Young Adults and Health Care Reform

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The new health care bill may be confusing.

But people understand the opportunity to add children up to age 26 onto the employer sponsored health plans of their parents.

Many health plans sponsors are already getting calls from anxious parents, and sometimes grandparents, concerned about the young adults in the family who are not insured or who will soon be aging off the plan.

People who did not pay attention to the health care debate seem to understand this.

But do they?

The press around the law seems clear.    Six months after the bill takes effect, employer sponsored health plans that offer dependent coverage for children shall “continue to make such coverage available for an adult child until the child turns 26 years of age.”

A separate provision amends the tax code to permit plans to extend tax-free coverage until the end of the calendar year in which a child turns 26.

How clear is the law?

Does it take effect in September, six months after the bill was passed – or January 1,2010, for calendar year plans.  Or after the expiration of any collective bargaining agreement in place when the law was passed?  Or some other date?

There will be many disappointed parents when they learn that they will need to wait months, or possibly years, to enroll those adult children.  In the meantime those children may turn 26 and still not be eligible.

Many questions will need regulatory clarification.

Can you exclude children with other health care coverage?

Does the child need to live with the parents?

How do the children of domestic partners fit into this legal/regulatory scheme?

What about step-children and foster children?

Can plans charge the participant for this additional coverage?

The law does not appear to exclude married children, but would exclude spouses and children of married children.

The good news

One extremely positive result will be the elimination of the burdensome and unfair  paper chase that plans, parents, and schools undertake to notify, monitor, and enforce plan requirements that older children must be students to stay on their parents’ plan.

Plan sponsor options

Even after there is clarification of the law, plan sponsors will have their own decisions to make.

Can enrollment of adult children be coordinated with regular open enrollment?

How much will this additional coverage cost?

If plan sponsors are permitted to charge differently for adult children, will they want the additional administrative and communication challenges that go with that?

This requirement only applies to plans that offer dependent coverage for children.  Will a plan sponsor want to continue to offer dependent coverage for children, or to restructure cost incentives for adding dependent children?

A reminder

This is one more reason why employer sponsored health care makes so little sense.

This provision of the law amounts to unfunded voluntary mandate.  If plan sponsors offer dependent coverage for children (the voluntary part), they must offer it to adult children (the mandate), or at least some adult children, and they must pay for it (the unfunded part).

A system that is open to all citizens regardless of the employment status of the individual or the parents of the individual is a lot simpler to understand and much simpler to administer.

The bill is an important step, but it is not enough.