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GroupLeader
Bulletin
October 2007 Bulletin G4A07
Minnesotalawextends This new law will impact your group in several ways.
Rates
dependentcoverage Your group may experience a small rate increase at
its next renewal based on newly eligible dependent
throughage24 enrollment in the plan.
Minnesota law has been amended to revise the definition
Tax considerations
of a dependent child for purposes of health coverage
If the dependent is not a tax dependent (“qualifying child”
eligibility to include an unmarried child who is under the
or “qualifying relative”) of the employee, then pretax
age of 25 or a dependent child of any age who is disabled
contributions by the employee may be taxable to the
and meets certain eligibility criteria. The requirement
employee, and pretax contributions by the employer may
that the child be a full-time student has been removed.
be imputed as income to the employee. The IRS currently
The law is effective on Jan. 1, 2008 for new fully insured
defines these terms as:
groups and for current groups on their 2008 renewal
date. The only self-insured groups impacted by this law A qualifying child is one who:
are political subdivisions, Service Cooperatives and self- >
l resides with the taxpayer 50 percent of the year
insured groups that are subject to state law.
>
l is either under age 19, or a full-time student ages 19
Eligibility through 24
This means that unmarried dependents through age 24 >
l has not provided greater than 50 percent of the child’s
can be covered under your group plan upon renewal if own support for the calendar year in which the
your employees choose to enroll them by submitting an taxpayer’s taxable year begins.
application for coverage. They no longer must be full-time
students to be eligible for coverage. Dependent children A child is no longer qualified during the year in which the
ages 19 through 24 who are classified either as students child turns age 24.
or as handicapped dependents will be assigned dependent A qualifying relative for health plan purposes is one who:
status unless Blue Cross and Blue Shield of Minnesota is
>
l bears a special relationship to the taxpayer (blood
directed not to change their status.
relative or an individual who resides in the taxpayer’s
Your employees must submit an application to Blue Cross household)
to add to their plan an unmarried child ages 19 through
>
l receives greater than 50 percent of their support from
24 who is currently not covered under the group plan.
If your newly eligible dependent was on COBRA, please the taxpayer
contact the Blue Cross group leader line. >
l is not a qualifying child for any taxpayer for the year
Once a dependent child turns 25, they must seek other in question
coverage or apply for COBRA continuation. At age 25, they
will be eligible for COBRA for 36 months.
Blue Cross and Blue Shield of Minnesota • P.O. Box 64560 • St. Paul, MN 55164-0560
GroupLeaderBulletin
October 2007
Account issues >
l Newly eligible dependents will be charged as child
The tax rule for paying claims from a health dependents.
reimbursement account (HRA), flexible spending account
>
l Standard preexisting condition exclusions and
(FSA) or voluntary employees’ beneficiary association
continuous coverage rules will apply to newly added
(VEBA) is that if the plan is used to benefit anyone other
dependents.
than the employee or the employee’s dependents, the
HRA, FSA or VEBA no longer qualifies as a tax-free benefit >
l Your employees and dependents will no longer receive
to the employee. student dependent letters from Blue Cross requesting
verification of dependent status beginning 60 days
HRA and VEBA issues prior to the plan’s renewal date (except for state health
The IRS has given unofficial guidance that if the value of plans, and self-insured groups subject to ERISA that do
the HRA or VEBA is imputed to the employee as taxable not take this option).
income, coverage of a domestic partner will not disqualify
>
l If a dependent is added to the coverage within the first
an HRA or VEBA for beneficial tax treatment. It is not clear
30 days of eligibility, the dependent will be treated as
whether this “unofficial guidance” can be extended to
a timely entrant — subject to a 12-month preexisting
children who are not tax dependents
condition exclusion period. This period is reduced for
prior creditable coverage. A dependent added after the
HRA and VEBA crossover
initial 30-day period is a late entrant — subject to an
It may be necessary to turn off crossover for employees
18-month preexisting condition exclusion period. This
with non-tax-dependent children if the IRS does not
period is also reduced for prior creditable coverage.
extend this guidance to dependent children.
Forms to assist you
FSA issues
We have prepared a Q&A document, a sample employee
A health FSA may reimburse eligible expenses only for a
letter and a form your employees can use to help you
taxpayer or the taxpayer’s eligible tax dependents.
determine whether their dependent child qualifies as
a tax dependent. You can find these materials by going
FSA crossover
to bluecrossmn.com, clicking on “for employers,” and
Crossover should not be used by employees whose health
looking for the Age 25 link under “Forms and guides.”
plan dependents are not tax dependents.
