Business Tip: Tax Changes for Your Neutral Practice
Your adult child has a college degree but no job and no health insurance. Do you have any parental responsibility to provide him or her with health insurance? And does that obligation extend past the age of majority for child support?
We all know that under current Georgia law, divorcing parentsí child support obligation ends when the minor child reaches the age of 18, dies, marries or otherwise becomes emancipated. If a child becomes 18 while enrolled in and attending secondary school on a full-time basis, then the child support must continue until the child graduates from secondary school or reaches age 20, whichever occurs first.
We also know that courts cannot order parents to pay for college in a divorce. The argument for voluntarily paying for a four-year degree usually turns on the parentsí income and the value they place on education. If there is no agreement, the issue cannot be presented to the trial court for adjudication, as the courts have no legal authority to impose payment of college costs on parents.
The Presidentís 2,309-page Patient Protection and Affordable Care Act, as amended by the Health Care and Educational Reconciliation Act of 2010, requires group health plans and health insurance issuers that provide dependent child coverage to make this coverage available until such children reach age 26. The health reform law will allow qualifying young adults whose parents have PRIVATE GROUP and NON-GROUP HEALTH COVERAGE to remain on their parentsí insurance policy.
The dependent coverage extension took effect on September 23, 2010, six months after the health reform law was enacted. From that date and beyond, when insurance plans start a new plan year, they will have to abide by the new dependent coverage rules. Most companiesí new plan years begin January 1, 2011.
As Georgia child support stops at age 18 or 20, does the Health Care Act create legal obligations for parents that extend beyond the age of majority? While there is still confusion over the details, it is generally agreed that costs for parents will increase. If divorcing parents choose to provide health insurance coverage for their adult children, which parent will pay for this coverage after the period for the lawful child support obligation ends?
At this time, there are more questions than answers about the Actís impact. These are just a few and are by no means an exhaustive list:
1. If the parents have existing coverage with their employers, can they afford to add their children to their plans? Yes, but remember that they do not have to add their children to their plan; that is an option for the parents.
2. Will parents have any knowledge of the actual cost of what they are being asked to pay for the following eight or so years for their childrenís coverage?
3. If they add their child to their existing coverage, does the employer provided coverage they already have include dental and optical insurance as well? If not, how are the parties going to cover these costs?
Until these issues make it through the courts, the parentsí moral obligation to help their children is going to provide the mediatorís best-leverage argument for continued coverage. As in all divorce mediation issues, the parentsí financial condition is going to be a critical factor. Parties that are barely making ends meet are not going to pay for their adult childrenís health insurance unless the law requires them to do so. Any medical conditions of the children also should carry considerable weight in their decision. Many parties, however, are going to have concerns over their own finances for the next eight years they are being asked to commit to paying to insure their children. The partiesí own age and health is always a factor.
Should your excellent mediation skills prevail and Ė regardless of legal obligations Ė you get an agreement whereby the parents obligate themselves to pay for the additional cost of health insurance for their adult children, you are plowing new ground full of unknown problems for the parties. I believe more parents might agree to help their children if their health insurance obligations are considered support obligations, which I believe they would be; support obligations can be modified later.
Since providing health insurance to adult children is not yet a parental legal requirement, you might consider including a paragraph in your agreements that would provide for terminating the obligation upon the occurrence of specific conditions. You should help the parents consider if they envision a time when the insurance costs would become prohibitive and their payment obligation to pay should cease.
The main problems with these insurance obligations are going to arise when the financial circumstances or health of the payor parents change. You should consider this when drafting your agreements and address with the parties as many contingencies as possible. These are never going to be one-size-fits-all agreements.