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Federal Employees News Digest : Nov 11, 2013
This second of five columns discussing how the Affordable Care Act (ACA) of 2010 affects feder- al employees examines how employees benefit from ACA's provision allowing 22- to 26-year-old young adult children to remain on their parents' Federal Employees Health Benefits (FEHB) program plans. Until ACA's passage, an employee's young adult child was no longer eligible to remain on a parent's FEHB plan once the young adult became age 22. It is interesting since ACA's passage how many young adults aged 19 to 29 have decided to remain on their parents' group health insurance plans---this includes both government and private company plans, as the table at the bottom of the page illustrates. Keeping a young adult on an FEHB plan as part of self and family coverage is probably the best option in terms of price and quality for a two-parent family with at least one child under age 26, sometimes even if the child can get insurance coverage through an employer. That is because it does not cost an employee any extra to include a young adult as part of self and family FEHB coverage, and the FEHB offers far better quality coverage compared to many private company plans. Many employees will find that their young adult child may have to purchase their own health insurance in spite of automatically remaining on their parent's FEHB plan. The following are some issues regarding whether a young adult child should purchase additional insurance: • Where does the young adult live? Under FEHB program rules, a young adult child can stay on parents' FEHB plan even if the child no longer lives with the parents and the child is no longer claimed as a tax dependent on their parents’ tax return. But if the child lives far away from his or her parents, then local doctors the child visits may be out of the FEHB plan's network, resulting in larger out-of-pocket costs. • Is the young adult married with dependents? If so, then a separate health insurance plan will have to be obtained. This is because FEHB plans do not extend coverage to the young adult's spouse or children. • Are the parents covered by Medicare? Most fed- eral annuitants 65 and older are encouraged to enroll in Medicare Parts A and B, which becomes primary coverage. Those annuitants who are enrolled in Medicare Parts A and B are also encouraged to enroll in a less expensive FEHB plan; for example, "high option" to "low option." The reason: As pri- mary payer, Medicare pays the majority of medical expenses while the FEHB plan pays the remaining expenses. But if a covered family member such as a child is not eligible for Medicare, then the annuitant must maintain more expensive FEHB coverage. • How much does the young adult earn, can he or she be claimed as a tax dependent, and is he or she eligible for a tax credit? Some children may pay less for health insur- ance if they buy insurance through the health care exchanges and qualify for a government subsidy in the form of a tax credit. The “premium assistance tax credit” is available to qualifying individu- als in order to limit the amount that an individual must pay for health insurance coverage obtained on an exchange. There are restrictions for those individuals to qualify for the health care tax credit, including: (1) an individual must purchase insurance on an exchange and not through an employer; (2) an individual cannot be claimed as a tax dependent on their parents’ tax return; and (3) household income limitations. An excellent up-to-date calculator to determine the amount of the tax credit may be found at http:// healthreform.kff.org/subsidyCalculator.aspx. The tax credit can be sent directly to the enrollee's insurance company and applied to the enrollee's premium, resulting in a reduced monthly premium, or it can be refunded in the form of a tax credit when the enrollee files income taxes. If one has children age 22 to 26 , and those children have modest incomes and are claimed as tax dependents, one may want to consider dropping these children as dependents and sending them to a health care exchange to buy a plan and be eligible for the tax credit. • Privacy. When a young adult child is enrolled on a parent's health insurance plan, the child's doctors and hospitals keep visits confidential. But they send bills explaining the services provided to the child to the child's parents, which may not be the ideal situ- ation. The question becomes: How much does the child want the parents to know about his or her medical information? Learn how to select the right health plan for 2014 with Edward A. Zurndorfer's special series of weekly Federal Daily Open Season col- umns---appearing this month only at FederalDaily.com. Edward A. Zurndorfer is a Certified Financial Planner and Enrolled Agent in Silver Spring, MD. He is also a registered representative with FSC Securities Corporation, branch address: 833 Bromley St. - Suite A, Silver Spring, MD 20902. Phone: (301) 681-1652. Securities offered through FSC Securities Corporation,member FINRA/SIPC. EZ Accounting and Financial Services and FSC are independent companies. Informed Investor How employees are affected by the Affordable Care Act: Part II November 11, 2013 Vol. 63, No. 17 7 Visit us on the Internet at www.FederalDaily.com Adults Ages 19 to 29 2011 2013 Uninsured 18.1 million 15.7 million Enrolled in a parent's health plan 13.7 million 15 million Ineligible to stay on parent's plan without the Affordable Care Act 6.6 million 7.8 million Percent who purchased health insurance through employer when it was available 64% 67% Percent who turned down employer's coverage to go on parent's plan 33% 36% Source: August 2013 Commonwealth Fund Health Insurance Surveys of Young Adults
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Nov 18, 2013