It sounds simple enough– the new health reform law says that young adults can stay on their parents’ insurance until they turn 26. But as the provision starts to take effect, we’re seeing what’s becoming a two-part trend any time a part of the new law is rolled out:
- Confusion about who is eligible and when, thanks to
- Resistance from the affected industry. Usually it’s the insurance companies who are fighting reform, but when it comes to covering young adults, insurance companies are all for it. This time around it’s employers who are stalling.
Since this part of the law is a lot more complicated than you’d expect, we’ll try to answer some of the biggest questions about the coverage of young adults.
Why is extending parents’ coverage to children under 26 important?
This is the age group most likely to be uninsured. Check out the numbers:
- Without insurance: 30% of young adults (ages 19-29), compared to only 17% of older adults (ages 30-64).
- Employed and without insurance: 28% percent of employed young adults, compared to 16% of working older adults. (Partly this is because half of all adults under 30 are employed part-time, and part-time workers are less likely to be offered coverage. Also, young adults are more likely to work for small businesses, which again are less likely to offer health coverage.)
- Unemployed and without health insurance: 36% of unemployed young adults, vs. 23% of older adults who are unemployed. (This is in large part because many young adults are unmarried, so can’t get coverage through a spouse.)
And so the new law is really a good deal for both young adults and insurance companies. Insurance companies get to collect premiums from a group that is cheap to cover, and in many cases wouldn’t have insurance otherwise. Meanwhile, young adults don’t have to worry about how they’ll pay their medical bills in the unlikely event that something happens to them.
(Or perhaps more accurately, their parents don’t have to worry. My mom said that she was talking about the new law with some of her friends from work, who have kids in college now. They asked her what she did in the years after my graduation from college, when I didn’t have health insurance. She told them that she did the only thing she could do: “I just prayed a lot!”)
The short answer is that if your insurance covers dependents, then any child who hasn’t yet turned 26 is eligible, even if they’re out of school or haven’t been on your insurance in years. But there is one limitation depending on the type of coverage you have:
- Plans on the individual market and new employer-sponsored plans that offer coverage for dependents, must make coverage available to all dependents until they turn 26 (and at the same rate).
- But if your plan existed before March 23, 2010 (the date health reform was passed), then you have what’s considered a “grandfathered plan.” Grandfathered employer-based plans– and since health reform just passed a few months ago, almost every existing employer plan is grandfathered– also have to offer coverage to dependents under 26, UNLESS those children are eligible for coverage through their own employer.
When does this go into effect?
Technically, the first plan year starting after September 23 (6 months after the law was passed). The problem is that for many young adults, coverage under their parents insurance expires shortly after they graduate in May, meaning that they’ll see a gap in coverage until the next plan year starts.
So for example, let’s say your health insurance plan year starts on July 1 every year. If your child has “aged out” of your insurance, they won’t be eligible to get back on your insurance until the new plan year starts on July 1, 2011.
To help families avoid this coverage gap, the Department of Health and Human Services has asked insurance companies to extend coverage to young adults before the law says they have to. More than 65 companies have complied so far– you can see a list of those insurance companies that have here (scroll to the bottom). It might seem out of character for insurance companies to extend coverage early, when just a couple months ago they tried to argue that they could still deny coverage to children with pre-existing conditions. But don’t worry, it isn’t altruism on the insurance companies’ part:
- They’ll save on the administrative costs of dis-enrolling and then re-enroll these young adults a few months later.
- Also, this is an age group that insurance companies love to cover- they don’t get sick all that often, which means insurance companies can rake in premiums without paying too many costly medical bills.
So what’s the problem?
Even though this is one of the few parts of the new law that the insurance companies don’t want to fight, there’s still a snag. Most employers cover at least part of the premiums for their employees, and they don’t necessarily want to cover these young adults before they have to. A survey by Mercer, an HR consulting company, found that only a quarter of companies intend to put the extended coverage in place before the new plan year starts.
For example, Cigna, one of the largest insurance companies, announced that they would be extending benefits before the new law goes into effect. However, if you work for a company that chooses not to extend benefits before September– even if your company gets its coverage through Cigna– you’ll have to wait for the start of the new plan year before you can cover adult children under your insurance.
How will young adults re-enroll in a parent’s plan after September 23?
The law says that insurers will have to provide written notice and a special enrollment period of at least 30 days to both the parent and their eligible dependents. They have to do this sometime before the first day of the new plan year.
Okay, that’s it for us. If you have more specific questions about how the extension of coverage for young adults could affect you, HSS has answers to a bunch of Frequently Asked Questions here.