Devil's In The Details On New Insurance Provisions

A much-publicized provision of the new health law would give parents the option of keeping children on their insurance plans until age 26, but coverage won't kick in for months.

When Allison McMaster Young heard that the new health overhaul law would allow her and her husband to keep their 21-year-old son on their family health insurance policy until age 26, she breathed a sigh of relief. Alex will graduate from Fordham University on May 21.

Under the terms of the family plan they have through her husband's job, he'll lose his coverage the very next day because he'll no longer be a full-time student. Keeping Alex on the family policy would be by far the simplest and most affordable way to keep him covered after graduating.

But then Young went online and read the legislative language. The provision, she learned, won't become effective until Sept. 23, six months after enactment. Their family faces a four-month coverage gap during which they'll have to cover Alex's medical bills or find an alternative insurance option.

"I thought, this is a big problem, both for us and for all those people who think their kids are going to be eligible when they graduate in May," says Young, whose family lives in Manassas, Va.

The young adult coverage provision, along with a few other consumer-friendly changes, has been showcased by the president and legislative leaders as an example of the immediate benefits of health reform. But instead of giving the new law a public relations boost, it's creating consternation among some parents, who are sharing their concerns online about when the provision kicks in and whether their family will qualify.

Until the Department of Health and Human Services issues regulations for the new law, many details about exactly how it will work remain uncertain. It's not clear how "dependents" will be defined, for example.

A companion measure removed a restriction in the main legislation on extending coverage if the child was married, says Sara Collins, a vice president of the Commonwealth Fund, a nonprofit health policy research organization. Likewise, employed children may be covered under the new provision as long as they don't have access to health insurance through their job, according to an HHS spokesman. But complete guidance must await the regulations; no date has been set for their release.

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.

About half of states have passed laws that extend the length of time that children can remain on their parents' policies into their mid-20s or later. But to qualify, children may have to be full-time students, live at home, or be financially dependent, among other restrictions.

David Campo of Princeton, N.J., ran into a different problem. Even though New Jersey allows children to remain on their parents' policies until age 30 with few restrictions, the engineering firm where Campo works doesn't have to abide by the law. That's because his company self-insures, meaning that it funds its own health benefits rather than buying a state-regulated insurance policy.

Campo's 22-year-old daughter Katie, who graduates from Rutgers in May, has Crohn's disease. She receives drug infusion therapy with Remicade every three months, which keeps her disease in check. But each treatment costs more than $7,000, says Campo, so ensuring that Katie has good health insurance is critical. For now, she is on her father's plan.

The new law will make it much easier for parents to keep their kids on the family plan. It applies to all health plans, whether fully insured or self-funded. In addition, the provision allows self-employed families with coverage on the individual market to keep their children on the family policy until age 26 and continue to deduct the family premium from their taxes, says Edwin Park, a senior fellow at the Center on Budget and Policy Priorities.

Policy experts have identified a few areas of concern, however. One is whether children who are added to the family plan may be subject to underwriting, and thus higher premiums. "The regulations must state strongly that not only do you have to put [adult children] on the policy, but you can't jack up the rates," says Sabrina Corlette, director of health policy programs for the National Partnership for Women and Families.

Another potential trouble spot for parents who are already impatiently counting the days until the new law takes effect: they may have to wait longer than they think. That's because plans may not implement the changes until the beginning of the new insurance plan year following the Sept. 23 effective date, says Dawn Horner, senior program director for Georgetown University's Center for Children and Families. "It takes time to get these things up and running," she says.

According to a Democratic Senate aide, "It was extremely important to lawmakers to get young adults covered under their parents' insurance plans as soon as possible, and this policy is designed to accomplish that goal within the quickest possible timeframe."

In the meantime, parents have some options. Both the Young and Campo families plan to extend their children's coverage through their current policies under the federal law known as COBRA. COBRA permits a child to remain on the family plan for up to 36 months if he or she no longer qualifies as a dependent under the health plan rules, including no longer meeting plan age restrictions.

But there's a catch: parents are on the hook for the entire premium plus a 2 percent administrative fee. In the case of the Young family, this will add another $500 a month to the family's current $700 premium. David Campo says his company hasn't yet informed him what it will cost to cover his daughter under COBRA.

Another possibility is to purchase a plan on the individual insurance market. If a child has no health problems, that may be an affordable option. But individual insurers can and do reject applicants for minor medical problems, a bad knee, for example, or a skin condition like eczema, say experts.

Young investigated individual policies for her son, whose post-graduation plans to turn a Web site he started in college into a profitable business will certainly not provide health benefits. But insurance brokers told her that because of minor pre-existing conditions no insurer would cover him.

Meanwhile, Young is trying to raise awareness about the issue. She created a Facebook page where she encourages its more than 120 members to contact their representatives in Congress to urge them to move up the effective date. Her next step: Adding her two cents to the public comment section once HHS posts draft regulations for the law. But at this point she's not confident her efforts will bear fruit. "We're getting closer and closer to September," she says. "I'm not sure what will happen."

This story was produced through collaboration between NPR and Kaiser Health News (KHN), an editorially independent program of the Henry J. Kaiser Family Foundation, a nonpartisan health-care policy research organization. The Kaiser Family Foundation is not affiliated with Kaiser Permanente. Copyright 2010 Kaiser Health News. To see more, visit http://www.kaiserhealthnews.org/.

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