When Brian Howell, a 23-year-old Nashville, Tennessee, guitar player, feared a lingering cold had turned into an infection last year, he decided against seeing a doctor. It would have cost too much, he said.
“I decided just to drink a lot of tea and take some Mucinex,” Howell said. “It turned out OK -- thankfully.”
Howell hopes to stop gambling with his health next year, he said. That’s when young adults up to age 26, who aren’t covered by a company insurance plan, will be able to join their parents’ policies under the U.S. health overhaul signed into law last month. The change may save Howell $800 a year in premiums, money he said he plans to put into savings and a diet that’s less dependent on road-tour fast food.
Fourteen million Americans ages 19 to 29 were uninsured in 2008, the largest group among the 46 million without coverage, according to a January report by the Kaiser Family Foundation, a research group. The expanded benefits, effective next year, will help people seeking their first jobs, those working for firms that don’t offer insurance and risk-takers starting their own business, said Landon Gibbs, executive director of SHOUTAmerica, a Franklin, Tennessee-based health-care advocacy group.
“Many of them have been forced to make the very rational decision of putting gas in the car or food on the table rather than buying health insurance,” said Gibbs, 27, whose group focuses on young adults.
Amid the worst economic decline since the Great Depression, fewer entry-level jobs offer insurance and those that do so increasingly require waiting before coverage starts, Gibbs said in a telephone interview.
Scared to Leave
Entrepreneurs may also gain, he said. “There’s a lot of young adults who want to go out and start their own company, but they’re scared to leave the security of health-care coverage through their jobs,” he said.
Among uninsured people in their 20s, half lived in families with incomes below $15,000 a year, according to the report by the Menlo Park, California-based Kaiser Foundation. Half were full-time workers. Forty percent worked in farming, construction or service-industry jobs less likely to offer insurance, Kaiser found in its study, which used U.S. Census data.
The health-care law requires employers and health plans that offer dependent coverage to let children stay on parents’ policies until age 26. Dependents with access to insurance through their own employers are ineligible until 2014, said Linda Douglass, a White House spokeswoman, in an e-mail.
The change kicks in six months after the overhaul was signed into law, and will affect parents’ policies as they come up for renewal, she said. Adult children who are on their parents’ plans now, but are set to lose that coverage when they graduate from college, can rejoin under the same schedule.
On average, the added policyholders will probably boost premiums for large employers by less than 1 percent, said Randall Abbott, a senior consultant with Towers Watson & Co. (TW:US), a New York-based benefits consultant to Fortune 500 companies. Young people tend to be healthier and generate fewer medical bills, so insurers charge less for them, he said by telephone.
The cost will rise for businesses that add children with expensive or chronic conditions, Abbott said, citing hemophilia as one example. Expanded access may also accelerate a trend of employers adding extra fees for dependents, rather than charging a flat rate for family coverage, he said.
The legislation leaves it to the U.S. Health and Human Services Department to define what “dependent” means, as well as whether and how employers can charge extra for the benefit, Abbott said.
Howell, a Raleigh, North Carolina, native, was on his father’s policy until last year when he realized his move out of state made him ineligible, he said. The replacement insurance he bought last year, through Blue Cross Blue Shield of Tennessee, charges $65 a month in premiums and carries a $3,500 deductible with no coverage for prescriptions or preventive-care visits, Howell said.
It’s a manageable cost for someone in good health, as a shield against the bills that might arise from an accident or serious illness, he said. Still, with money tight, medical care has sometimes come second.
“I make enough to get by, but it’s little enough to where having my own private insurance is a strain.” said Howell, a bass player who tours with The Carter Twins, a country duo.
His parents’ insurance plan, purchased through his father’s commercial real-estate and instructional video business, offers a lower deductible and covers drug costs and at least one preventive-care visit a year.
Mary Thompson, a Blue Cross spokeswoman, declined to comment, saying she was bound by privacy rules.
Thirty-seven states now require group health plans to let adult dependents stay on a parents’ plan into their 20s, according to a Kaiser Foundation survey. Most mandate coverage until age 25 and typically only for full-time students or those without access to their own insurance.
The health-care legislation would expand the criteria and extend the requirement to large employers who fund their own insurance plans.
Insurers, led by WellPoint Inc. (WLP:US) of Indianapolis, have long coveted the young and uninsured, said Dave Shove, a BMO Capital Markets analyst in New York. The one-third of young adults without coverage may be the last sizable, untapped market for an industry that’s lost membership in the recession, he said.
While enrolling them through parents’ plans won’t be as profitable as signing them up individually, the business should be “a net positive” for the insurance companies because young beneficiaries use relatively little medical care, he said.
That dynamic may also make expanded coverage a money-saver for small employers, whose more limited workforces make them susceptible to one or two bad illnesses among employers, said Amanda Austin, director of federal policy at the National Federation of Independent Business, a Washington trade group. Employers may face administrative burdens if they’re responsible for determining which children are eligible, she said.
The full impact won’t be clear until businesses see how many families decide extra coverage is worth the cost, she said. If expenses rise, companies are likely to raise deductibles or trim benefits in other ways before dropping dependents.
“To the extent a lot of these places are family-owned and still treat employees like family, the last thing they want to do is drop a person’s kid,” Austin said. “If they try to hold onto anything, it’s usually the dependent coverage.”
To contact the reporter on this story: Alex Nussbaum in New York email@example.com.
To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net