ADULT CHILD HEALTH COVERAGE RIGHTS Come out of DeForest

Yes, a bad pun but who can resist a case called DeForest v. DeForest decided on March 17. At least, I learned some very useful information about insuring adult children.

This issue has come up a fair number of times since the Affordable Care Act was passed by Congress in 2010. Parents who have health insurance for their minor children were allowed to continue them on their employers’ group coverage until the child reached age 26. As most of us know, college, vocational training, the gig economy and “failure to launch” issues have put adult children in a position where their health insurance options can be quite limited. This was a win-win provision in the sense that young adults could attach themselves to a parent’s group plan for reasonable cost while the group plan benefited while people under 26 typically don’t cost a lot to insure because they a pretty healthy bunch.

In divorce proceedings health insurance coverage is a sticky issue because many dependent spouses are used to being covered by the primary breadwinner’s plan. The good news here has been the COBRA statute that permits them to remain part of their former spouse’s health insurance for up to three years following divorce.

Once the Affordable Care Act came down the pike, one of the sweetners a party to divorce would ask to complete the deal was “coverage for the children until they reach age 26 if they don’t otherwise qualify for their own group plan.” That’s what happened in the DeForest case. Husband agreed to provide the coverage for the adult kid and then reneged. Wife sued to enforce and the court agreed.

In reading the case, what I learned was that Pennsylvania adopted an enhancement to the federal Affordable Care Act. It is found at 40 P.S. § 752.1(a)(1)-(4) and says that health insurers doing business in the Commonwealth have to give policyholders the right to continue coverage for their children until age 29 (three more years) if the child is not married, has no dependents and lives or attends school in Pennsylvania. The language is a little hinky and could be subject to different interpretations, but it is still an additional avenue for low cost health coverage for a child.

The ruling in DeForest heads into some different directions but the thrust of the case had to do with the language in the property/marital settlement agreement betwixt the couple getting divorced. Because this is not a vital provision of divorce agreements lawyers tend to give this language short shrift, meaning that they use phrases like “as long as the cost is reasonable.” Respectfully, these clauses can cost real money to whomever is paying and should get a little more attention. Meanwhile, my suspicion is that most members of the divorce bar did not know about Pennsylvania’s additional coverage periods beyond the ACA age 26.

So, let’s think about a clause with a little more tooth in it than “reasonable.”

[Husband/Wife]  agrees to provide health and dental insurance coverage to the extent allowed by either the federal or state versions of the Affordable Care Act for so long as any of the children identified in this Agreement are eligible subject to the following terms and conditions:

• The child must fully cooperate in securing this coverage and for the duration of the coverage keep both parents fully informed as to his/her employment and compensation arrangements
• The parent providing coverage shall be reimbursed by the child for providing such coverage from that child’s earnings on a quarterly basis.
• If the reimbursement amount constitutes more than 15% of the child’s gross earnings, the reimbursement beyond the 15% shall be deferred until the child attains age 30, at which time it shall be due in full.
• Should the parent providing coverage experience a loss of income of 20% or the cost of providing insurance for children under this agreement rise by more than 20% from the date the coverage went into effect, the parent providing the coverage shall give 90 days notice in writing of his/her specified reasons for terminating coverage. If the child or the other party to this Agreement demand arbitration of the issue within 30 days of the notice specified herein, an arbitrator shall be empowered to decide whether and on what terms health insurance should continue and how the cost shall be allocated prospectively. The arbitrator’s fee shall also be allocated between, insured child and parents as the arbitrator determines to be fair.

The cause is a sound one. But when we are discussing what amounts to a decade long “support” obligation, everyone involved needs to be mindful that we are long past the days when health insurance was a de minimis obligation. Moreover, it is an obligation that no court has the power to impose under ordinary circumstances.