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AIS's Health Business Daily
Featured Story, June 14, 2010 Insurers Cite Operational, Not Financial Hurdles in Adding Young Adults to Health Insurance Coverage Reprinted from AIS's HEALTH REFORM WEEK, a new newsletter designed to help savvy business leaders in health care understand what the enormous changes mean to them ... and what they can do about it. By Judy Packer-Tursman, Contributing Editor (tursman@comcast.net) Some insurers cite more ongoing operational than financial challenges as they work to implement reform regulations issued this month requiring insurers to allow dependent children to stay on their parents’ policies until age 26. These carriers say they must adjust internal systems substantially to accommodate regulatory changes and handle the “nuts and bolts” of reform. One actuary estimates that the hike in premiums resulting from the new requirement might average just 2% or less.
“It takes a lot of work operationally…to make sure all things are set up internally to allow for [expanded coverage up to age 26] and account for it,” Jennifer Cannaday, director of legislative and regulatory affairs for Blues plan operator The Regence Group, told HRW May 24. “Changes in your computer systems, in documentation and things filed with your regulator — that’s the internal picture for us. We want to implement the regulations as quickly as we can…and accommodate individual and employer customers.”
Under a new interim final rule issued May 10 by HHS, young adults up to age 26 may opt to remain on their parent’s health insurance during a 30-day enrollment opportunity and cannot be forced to pay more for coverage than what is required under their parents’ existing policy. These young adults also are entitled to the same benefits.
While the provision won’t officially take effect until Sept. 23, dozens of carriers, including Regence in the Pacific Northwest, other Blues plan operators, UPMC Health Plan in Pennsylvania and Aetna Inc., have announced early implementation of the policy change in order to allow uninterrupted coverage — thus preventing some young adults from falling through the cracks between now and Sept. 23.
“We’re doing it [i.e., extending dependent coverage to age 26] on our fully insured book of business and smaller to midsized groups,” Tony Benevento, vice president of commercial products for UPMC Health Plan, tells HRW. He explains that some of the insurer’s large groups have decided to wait until the federal mandate kicks in because preparing for open enrollment is a major operational issue that requires more lead time.
UPMC Health Plan made the policy change retroactive to May 1 because it became aware that a lot of graduating students were terminating coverage as of that date, he says.
The plan expects the policy change to affect between 5,000 and 6,000 people who would typically “age out,” or about 1% to 2% of its total commercial covered lives, over the course of a year. “It’s not huge amounts of people, but people we typically would not be covering a liability for that we’ll now be covering a liability for,” he says.
Aetna spokesman Ethan Slavin tells HRW, “We will allow our self-funded plan sponsors and our large-group fully insured plan sponsors to extend coverage to dependents who are currently covered under their parents’ plan until age 26 effective on or after June 1, 2010.”
“For our individual and small-group customers,” he adds, “we will continue coverage effective June 1, 2010, for dependents under age 26 currently covered on a parent’s health plan for individual and fully insured small-group plans (as defined in state law) that currently offer dependent coverage.”
Regence Says Issue Triggered Interest
Regence also decided to implement the policy change for dependents as of June 1, primarily because the issue has gained widespread attention and thus has triggered “quite a lot of interest” from employers and individuals, Cannaday says.
But she notes that it remains a question whether self-insured employers will implement the policy change early as well.
Blue Cross and Blue Shield Association spokesperson Brett Lieberman tells HRW that several hundred thousand young adults potentially are about to age out of dependent coverage in Blues plans — and now would be eligible to stay on their parents’ policies.
Nationwide, out of roughly 2.4 million young adults eligible for coverage under their parents’ plans, HHS estimates that 1.2 million likely would enroll for dependent coverage in 2012. That figure likely would rise to 1.6 million in 2012 and 1.65 million in 2013.
According to HHS, the annual premium costs for adding a young adult, using a mid-range estimate, would be $3,380 in 2011, $3,500 in 2012, and $3,690 in 2013. This would raise employers’ group premium costs by 0.7% in 2011 and 1% in 2012 and 2013. For non-group or individual policies, the annual premium costs are anticipated to be $2,360 in 2011, $2,400 in 2012 and $2,480 in 2013.
Mike Sturm, a consulting actuary at Milliman, Inc., explains that premium rates likely will increase by “a fairly small amount” — perhaps up to 2% (the cost of adding two dependents out of 100 covered lives) — because it is written over all policyholders.
“It’s just covering more children falling through the cracks,” Sturm tells HRW. “It will add zero to 2% of cost. It might be 3% for [those plans with] a lot of 25-year-olds, but on average for typical large employers it’s going to be 1% to 2%. So it’s really not that big a deal, I don’t think.”
While the interim rule does not require an insurer to extend coverage to the covered child’s spouse or children, Sturm notes that he recently talked to a “very, very large carrier” that intends to cover dependents’ children — but not their spouses.
The federal government has stated that, while it is “eager” to provide coverage to young adults prior to Jan. 1, current law specifically prohibits the Federal Employees Health Benefits Program (FEHBP) from doing so. FEHBP must follow existing law — covering unmarried dependent children until age 22 — until the new law goes into effect. Ditto for military families using the federal TRICARE program.
The Office of Personnel Management (OPM) stated May 12 that the reform law makes adult children up to age 26 eligible for coverage at the start of the next benefit plan year. The effective date of the provision is the first day of the plan year that is six months following enactment of the law, which, for FEHBP, is Jan. 1, 2011.
OPM says it is working to address the matter with Congress, where legislators have introduced a proposed fix. Meanwhile, OPM says, children turning 22 are automatically covered for an additional 31 days under a parent’s coverage policy. During this time, OPM says, families may decide to continue FEHBP coverage for adult children for up to 36 months through the Temporary Continuation of Coverage program. There is no federal contribution toward the premium, but the coverage policy is not subject to underwriting or pre-existing condition exclusions, OPM notes.
To view the regulation, visit www.AISHealth.com/AISHealthReform.html.
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