By: HUB’s EB Compliance Team
A change in Illinois insurance law has drawn the attention of employers and many are questioning the implications for their health insurance plans. The reason may be surprising. Illinois House Bill 5258 amends the Illinois Insurance Code, the Health Maintenance Organization Act, and the Limited Health Service Organization Act requiring that insurers extend coverage to certain parents and stepparents of an insured individual when a plan provides dependent coverage. This new requirement applies to health insurance policies issued, amended, delivered, or renewed in Illinois on or after January 1, 2026.
Who Must be Offered Coverage?
At first glance, it might seem like insurance plans will be required to extend coverage to all parents and stepparents, but that is not the case. Insurance policies are only required to extend coverage to parents and stepparents of an insured if the parent or stepparent resides within the plan’s service area and meets the IRS definition of a “qualifying relative.”
To be considered a qualifying relative there are several requirements that an individual must meet including a relationship test, an income test, and a support test. Coverage must only be extended if a parent or stepparent of the insured has gross income of less than $5,050 annually (2025), is dependent on the insured for more than 50% of their support and is not the qualifying child of any other taxpayer.
What Plans are Exempted?
This new coverage requirement does not apply to employers with insurance policies issued in other states that may have employees living and working in Illinois. And it does not apply to self-funded employers whose plans are exempt from state insurance laws. Specialized health care service plans, Medicare supplement insurance, hospital-only policies, accident-only policies and specified disease insurance policies are also exempt.
Conclusion
For purposes of employee contributions to the cost of coverage, a qualifying relative is considered a federal tax dependent, so pretax payroll contributions are permitted. Employers should work with their insurance carriers to understand how to manage eligibility and enrollment in coverage for these individuals.
It is likely that insurers will require some form of affidavit or attestation that the parent or stepparent is a qualifying relative and resides in the plan’s service area to enroll. An affidavit would also help the employer manage eligibility under the plan, by including the definition of qualifying relative (including the income limits) in the affidavit. Many relatives may not meet the IRS definition of qualifying relative.
Finally, it is also important to note that parents and stepparents are not automatically eligible for continuation of coverage under COBRA. COBRA applies to employees, spouses, and dependent children, so whether any continuation of coverage is available to parents or stepparents depends on the individual insurance policy and any right to continuation under Illinois State Continuation Law.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
NOTICE OF DISCLAIMER
Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.