Transcript Adult Dependent Coverage Under the Affordable Care Act of 2010: An Employer Perspective Alliance for Health Care Reform Briefing Roland McDevitt May 24, 2010 © 2010

Adult Dependent Coverage Under the
Affordable Care Act of 2010:
An Employer Perspective
Alliance for Health Care Reform Briefing
Roland McDevitt
May 24, 2010
© 2010 Towers Watson. All rights reserved.
Affordable Care Act of 2010:
Key Issues for Employers


Young adults will be eligible for parent’s plans until age 26

Regardless of whether they are working and have an offer of coverage

Regardless of whether they are students

Regardless of whether they are married
Applies to first plan year beginning after September 23, 2010


For most employers this will be the 2011 plan year
Transition rules allow a three year period (2011, 2012 and 2013) during
which employer plan may withhold eligibility if young adult is offered
coverage from own employer
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Considerations for Employers

What is the cost impact of simply extending eligibility?

Administrative issues

Dental and vision are not mandated – should employer extend eligibility
along with medical coverage or create separate eligibility rules, processes
and communications?

Many retiree medical plans are administered together with the plans for
active employees. Do these retiree medical plans need to be separated in
order to avoid this regulation for the retiree plan?

COBRA will apply to all of these adult dependents (could remain in plan after
age 25)

Require young adults to take coverage elsewhere when offered?

Administrative systems are not in place
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Percentage of Large Employer Plans Covering
Children by Age of Child and Student Status
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
18
19
20
21
22
23
24
25
26
27
Ages for which coverage is offered
Full-Time Student
Not a Student
Note: Many employer plans also include provisions that coverage is lost if the adult child is married or working
full-time. Source: Towers Watson’s Employee Benefit Information Center.
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Current Coverage Categories for Americans with
Employer-Sponsored Insurance
Child Ages 19
and Older, 3%
Child Ages 0-18,
27%
Employee, 53%
Spouse, 17%
Source: March 2008 Current Population Survey. Calculations by Towers Watson.
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Back of the Envelope Estimates of
Cost Impact to Employer Plans
Baseline
Enrollment
Premium
3 Scenarios for Influx of Young Adults
Expense (in Millions)
Total
Premium
(millions)
Enrollment
Up 25%
Enrollment
Up 50%
Enrollment
Up 100%
Adults
6,900
$5,000
$34.5
$34.5
$34.5
$34.5
Children
3,100
$2,500
$7.8
$8.0
$8.2
$8.6
$42.3
$42.5
$42.7
$43.1
.5%
1%
2%
Total
% Increase
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Factors That Will Influence Take-up Rates


Other alternatives available to young adults

Coverage from own employer

Medicaid in 2014

Purchase through individual market or exchange

Decline coverage and purchase through the exchange when need arises
How the employer prices coverage

Most employers have only three or four coverage tiers today
— Employee only
— Employee + Spouse
— Employee + Child(ren)
— Family


Many are considering one or more additional tiers
If young adults can obtain “free” coverage through parent’s plan, then why not?
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Bottom Line


For most employers, this is not viewed as a critical issue

Financial impact viewed as 1% or less

Those who employ young adults may realize some savings if pricing of
parent’s plan is attractive
Could have significant effects for some employers

Administration and compliance are significant concerns for many employers

Will young adults come back to “free” coverage in parent’s plan?

Employers will need to consider
— level of employer premium subsidies for dependents
— additional premium tiers
— generosity of plans offered
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