New Health Law’s Protections For Adult Children Begins

Parents, mark your calendars. Starting Sept. 23, adult children will no longer be left to fend for themselves in their search for health insurance. The new federal health law requires that insurers give parents the option of keeping their adult children covered until they’re 26 years old. It becomes effective for the health policy at the beginning of the plan year.  

New individual and group health plans that provide family benefits are required to extend coverage to young adult children, including those who had previously fallen off their parents’ plans. However, if a child has an offer of insurance through a job, some group plans that were in existence when the law was enacted on March 23 can exclude the young adults from their parents’ coverage. That exemption expires in 2014.

Married children and financially independent children are eligible for the coverage, but their spouses or children are not.

About 30 percent of young adults do not have health insurance, according to the Department of Health and Human Services. HHS estimates that the new law could provide coverage to about 1.2 million people ages of 19 to 25 who are currently uninsured.

Cost and access are a problem for many of these people. Only 25 percent of young adults are offered insurance through their employers, says Aaron Smith, co-founder of Young Invincibles, a national organization representing the interests of 18-34 year-olds. The organization provides information on this provision at Gettingcovered.org.

Some questions and answers about the change:

Will my benefits change if I add my adult child to my plan? 

The majority of employees won’t see significant changes to their benefits packages, according to Steve Raetzman, a partner in consulting firm Mercer’s health and benefits consulting practice. However, some employers are expected to alter the way they share costs with employees as a direct response to this provision.

What’s the likely charge for adding an adult child?

That will vary. But under the new law, young adults cannot be charged more than any other dependent. In a recent Mercer survey of nearly 800 employers, 20 percent said they’ll account for any additional costs by offering four or more rates based on how many dependents an employee chooses to cover, instead of the traditional two-tiered rates for employee-only and family coverage. Under such a system, someone covering three children would likely pay more than a co-worker covering only two. Sixteen percent of employers surveyed said they plan to simply raise employee contributions for all dependents.

Does the change apply to all health care benefits?

No. It’s important to note, Raetzman says, that the new law covers medical benefits and that coverage for other care, such as dental and vision, may not apply. “You have to look closely for the eligibility of each benefit,” Raetzman says. “The official source of what you are entitled to is your employer’s plan.” 

What about pre-existing conditions?

Although the new health law prohibits insurers from denying coverage for children under the age of 19 who have pre-existing conditions, that doesn’t apply to young adult children applying for coverage in the individual insurance market. They can be denied coverage because of existing medical conditions or disabilities that require ongoing medical care, says Carrie McLean, consumer specialist at online broker eHealthInsurance.com

“People automatically assume insurance companies have to allow children back on their plan until age 26. They’ll allow them back on the plan only if they can pass medical underwriting,” McLean says. During medical underwriting, insurers review age, gender and health history before offering coverage. That exemption also expires in 2014.

Some young adults joining their parents’ employer-sponsored health plans can face a pre-existing condition exclusion for up to 12 months in which care for the existing illness is not covered. The rules vary by state. Once the exclusion period expires, the young adult will be covered for the illness. 

Can I find a better deal for my child if I decide to go outside my employer plan and get my adult child an individual policy?

If the cost of adding an adult child to your employer-based health plan seems high, parents can also explore options on the individual market.

EHealthInsurance evaluated more than 288,000 individual health insurance policies sold to consumers ages 18 to 24 and found that the average national monthly premium as of last February was $109 with a $2,651 deductible.

Parents who buy their family’s insurance on the individual market also may save money on their adult child’s coverage by purchasing a different plan tailored to that individual child’s needs instead of adding him or her to the family plan, McLean says.

How do I sign my child up?

Insurers and employers are required by law to notify consumers about a special 30-day dependent open-enrollment period. It must begin no later than the first day of the plan year that starts after Sept. 23. Many employers will simply fold this into their annual open-enrollment period beginning in late fall for a benefit year that starts on Jan. 1, 2011.

Are there other dates to watch for?

July 1 is the second most common benefit start date, according to Raetzman. But a company can begin its plan year at any time, so it’s critical to check with your employer about when your child will be eligible for coverage.

In the individual market, the majority of policies start on Oct. 1. You’ll need to contact your insurer or agent to fill out the necessary forms.