New Young Adult Health Mandates Will Raise Premiums, Some My Not Qualify

By Ricardo Alonso-Zaldivar

WASHINGTON, D.C. (AP) — Letting young adults stay on their parents’ health insurance until they turn 26 will nudge premiums nearly one percent higher for employer plans, the government said in an estimate released earlier this month.

The coverage requirement, effective starting later this year, is one of the most anticipated early benefits of President Barack Obama’s new health care law. Many insurers have already started offering extended coverage to families who purchase their coverage directly. And employers say parents have flooded their benefits departments with questions.

The Health and Human Services Department released estimates of the costs and benefits of the requirement as part of a regulation directing employers and insurers how to carry it out.

The new benefit will cost $3,380 for each dependent, raising premiums by 0.7 percent in 2011 for employer plans, according to the department’s midrange estimate. Some 1.2 million young adults are expected to sign up, more than half of whom would have been uninsured.

Extended coverage will be required starting this fall, for health plan years beginning on or after September 23.

That premium increase will come on top of hikes employers already expect for next year. Large companies forecast that premiums will rise between 6.5 percent and 7 percent without the impact of the health care overhaul, according to an early survey by the National Business Group on Health and benefits consultant Towers Watson.

Family coverage through the workplace now averages about $13,400 a year — counting both the shares paid by the employer and worker. Many employers allow workers to keep college students on the company health plan until they graduate.

But under the new law, staying in school would no longer be required.

Can’t Charge More

The new federal health insurance regulations also specifies that young adults offered extended coverage through an employer cannot be charged more than other dependents, nor can they be offered a lesser set of benefits. Instead, the cost must be spread broadly.

The situation is different for people buying their family coverage directly from an insurer, as many self-employed parents do. Unlike employers, insurers in the individual market do not have to spread the costs broadly.

Parents would face an estimated additional premium of $2,360 in 2011.

Enrollment as well as cost would increase modestly after 2011 for both employer and individual plans. Starting in 2014, the major changes of the new health care law go into effect.

New competitive insurance markets would open for business, government tax credits would be available to help pay premiums, and insurers would no longer be allowed to deny coverage to those in poor health. Most Americans would be then required to carry health insurance.

Waves of insurers have recently announced extensions that start much sooner than September 23, in part to keep young adults from hitting coverage gaps that arrive when they finish school. But that doesn’t mean one can automatically sign up their child.

These voluntary extensions come with a host of qualifications — and whether a child qualifies for coverage also can depend on one’s employer.

Frequent Questions Answered

The Associated Press has developed a series of frequently asked questions, and answers on the topic:

Q: When does coverage usually end for dependents?

A: Many insurers will keep young adults on a parent’s plan until they turn 19 or graduate from college.

Most states also call for coverage extensions beyond those time frames for certain types of coverage. For instance, dependents in New Jersey can remain covered under some plans up to age 31 as long as they are unmarried or have no dependents of their own. But that’s an extreme. Most states allow for extensions to around age 25.

A state-by-state list is available from the National Conference of State Legislatures at http://bit.ly/9Sg5El

Q: How much will this extension cost me, as a parent?

A: That depends on your coverage and your employer.

Insurers offer several types of coverage, including plans for single people, an adult plus a child or family coverage. With family coverage, there is usually no additional cost to add a person.

Employers pay, on average, about 73 percent of an employee’s insurance premium, according to the Kaiser Family Foundation.

The new health care legislation doesn’t spell out how much of the premium your employer has to pick up for an extra dependent, said Karyn Schwartz, a senior policy analyst with Kaiser.

Details of the law have yet to be written, said Steve Wojcik, vice president of public policy for the National Business Group on Health. But he believes it intends for all dependents to be treated equally.

“It implies you should provide dependent [child] coverage in the same way you’re currently providing it and not have two separate classes,” he said.

Q: Can my employer decline to offer this extension even if my insurer announces plans to provide it?

A: Yes. Companies that self-insure, or pay their own medical claims and have an insurer administer the policies, can wait until on or after September 23 to start the coverage extensions.

Also, the law says that if your dependent has a job, and that employer offers coverage, then your insurer or employer doesn’t have to cover him or her, Wojcik said.

Q: What can I do if my insurer or employer doesn’t offer a coverage extension?

A: Look for short-term coverage in the individual insurance market. If a dependent has recently grown too old for a policy, he or she may be eligible to continue a parent’s employer-based coverage through the federal law known as COBRA. But COBRA premiums are pricey without an employer’s help paying them, and the dependent would not be eligible for federal subsidies that help unemployed people make COBRA payments.

Still, the expense may be worth it. A gap in coverage can be financially devastating if a big claim hits.

Q: Are these extensions all basically the same?

A: No. Some have different start dates or include different groups of people.

Hartford-based Aetna Inc will extend coverage starting June 1 to dependents who would otherwise become too old to remain on parental coverage. United Health starts coverage right away, but only for graduating college students.

Other insurers who have extended coverage include Humana Inc, WellPoint Inc, and several regional Blue Cross and Blue Shield plans.

Q: What is the federal government, which operates the country’s largest employer-based health benefits program, doing with its own employees?

A: The eight million people covered under the government’s health plan are going to have to wait until January 1 to get extended coverage.

Unmarried dependents of federal workers — including the children of lawmakers — are now covered until their 22nd birthday. The Office of Personnel Management, which runs the feds’ health plan, said it would like to provide the new extended coverage earlier but is precluded from doing so under the law.

Families can extend coverage for their young adults, however, if they pay the full premium.

Walton Francis, author of an annual guide to the federal employee health program, said he believes the government will charge no additional premium for those who already have family coverage.

The bottom line is — check with your own insurer on the specifics of your own coverage extension.

Associated Press reporter Tom Murphy also contributed to this report.