The first big coverage expansion: Young adults going back on their parent's plans
Posted on April 5th, 2010 by Jason Rosenbaum in Solutions that WorkWhile major pieces of health reform don't go into effect until 2014, major pieces go into effect much quicker. The Associated Press writes about one big piece - allowing young adults under the age of 26 to stay on their parent's insurance plans:
Congress voted to overhaul the health care system on a Sunday. On Monday, Patti Lawson e-mailed her employer's human resources office to ask how soon she could get her 22-year-old daughter back on her health insurance.
In about six months, the new law will allow at least 2 million young adults to be covered by their parents' policies. These are the "millennials," those who came of age in the new century and now are struggling to get on their feet during the worst slump since the Depression.
Many can't find jobs, and many who are employed don't have health coverage from their employers.
The law will allow young adults to stay on or return to their parents' insurance until age 26. To qualify, young people must be "dependents" of their parents. They don't necessarily have to live under the same roof.
Current federal law has no minimum age for allowing people to stay on plans as dependents, and most policies allow children to stay on until they are 18, or until they graduate college. Some states force insurance companies to cover dependents until they are much older - into their 30s in some places - and these higher standards will supersede federal law. Still, this is the first time there has been a federal standard in place, and it will affect 2 million young adults - a demographic particularly struggling to find work, not to mention work that offers health benefits.
According to Kaiser Health News, which notes that some families will have very problematic coverage gaps until September when the new laws go into effect, the population this law serves is really in need:
Young adults make up one of the biggest groups of the uninsured. Forty-five percent of those between the ages of 19 and 29 were uninsured for at least part of 2009, according to a Commonwealth Fund survey last summer of 2,002 young adults. This figure is significantly higher than the 30 percent rate reported for 2008 by the Kaiser Family
Foundation’s Commission on Medicaid and the Uninsured, and may be a result of the continuing economic downturn. (Kaiser Health News is part of the foundation.)Since many health plans require adult children to be full-time students in order to stay on their parents’ plans, young adults are at particularly high risk for losing coverage when they leave high school or college. The Commonwealth Fund survey found that although more than three-quarters of college students had health insurance while they were in school, 28 percent lost their coverage when they graduated or left school. Nearly half of those who were able to get new insurance experienced a gap in coverage; in many cases they were uninsured for a year or more.
It also should be noted that this policy will take a chunk out of insurance company profits.
The most profitable plans insurance companies sell are high-deductible junk insurance with medical loss ratios in the 70% range or even much lower and premium prices aimed at the out-of-work "young invincible" market. Allowing these people to stay on their parent's plan - usually a group health plan, the "blue chip" of the insurance market, with lower profit margins, higher medical loss ratios, and more stable and better benefits - takes away a big chunk of this customer pool, as people are more likely to have good jobs with good benefits the older they get.
Come September, young adults are winning, and the insurance companies are losing.