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A Plan to Allow Young Adults to Stay On Parents' Plans Wins Broad Appeal

By Jane Norman, CQ HealthBeat Associate Editor

December 11, 2009 -- Here's a rarity: A provision in the health care overhaul bills that is cheap, fairly easy to understand and universally popular.

Both House and Senate bills would allow young adults to remain on their parents' health insurance policies until their mid-20s. It is being touted as a way to extend health insurance to the "young invincibles," who have the highest rate of uninsurance.

The Commonwealth Fund estimates that a third of Americans age 19 to 29 are uninsured, the largest and fastest-growing segment of the population lacking health insurance. For those who aren't full-time students, it climbs to 39 percent.

Sen. Richard J. Durbin said parents worry when their sons and daughters graduate from college already loaded with student debt and then must leave parents' health care policies, which generally end when their status as a full-time students ends.

"I can't tell you how many times I called my daughter and said: 'Jennifer, have you got health insurance yet?' 'Oh, yeah, Dad, I will get to that soon.' I didn't like to hear that," said Durbin, an Illinois Democrat. "Parents don't like to hear that. Well, we extend them from age 24, and we say they can stay on their parents' insurance policy until they are 27. That is an addition of several years of protection—peace of mind—while a young person goes about finding a job, starting a career and starting a family."

While the proposal has universal support, health policy experts are not so sure that it would have a big impact on the number of uninsured Americans.

For one thing, it's unclear how many young adults would actually be added to their parents' policies. In states that have moved on to mandate addition of young people to parents' policies, the effect has been minimal, according to one study

"There was no impact," said Joel Cantor, a co-author and director of the Center for State Health Policy at Rutgers University. The study did find a small increase in young adult dependent coverage in the 25 states that at the time of the study had implemented expansions, but it was offset by a decline in coverage in the young adults' own names as policyholders, he said.

"Our conclusion, at least at this early stage, is this is causing a bit of a shift in the source of coverage, but really is not meeting the policy makers' intent in making a dent in the number of uninsured young adults," he said. "These policies really don't address the big problem of affordability." Some 38 states now have enacted young adult policies, most since 2003, though they differ in detail.

The impact could be greater if young adult coverage is implemented on a national scale and accompanied by an individual insurance mandate, federal subsidies and other market improvements, Cantor said. "I think it's a totally different game in a post-reform world," he said.

Policy makers are less sure of the effect if the policy is put into place on its own. The House health care overhaul bill (HR 3962) would make the expanded coverage effective Jan. 1, prior to other changes, assuming legislation is signed into law by then. The provision is based on a bill by freshman Kathy Dahlkemper, D-Pa.

No Objections From Industry
Under the House bill, health plans would have to allow parents to keep their dependent children on their policies until age 27 as long as they are not enrolled in other health plans. The Senate bill (HR 3590) would allow parents to keep unmarried dependents on their policies until age 26 and specifically bars "a child of a child," or grandchildren, from coverage. A spokesman for America's Health Insurance Plans said that the industry insurer group has no objections to either of the expanded young adult coverage proposals.

While it's difficult to estimate how many uninsured young people could be added to their parents' policies, just 1.1 million of the 10.3 million uninsured young adults in 2007 appeared to live in families with parents who have group employer coverage, according to a study by the Urban Institute.

"Therefore, even a very high take-up rate of dependent coverage for these young adults would only make a small dent in the uninsured rate among this age group," researchers John Holahan and Genevieve Kenney said in their report.

Kenney said in an interview that the affordability of insurance will remain key for this group, and that Medicaid expansion and federal subsidies would probably be more important for extending coverage to young adults on a national scale. "I don't think we can get there without an individual mandate," she added.

A report by Richard S. Foster, actuary for the Center for Medicare and Medicaid Services, estimates that 485,000 people would gain coverage through their parents' group plans under the Senate bill.

Whatever happens, the young adult provision seems a winner among politicians looking to burnish the appeal of the overhaul among worried parents.

"Can you imagine all of the young people today, college or not, who come out, get the first job, like my children, no health insurance, who will benefit by saying you can stay on your parents' insurance until your 27th birthday?" asked Sen. Debbie Stabenow, D-Mich. "That is in this bill, and it is very important."

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