Beginning January 1, 2026, Illinois House Bill 5258 introduces a significant change to the Illinois Insurance Code, the Health Maintenance Organization Act and the Limited Health Service Act. The new amendment requires that fully insured health plans issued in Illinois must extend coverage to eligible dependent parents and stepparents of insured individuals, provided they reside within the health plan’s service area.
To qualify for coverage, a parent or stepparent must meet the IRS definition of a “qualifying relative” under 26 U.S. Code § 152(d). This includes four specific criteria:
- The individual must have a qualifying relationship to the taxpayer (such as being a parent or stepparent);
- Their gross income for the calendar year must be less than the exemption amount, which is $5,050 for 2025;
- The taxpayer must provide more than half of the individual’s total financial support during the year; and
- The individual must not be the qualifying child of the taxpayer or of any other taxpayer for that same year.
This coverage requirement applies to health insurance policies issued, amended, delivered, or renewed in Illinois on or after January 1, 2026. It does not apply to policies issued in other states, even if the employer has employees living or working in Illinois. The law also excludes self-funded (and level-funded) plans, as well as specialized health care service plans, Medicare supplement policies, hospital-only policies, accident-only policies, and specified disease insurance policies.
Employer Action
Employers sponsoring fully insured group health plans in Illinois should begin preparing for this change. This includes reviewing plan documents with carriers to ensure compliance and updating communications and internal systems to verify dependent eligibility. In practical terms, employers will need to determine how they will administer enrollment for dependent parents and stepparents. This may involve requiring employees to submit an attestation form or affidavit confirming that the dependent meets the above-listed IRS criteria. Employers should also clearly communicate the income limits and support requirements to employees during open enrollment and onboarding to ensure that only qualifying relatives are enrolled on the plans.
Additional Resources
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
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