Obama administration issues rules for young adults on parents' insurance plans

May 12 2010

The Obama administration Monday issued rules to allow children as old as age 26 to remain on their parents' health insurance plans, but such changes will likely increase the cost of insurance for families next year.

Kaiser Health News: Health On The Hill reports that the law will allow children who don't live with their parents and who are not a dependent on a parent's tax return to "receive the expanded coverage. The young adult could be married and still qualify but neither their spouse [n]or their child could receive the expanded coverage." HHS said the regulations will likely increase the cost of employer-sponsored health insurance by 0.7 percent in 2011, and that a plan would cost  an average of $3,380 for each dependent (Carey and Judd, 5/10).

The New York Times: "Kathleen Sebelius, the secretary of health and human services, estimated that 1.2 million people would gain coverage because of the new requirement." 

"However, the rules allow an exception for employer-sponsored health plans that were in existence on March 23, when President Obama signed the health care bill. In general, such health plans can exclude adult children of workers until 2014 if the children have access to insurance through another employer-sponsored health plan. … Under the rules, insurers and employers must provide young adults with a 30-day opportunity to enroll in their parents' coverage. Terms of coverage cannot vary based on the age of young adults under 26" (Pear, 5/10).

Modern Healthcare: Sebelius noted on her blog that "the slight premium increases are worth it and that graduating seniors and their families will get 'added security in exchange for premiums that are only expected to rise by 0.7 percent.'" She also wrote that insurance companies and employers will see positives, too, as they "save the administrative costs that would have added up as they dropped people in May only to sign them back up in September." Also, businesses have been informed "that the tax exclusion for employer health benefits will apply to all the young adults who choose to stay on their parents' plans'" (Lubell, 5/10).

The Associated Press: "[The] 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" (Alonso-Zaldivar, 5/10).

The Wall Street Journal: "The law itself wasn't clear on whether companies had flexibility to set the price for covering young adults. But the new rules spell out that premiums must be the same for all dependents, regardless of their age. Although dozens of insurers agreed to implement the rule this spring, many young adults still won't have access to it. About 170 million Americans get coverage through an employer, and those firms don't necessarily have to comply with their insurance administrator's request to adopt the rule early."

Coverage for someone in their mid-20s can cost more for insurers than coverage for younger dependents, according to the Journal. "But the rule specifies that companies can't limit the benefits package for a young adult so that it's narrower than what's offered to other dependents. ... Insurance providers could end up passing on the cost by raising premiums for all younger enrollees. ... About 30 percent of young adults are uninsured" (Adamy, 5/10).

The Washington Post: "The provision 'applies only to health insurance plans that offer dependent coverage in the first place: while most insurers and employer-sponsored plans offer dependent coverage, there is no requirement to do so,' the Department of Health and Human Services said in a statement Monday. The announcement is part of the administration's effort to translate the new health-care law into more specific regulations." Many insurers have already agreed to cover the young adults early instead of waiting for Sept. 23 or the beginning of a new plan year after that date (Hilzenrath, 5/11).

Business Insurance: "In addition, the regulations affirm that a child who previously lost coverage because of age and then opted for COBRA coverage can re-enroll in a parent's heath care plan. Then, upon reaching age 26, the child could again take COBRA" (Geisel, 5/10).