Graduates may see coverage gap after all

Amid a flurry of publicity, dozens of the nation's insurers announced this spring that they would put into effect a popular provision of the new health law ahead of schedule. Instead of dropping young adults from their parents' health plans when they graduated this spring, insurers said they could stay on. Early implementation was a welcome graduation gift for many families. Or so they thought.

But when parents ask for details from their employers about how to keep their children on a family plan, many are learning that their employers have said "no thank you" to their insurer's offer to make the change early.

Instead of modifying health plans now, they plan to wait to provide the extended coverage until they are legally required to do so. For many employers, that means January. The provision of the law takes effect Sept. 23, but employers don't have to comply until the beginning of the new health-plan year, after the law becomes effective.

According to a study of nearly 800 employers released last month by human resources consultant Mercer, only about a quarter of respondents who don't already cover children until age 26 said they planned to put the change into effect before their annual health-plan renewal date.

Typically, children lose their coverage under their parents' plan when they leave school or reach a certain age. Under the new law, health plans eventually will be required to permit virtually all adult children to remain on their parents' plans until age 26.

For insurance companies, early implementation means more revenue, explained Beth Umland, research director for health and benefits for Mercer, "but for the companies it just means more costs." In addition to the unbudgeted expense of extending coverage to older children, companies must comply with the new law's notification requirements. They will have to inform not only parents but also adult children of the option to re-enroll. That includes children who may have left the plan years ago but are under age 26, Umland said.

In the future, many employers say they are going to take steps to offset the increased costs of offering extended coverage, according to the Mercer survey. The law says that adult children who are working and have an offer of coverage from their employer can't stay on their parents' plan; about half of the companies said they would seriously consider requiring proof that such coverage isn't available.

In addition, more than a third of employers surveyed said they would consider either charging more for dependent coverage in general or changing their coverage structure from simple "individual" and "family" designations to rate tiers that vary the premium based on the number of people that participate in the plan.

Insurers, for their part, aren't throwing the gates wide open to all adult children under age 26 but generally only to those who now are enrolled in the family plan. Grown children who already have left or been dropped before the early implementation start date — typically May or June of this year — may have to wait until the next plan year to sign back up.

That's what the Young family expects to do. Until Alex can rejoin the family plan again as a dependent in January, they plan to pay for him to continue his current coverage under the federal law known as COBRA, which allows children who are no longer eligible for their family's plan to extend their current coverage for up to three years.

There's a hitch, though: The family must pay the entire premium plus a 2 percent administrative fee. In the Young family's case, they'll pay $510 a month for Alex's COBRA coverage. The premium for the entire family of five, in contrast — including Allison, her husband, Alex and his two sisters — was $750 monthly.