Ask Kim


New Grads and Health-Care Reform

Kimberly Lankford

Several insurers are letting adult children stay on their parents' policies after graduation.



My son is graduating from college this May and doesn’t have a job yet. What can he do about health insurance until the health-care-reform law, which permits children to remain on their parents’ policies until age 26, takes effect?

He may be in luck. Several major insurers -- including UnitedHealthcare, WellPoint, Humana, Kaiser Permanente, Aetna and the Blue Cross Blue Shield plans -- say they will let new grads stay on their parents’ policies after graduation, so they won’t have a coverage gap of a few months before the new law kicks in. Secretary of Health and Human Services Kathleen Sebelius is urging other insurers to follow suit and voluntarily allow this year’s grads to remain on their parents’ policies until the new law takes over, which for most plans is January 1, 2011. (Although the new rule applies to plan years starting after September 23, 2010, most plans operate on a calendar-year basis.)

If your child is about to graduate from college and would otherwise be dropped from your health policy, ask your firm’s HR department or the insurer about its rules. Keeping new grads on the family policy lets the insurer avoid the administrative hassles of disenrolling kids at graduation only to re-enroll them a few months later. Note: 30 states already have laws on the books that require insurers to let adult children stay on their parents’ policies until their mid twenties.

If your insurer doesn’t fill the gap, you can keep your child on your policy through COBRA until the new law takes effect. But the premium price will jump because your employer will no longer cover part of the cost. COBRA premiums for an adult child can vary a lot, but could be as high as $300 to $500 per month, says Randall Abbott, senior consultant with Towers Watson, a global benefits-consulting firm. If you face such a steep bill, your son might find a much better deal on his own. In most states, healthy people in their early twenties can buy a policy for less than $150 per month, especially if they choose a high-deductible policy. You can shop for an individual policy at eHealthInsurance.com or find a local agent at www.nahu.org.

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How much will it cost to keep my child on my health-insurance policy?

If your child is currently on your policy and is being allowed to keep the coverage after graduation this year, then you’ll generally just continue to pay the premiums you’ve been paying, at least through the end of the plan year. A big benefit of keeping your child on your employer’s policy as a dependent -- rather than having to continue the coverage through COBRA -- is that most employers subsidize part of the premiums for family coverage.

The details depend on how the employer prices the coverage. “Some employers stratify pricing based on the number of dependents, and others do not,” says Daryl Richard, of UnitedHealthcare. That is, some employers charge one rate for single employees, another for an employee plus spouse, and yet another rate for full family coverage, regardless of the number of kids. In that case, you may not pay extra to keep an adult child on your policy if you’re already covering younger kids. But if your employer charges extra per child, it’s important to compare the cost of keeping the young adult on your policy with the cost of buying coverage on his or her own.

The pricing structure may change for adult children who are being added back to their parents’ policies for the next plan year, after the Secretary of Health and Human Services issues regulations with more details.

My company’s health coverage is self-insured. Do these new laws apply to me?

Yes. The new law also requires self-insured plans to let young adults stay on their parents’ policies until age 26. It’s up to your employer, however, to decide whether to extend the coverage to new grads before the law takes effect, even if the plan is administered by one of the insurance companies listed above.

Got a question? Ask Kim at askkim@kiplinger.com.



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