Coverage of young adults up to 26 years of age on a parent’s insurance plan is one of the most popular provisions of the new health reform law and an early win for children and families. This week, three federal agencies released joint interim final regulations on this provision. The rules confirm that all individual and group health plans, including self-insured plans, must allow young adults to be enrolled as dependents on their parent’s plan starting with new or renewing policies commencing after September 23, 2010.
Under the new law, insurers cannot impose restrictions that have existed previously in determining dependent status, including student status, marital status, residency or financial support by the parent. One short-term exception does apply. Until January 1, 2014, “grandfathered” health plans may reject young adults who are eligible to enroll in their own employer sponsored insurance plan.
The term “grandfathered” health plan generally describes plans in existence on the date of enactment of the health reform law. What is not clear until additional federal guidance is issued is when or how a plan might lose its “grandfather” standing and be considered a new plan for the purpose of this and other provisions of health reform.
Plans must notify subscribers of the new provision and parents will have 30 days to enroll their adult children. The law explicitly allows a parent to enroll if not currently insured or switch coverage options for all family members. However, there is no requirement for a plan that does not provide dependent coverage at all to start doing so.
Insurers must offer all the benefit packages available to other “similarly situated” dependents. For example, if an insurer offers a choice of an HMO product and an indemnity plan to a group, it cannot limit enrollment of young adults to the HMO plan. Insurers can charge more on an individual family basis if they already do so for each new dependent enrolled or they can raise rates across the board to cover the cost of including young adults in the risk pool.
The guidance also clarifies that if a state dependent coverage law imposes stricter requirements on insurers state law is not superseded by federal law. For example, if a state allows a young adult to remain on their parent’s plan until age 28, the higher age limit continues to apply to state regulated health plans. Federal law would supersede state law that has less stringent provisions such as excluding young adults who are married or not claimed as a dependent on the parent’s tax return.
The administration projects that 1.2 million young adults could be covered under this new provision. As widely reported, some 65 insurers have indicated they will implement the provision early by at least allowing dependents who would lose coverage as they age out or graduate to remain on their parent’s plan. This is good news as we chip away at the 47 million uninsured Americans.
