of children, the plan must continue to make such coverage available for an adult child
until age 26.13
• Plans that offer dependent coverage must continue to make that offer
available until the adult child turns 26 years of age. As an example, an adult
child who is 26 years and 1 month old would no longer be required to be
covered.
• Plans must make coverage available for both married and unmarried adult
children under age 26, but not for the adult child’s children.
• The requirement affects individuals enrolled in all group and individual
health plans, including self-insured plans.
The statutes do not require plans to offer coverage, so that if a plan chooses not to provide
dependent coverage, nothing in this statute would require them to do so. The age requirement
affects only plans that choose to offer dependent coverage.
• Prior to 2014, for grandfathered group health plans, dependent coverage is
not available to those adult children who can enroll in an eligible employer-
sponsored health plan based on their employment.
Because the statute takes effect for plan years beginning six months after the date of enactment,
there may be some adult children who were covered when PPACA was enacted, but who will age
out of their parent’s plan before the required effective date. However, several insurers have
already indicated that they will continue to provide dependent coverage for these individuals even
before such coverage is required. In addition, Secretary Sebelius issued a statement on April 19,
2010, recognizing those insurers who have already chosen to “bridge the gap between now and
the fall when the law becomes effective.”14 The Office of Personnel Management (OPM) has
stated it cannot provide this gap coverage for enrollees of the Federal Employees Health Benefits
12 §1001 of P.L. 111-148 (new PHSA §2714), as amended by §2301 of P.L. 111-152.
13 §1004(d) of P.L. 111-152 extended the exclusion from gross income of the parent to include dependent coverage for
a child who has not attained age 27, as of the end of the taxable year. Prior to PPACA, the exclusion was allowed only
up to age 23, so that dependent coverage for older children was considered taxable income to the employed parent.
14 See http://www.hhs.gov/news/press/2010pres/04/20100419a.html.
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Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
program (FEHBP), because the current law governing FEHBP specifically prohibits OPM from
doing so.15
For those individuals who do lose coverage before the requirements are in place, the health
insurance options for an adult child who ages out of a parent’s policy remain unchanged from
those available prior to the passage of PPACA. Children who age out of their parent’s policy may
be able to purchase health insurance through COBRA,16 which provides temporary access to
health insurance for qualified individuals who lose coverage for certain conditions. One of the
qualifying conditions for COBRA coverage is the end of dependent coverage. The child could
also buy health insurance through the individual market.
The Secretary will also be responsible for promulgating the regulations to define “dependents,”
for the purpose of this provision.17 The federal requirements are a floor. That is, they provide a
minimum requirement. States that already impose requirements beyond age 26 may continue to
do so. For example, New Jersey requires dependent coverage to be available up to the age of 31,
as long as the adult child is unmarried and has no dependents.18 To the extent that the state law is
more restrictive than the federal law (e.g., New Jersey’s requires that the individual not be
married), the federal statute would apply, therefore covering the married adult child through the
age of 26.
For 2008, about 30.7 %, or 8.8 million, young adults aged 19 to 25 (i.e., up to their 26th birthday)
had no health insurance.19 Another 6.2% or 1.8 million, young adults in that cohort had private
nongroup coverage. So while the potential “pool,” at least in 2008, was 10.6 million individuals,
it is difficult to estimate how this number might translate into covered lives as a result of the
dependent coverage provision in PPACA. The potential effect is difficult to estimate because (1)
some of these individuals may have had an offer of coverage through their employer that they did
not accept, which would disqualify them from enrolling in their parent’s policy, and (2) the
parents of these individuals may not have had an offer of dependent coverage through their
employer, or may be uninsured themselves.
15 See information on OPM’s website, http://www.opm.gov/insure/health/reform/index.asp.
16 For more information on COBRA, see CRS Report R40142, Health Insurance Continuation Coverage Under
COBRA, by Janet Kinzer and Meredith Peterson. For individuals covered by the Federal Employees Health Benefits
program, the Temporary Continuation of Coverage (TCC) program provides coverage similar to COBRA.
17 Because §1001 of P.L. 111-148 of the statute requires plans to “continue to make such coverage available,” it is
unclear whether those adult children who have already aged out of their parent’s plan could return to that plan. The
regulations will clarify who is an applicable dependent; thus far the Secretary has held webinars and has issued a press
release, dated April 19, 2010 (see footnote 14), that recognizes insurers who have chosen to “ bridge the gap between
now and the fall when the law becomes effective.”
18 For a complete description of state law applying to dependent coverage, see http://www.ncsl.org/default.aspx?tabid=
14497.
19 For more information, see CRS Report 96-891, Health Insurance Coverage: Characteristics of the Insured and
Uninsured in 2008, by Chris L. Peterson.
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Preexisting Exclusion Provisions for Children and Dependent Coverage under PPACA
Author Contact Information
Hinda Chaikind
Bernadette Fernandez
Specialist in Health Care Financing
Analyst in Health Care Financing
hchaikind@crs.loc.gov, 7-7569
bfernandez@crs.loc.gov, 7-0322
Congressional Research Service
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