Keeping adult children on your insurance policy

With college graduation around the corner, parents are peppering their insurers with questions about how the new health-care reform law will affect their adult children.

The law has two provisions of particular interest to parents. One bars insurers from refusing to cover children under age 19 because of pre-existing medical conditions. Another allows parents to keep their kids on their family plan even after a child graduates from college.

Until now, kids typically have been booted off mom and dad’s insurance once they hit a certain age (that varies from 19 to 24) or once they’ve stopped being full-time students, depending on the terms of the policy. The new law allows parents to keep an adult child on their policy until he or she turns 26.

But both of the new provisions have left consumers with questions about when the rules take effect and how they apply. Here are a few answers.

Does the law mean I can put my college graduate back on my health plan?

Not immediately. The law allows children to remain on their parents’ policies until age 26, but it doesn’t go into effect until sometime in the next year, depending on when it’s time for a policy’s annual renewal.

That means your insurer probably will allow you to enroll a college graduate when the next “plan year” starts, most commonly in January.

My child graduates from college in May. What do I do in the interim?

You can enroll your adult child in COBRA coverage until he or she can go back on your employer-provided plan. Or you can buy a policy in the individual market. Healthy young people can generally find insurance for less than $100 a month, said Sam Gibbs, senior vice president of, a Web-based health insurance shopping site.

There’s also a possibility that your insurer will allow your child to stay on the plan for the few months before the law kicks in. That’s not required, but some speculate that insurers may just decide that it’s silly to dump dependents who are certain to boomerang back in a matter of months.

Does it matter if my child is a dependent?

Not in the Internal Revenue Service definition of the word. The law makes it clear that a “dependent” for purposes of health insurance will not follow the tax definition, which demands that the parent pay most of the child’s living expenses.

According to Laura Baker, principal at Mercer, an employee benefits consulting firm, your child could have a job, be married, be living on his own and supporting himself and still qualify to be covered under your plan.

The U.S. Department of Health and Human Services will soon issue regulations to define dependents for purposes of health insurance, but Baker says the law has few restrictions.

There’s one caveat: Anyone, including a working-age child, who has access to employer-provided health insurance at his own job is expected to obtain coverage through his employer.

What if the parent’s coverage is better—or less expensive—than what an adult child could get through work?

As the law is written now, you will be able to get dependent coverage for any child under the age of 26, regardless of whether the child has other insurance available.

But for the time being, the child can jump on your policy only if he doesn’t have an employer-sponsored plan of his own.

Does that also mean the child can’t get on our family plan if he can buy coverage through school?

No. The only thing that would exclude your adult child is employer-provided health insurance, Baker said.

Does the law have any long-term implications for youths trying to get coverage?

In the long run, premiums for young adults buying coverage are likely to rise fairly significantly because of a provision that restricts how much premiums can vary by age.

Currently, people over age 60 pay five to six times as much for health insurance as people under 30, said Robert Zirkelbach, press secretary for America’s Health Insurance Plans, a Washington-based trade group that represents insurers covering more than 90 percent of Americans. The law stipulates that, in most cases after 2014, premiums for one age group can be no more than three times as much as premiums for any other age group when other criteria are the same.

“The age-rating issue is a big one that hasn’t gotten a lot of attention,” Zirkelbach said. “This is likely to mean that people of those (lower) ages will see an increase in premiums of as much as 50 percent—that’s on top of any other changes in the law that might affect premiums.”

On the bright side, 2014 is also when employer coverage will be mandated and when subsidies will be available for those who can’t afford to buy insurance.

What about younger kids with pre-existing medical conditions? How do the rules work with respect to them?

Starting in September, children will not be subject to coverage restrictions that force people with long-standing medical conditions to pay the cost of treating that ailment out of their own pockets.

This rule, incidentally, came from a post-passage compromise between Health and Human Services Secretary Kathleen Sebelius and the insurance industry, which had previously argued that the law could be interpreted to say that coverage of a child’s pre-existing conditions wouldn’t be required until 2014.

Sebelius, hearing that the industry planned to deny pre-existing-condition medical coverage for four more years, sent a sharply worded letter to the industry’s main lobbying group saying that her upcoming regulations would make it clear that this rule will go into full effect in September.

America’s Health Insurance Plans said in a written response that insurers understand the difficulty of having a child with uncovered pre-existing ailments and “will fully comply” with any regulations Sebelius comes up with.

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