Health Reform: Some Families Will Face Wait
to Cover Young Adults

 

Before Congress passed the Affordable Care Act, many health plans and issuers could - and, in fact, did - remove young adults from their parents' policies because of their age, leaving many college graduates and others with no insurance.  Today, about 30 percent of young adults are uninsured, representing more than one in five of the uninsured Americans. This rate is higher than for any other age group. The Affordable Care Act was supposed to take care of this major worry for parents of 20-year-olds making the transition to work. But what sounds like a simple solution – starting this year, letting young adults stay on their parents' health plan until they turn 26 – involves a surprising amount of fine print. Some families may have to wait until 2011 to get their kids covered, particularly if the parents are working for a large employer, benefits experts and government officials say.

While the new provision takes effect for policies and plan years beginning on or after September 23, 2010, more than 65 insurance companies have voluntarily agreed to provide coverage to young adults before the deadline. However, an important caveat was largely overlooked: The insurers' decision applies to policies they sell directly to customers, and not generally to health plans operated by large employers. Big companies — the primary sponsors of private coverage — usually budget enough money to cover their health care costs and hire insurers as intermediaries to administer their plans. Under the health care overhaul law, there may be a lag in when they offer the new benefit. That's because the law says the coverage extension is effective for the first plan year on or after Sept. 23. For most big company plans, the new plan year doesn't start until Jan. 1, 2011. Some young adults currently insured could experience a break in coverage.

If figuring out the effective date of the new benefit turned out to be tricky, issues of taxation and costs are more complicated. Workplace health insurance is tax-free to the worker, and tax-deductible for the employer. The overhaul law applies that principle to new benefits such as the coverage extension. But employers considering immediate action ahead of the Sept. 23 effective date are wondering whether that would prompt the IRS to deem the value of the coverage taxable income. On April 27, the Internal Revenue Service released new guidance specifically stating that children can be covered tax-free on their parents' health insurance policies.

It's also unclear how employers will charge for the new coverage. They could spread the cost across their entire pool of employees with family coverage. Or they could charge families that elect to cover their young adults a separate premium, likely higher.

-From “Some families will face wait to cover young adult”, by Ricardo Alonso-Zaldivar, AP/Associated Press, April 27, 2010, http://www.google.com/hostednews/ap/article/ALeqM5jaEwY5D7Nz6-y0xfvSsteQ2Hea4AD9FB8OLG0 retrieved 4/30/10, cited in/linked from “ HEALTH CARE WEEKLY UPDATE”, Barbara Roop & John Goodson, Health Care for Massachusetts, April 30, 2010 and “ Letter to Hill Leadership from Secretary Sebelius Outlining HHS’s Progress to Date on Implementation Efforts”, http://www.healthreform.gov/newsroom/implementation_efforts.html, undated, retrieved 5/25/10.

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