Although the law doesn’t apply to most other self-insured
HSA issues groups, these groups may elect to cover dependents under
HSA funds used to pay a qualifying medical expense for age 25 at their plan renewal date.
a non-tax-qualified individual (someone who is neither
Please contact SelectAccountSM for questions regarding
a qualifying child nor a qualifying relative) are taxable
HRA, HSA, FSA or VEBA at (651) 662-5065 or toll free at
and subject to penalty. The HSA remains qualified. It is
1-800-859-2144.
the responsibility of the individual account holder to
determine the correct tax treatment.
Administration and application process
>
l Certificates will be issued upon group renewal
indicating the change in age of dependents beginning
Jan. 1, 2008 for large groups and July 1, 2008 for small
groups.
Blue Cross and Blue Shield of Minnesota • P.O. Box 64560 • St. Paul, MN 55164-0560
GroupLeaderBulletin
October 2007
Hearingaidcoverage Healthplansmust
expanded accommodateTRICARE-
The required coverage for hearing aids for children age
18 or younger has been expanded to those who have a
eligibleemployees
hearing loss that cannot be corrected by other covered Effective Jan. 1, 2008, the John Warner National Defense
procedures. Before Aug. 1, 2007, the law restricted Authorization Act applies to all employer-sponsored
coverage to children with hearing loss due to functional health plans, including those of states and local units of
congenital malformation of the ears that could not be government with 20 or more employees as it relates to
corrected by other covered procedures. TRICARE, the federal health coverage program for certain
active duty and retired military personnel and their
This change was effective for small group employers
dependents. Both fully insured and self-insured groups
beginning July 1, 2007; for fully insured large groups
are subject to this law.
the change is effective Aug. 1, 2007 or upon renewal,
whichever is later. Self-insured groups may choose to The Act imposes three new requirements on employers (or
elect this coverage upon renewal. unions) and their group health plans.
Benefit design 1. Employer-sponsored or union group health plans must
The coverage for hearing aids will fall under the contract’s allow TRICARE-eligible employees the opportunity to
durable medical equipment (DME) benefits and is limited enroll in the plan and receive primary coverage for
to one hearing aid for each ear every three years. If all health care services in the same manner as similarly
hearing aid criteria are met, the hearing aid coverage situated employees who are not TRICARE-eligible.
includes hearing aid molds and batteries. No prior Health plans may not offer financial or other incentives
authorization (PA) is necessary for a fully insured member, to a TRICARE-eligible employee to encourage him or her
age 18 and younger. The member contracts will be to either not enroll or to terminate enrollment under
amended to reflect this new benefit as indicated above. the plan. The Inspector General of the Department of
Defense is responsible for oversight and investigations
of employers and other entities. Civil monetary
penalties of up to $5,000 apply to violations.
2. The Act provides that TRICARE is secondary to most
coverage other than Medicaid. Group health plans
of employers with 20 or more employees are primary
to TRICARE. TRICARE is primary to Medicaid and
employer group health plans with fewer than
20 employees.
3. The Act authorizes the Secretary of Defense to collect
health insurance coverage information regarding
TRICARE beneficiaries and may obtain employment
information from the Social Security Administration.
The Secretary of Defense may also contact employers
of TRICARE beneficiaries to obtain group health plan
information.
Blue Cross and Blue Shield of Minnesota • P.O. Box 64560 • St. Paul, MN 55164-0560
GroupLeader Bulletin
October 2007
If TRICARE pays primary by mistake or makes
a conditional payment, TRICARE can demand
reimbursement when it becomes clear that another payer
was primary. TRICARE may impose interest on amounts
owed, starting 60 days after TRICARE notifies a primary
payer that an amount is due and owing. If the federal
government takes legal action to collect a debt owed by a
primary payer, it may collect double damages.
Blue Cross obtains other coverage information through
the annual Coordination of Benefits letter process. This
should help mitigate the risk of receiving demand letters
relating to TRICARE.
Questions
If you have any questions about how any of these laws
will impact your group, please contact the group leader
line at (651) 662-1725 or toll free at 1-877-293-7035.
MII Life, Inc. d.b.a. SelectAccount is an independent company providing
account administration services.
Blue Cross and Blue Shield of Minnesota • P.O. Box 64560 • St. Paul, MN 55164-0560
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