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Dependents' Day

Relief for young adults without health benefits may be on its way today, as several key provisions of federal health care reform take effect. The law mandates that insurers allow parents to enroll dependents up to age 26 regardless of their student status.

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When Amanda Holguin moved from El Paso to Dallas over the summer, she anticipated taking a semester off from school, hoping to work and adjust to life in a new city. Instead, the 22-year-old soon found herself sifting through the Dallas Community College course schedule, picking classes. Unable to find a job with health benefits, Holguin needed to enroll as a full-time student so she could stay on her father’s insurance plan.

“As soon as fall starts, I get sick. And as soon as winter starts, I get sick,” says Holguin, who explains that she has a weak immune system. “So being without insurance was a little scary. It’s a must-have. If not, I would have to pay a couple thousand a year just because I get sick so often.” 

Relief for young adults like Holguin may be on its way today, as several key provisions of federal health care reform take effect. The new law mandates that insurance companies allow parents to enroll dependents up to the age of 26 regardless of their student status. Since 2001, state-regulated plans have allowed dependents only up to the age of 25 to receive health coverage under their parents’ plan, and some unregulated plans, like those offered by many large employers, had age limits as young as 19.

“This is the single early-on provision that probably will affect the most people,” says Anne Dunkelberg, associate director of the Austin-based Center for Public Policy Priorities, a nonprofit that advocates for low- and moderate-income Texans. “It is a very well-timed aid to young adults during a really difficult time in our economy.”

As of today, parents can add their dependents to their plan during the next insurance renewal period; some companies have already increased the age limit. An estimated 161,000 Texans between the ages of 19 to 25 will gain coverage through the dependent extension provision, according to Young Invincibles, a Washington, D.C.-based advocacy group for young adults. (The extension does not apply to government-subsidized plans like the Children's Health Insurance Program and Medicaid, which have their own age limits.)

Provisions of federal health reform taking effect today:
Extension of coverage to young adults up to 26
Insurance companies must provide free preventive care
Prohibition on rescinding insurance coverage for technicalities
New rules for appealing insurance company decisions
Elimination of lifetime and annual payout limits
Children can't be denied for pre-existing conditions

Like most provisions in the health reform bill, extending dependent coverage comes with much debate over costs and government intrusion. Business advocates worry that large employers might have to shoulder major costs because they are covering more people for a longer period of time. Large employers traditionally have self-insured plans that are not regulated by the government, so the companies set their own age limits for dependent coverage, which vary. 

“We think it’s completely inappropriate for the federal government to dictate to employers the terms and conditions of their health insurance,” says Bill Hammond, president of the Texas Association of Business. Hammond fears that dependents who receive out-of-network coverage on their parents’ health insurance plan might drive up premiums for employees and employers. The new provision does not restrict dependents who live in other states from getting on their parents’ plans. 

Dunkelberg concedes that the young adults who take advantage of the new provision might be those most in need of medical attention — and thus the costliest. As a result, the sick might increase the cost of premiums for everyone else. Yet the U.S. Department of Health and Human Services predicts that the new provision will only increase premiums by 0.7 percent, Dunkelberg says.

A survey conducted by the consulting firm Mercer found that some employers will shift that small increase in costs disproportionately onto employees with family coverage rather than individuals without dependents. Even so, the dependent provision isn't a “sweeping” change for the health insurance system in Texas, Dunkelberg says, since many plans offer coverage for dependents up to 25. But she says it will provide some constancy to the health insurance system so that the same rules apply to all policies. 

Although Holguin does not know if the new provision will change her plans for the future, she believes it is no longer dictated by health insurance coverage. “It’s a lot better for students who don’t do the four-year route and are not full-time students all the time,” Holguin says. “It’s a little comforting, because we never know what is going to happen in life.”

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