Summary: Beginning after January 1, 2026, fully insured group health plans issued (or renewed) in Illinois that provide dependent coverage will be required to cover an insured’s parent or stepparent as dependents under certain conditions.
Read on for more information and employer plan sponsor considerations.
Illinois House Bill 5258
Illinois House Bill (H.B.) 5258 amends the Illinois Insurance Code, the Health Maintenance Organization Act and the Limited Health Service Organization Act, to require group (and individual) health plans issued, amended, delivered, or renewed in the state after January 1, 2026 that provide dependent coverage to cover the parent or stepparent of the insured as long as that parent or stepparent:
- satisfies the definition of a qualifying relative under specified federal law (see below), and
- lives or resides within the plan’s service area.
Internal Revenue Code “Qualifying Relative” Definition
To satisfy the definition of a qualifying relative under the Internal Revenue Code (IRC) Section 152(d), an individual must meet all of the following requirements:
- The individual is a relative of the taxpayer employee, which includes a parent or stepparent,
- The individual’s gross income for the calendar year is less than the personal exemption amount (treated as $5,200 for 2025),
- The individual receives more than half of their support from the taxpayer employee for the calendar year, and
- The individual is not a qualifying child of the taxpayer employee or of any other taxpayer in the calendar year.
Generally, health plan coverage may be provided on a tax-free basis to individuals satisfying this IRC Section 152(d) definition of a qualifying relative. This means that pre-tax contributions under an IRC Section 125 cafeteria plan for a qualifying relative’s group health plan coverage are permissible.
Starting in 2026, Illinois will become the first state in the nation to mandate employer-sponsored fully insured group health plans (that provide dependent coverage) to cover parents and stepparents as dependents under certain tax and residency-related conditions outlined above.
Note that California passed Assembly Bill (A.B.) 570 in 2021 (and became effective in 2023), a similar bill to Illinois H.B. 5258. California A.B. 570 also requires dependent coverage be provided to an insured’s parent or stepparent under similar tax and residency-related conditions. However, California A.B. 570 applies only to individual health plans issued in that state, rather than to fully insured group health plans.
H.B. 5258 Effective Date Note
Notably, the effective date language in H.B. 5258 (as currently written) does not state health insurance policies “issued, amended, delivered, or renewed on or after January 1, 2026." As a result, and absent any contrary guidance from the Illinois Department of Insurance or state legislative updates, employers with calendar year policies will presumably have until January 1, 2027, to comply with H.B. 5258. Non-calendar year plans will be required to comply with H.B. 5258 upon their applicable renewal date in 2026.
Risk Strategies will monitor for any relevant legislative or regulatory updates with respect to the effective date of H.B. 5258. In the meantime, employers sponsoring fully insured group health plans issued in Illinois should reach out to their group health plan insurance carriers for more guidance and direction here.
H.B. 5258 Exclusions
H.B. 5258 does not apply to fully insured group health plans issued in other states, even if the plan covers participants residing in or working in Illinois. It also excludes self-funded/level-funded group health plans, hospital-only policies, accident-only policies, specified disease insurance policies, specialized health care service plans, and Medicare supplement insurance.
Continuation Coverage under H.B. 5258
A parent or stepparent who becomes a covered dependent under H.B. 5258 is not eligible for federal COBRA* coverage as a COBRA qualifying beneficiary once active group health plan coverage terminates. COBRA qualified beneficiaries generally include only employees, as well as their spouses/former spouses and dependent children covered under the applicable group health plan.
The Illinois Continuation Law (Illinois “mini-COBRA”) might be available to a covered dependent parent or stepparent, provided they were continuously covered by the group health plan during the entree three-month period before the insured employee’s termination or reduction in hours.
*COBRA stands for The Consolidated Omnibus Budget Reconciliation Act, which provides workers and their specified family members who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, including voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.
Employer Plan Sponsor Considerations
Employers sponsoring fully insured group health plans issued in Illinois are advised to begin preparing for this H.B. 5258 dependent coverage change before the effective date. Employer plan sponsors should work directly with their group health plan insurance carriers to:
- Clarify the effective date of H.B. 5258, depending on their calendar/non-calendar year plan renewal date (see section above here for more details),
- Update plan documents and employee benefit communications, and
- Develop dependent eligibility and enrollment administrative processes to comply with H.B. 5258. This may include requiring employees to complete an affidavit attesting that their parent or stepparent meets the IRC Section 152(d) qualifying relative elements outlined above and lives or resides within the plan’s service area.
Contact your Risk Strategies account team with any questions, or contact us directly here.
