In­sur­ers barely reg­is­ter costs of adding more young adults to their rolls

2.5 mil­lion young adults gain cov­er­age, while in­sur­ers barely reg­is­ter a change in costs

Modern Healthcare - - NEWS - Beth Kutscher

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Young adults were once par­tic­u­larly sus­cep­ti­ble to los­ing health in­sur­ance. Fin­ished with school and try­ing to piece to­gether a ca­reer, many de­cided to gam­ble on their youth and good health if they weren’t of­fered em­ployer-based cov­er­age.

Yet as the U.S. Supreme Court geared up to hear the first oral ar­gu­ments on the Pa­tient Pro­tec­tion and Af­ford­able Care Act, an HHS re­port trum­peted the sig­nif­i­cant gains young adults have made in this area—thanks to a pro­vi­sion that al­lows de­pen­dents to stay on their par­ents’ plans un­til age 26.

The re­port found that 30.8% of adults ages 19-25 who had pri­vate health in­sur­ance in 2008 were unin­sured for at least one month in the fol­low­ing two years—com­pared with 13.8% of adults ages 26-60.

“Thanks to health re­form, more young adults have in­sur­ance and par­ents have peace of mind know­ing that their sons and daugh­ters will be able to get the health­care they need if they get sick or are in an ac­ci­dent,” HHS Sec­re­tary Kath­leen Se­be­lius said in a March 21 news re­lease.

Health in­sur­ers, mean­while, re­ported that the early pro­vi­sions of health­care re­form have been a small blip on the radar, one for which they were al­ready pre­pared.

Both they and em­ployer groups saw only mar­ginal cost in­creases at­trib­uted to the changes. In to­tal, HHS re­ports that 2.5 mil­lion more young adults were in­sured last June than in Septem­ber 2010. The new el­i­gi­bil­ity re­quire­ments went into ef­fect for plans that be­gan on or af­ter Sept. 23 of that year. One of the rea­sons the im­pact has been mod­est is who this group of newly in­sured is— young, of course, and rel­a­tively healthy.

John Garner, prin­ci­pal of Garner Con­sult­ing, notes that his firm re­searched the ef­fect of the pro­vi­sion for a group of 4,500 em­ploy­ees in a self­funded plan. The data showed that about 100 new 19- to 23-year-olds were added to the group’s cov­er­age, at an av­er­age cost of about $1,000 a per­son. “That’s a lot lower than the over­all av­er­age cost,” he says. More­over, to­tal claims paid for the year ac­tu­ally came in less than in the pre­vi­ous year. “That was a very pleas­ant sur­prise,” he says. “Our con­clu­sion was that that as­pect of health­care re­form didn’t have an im­pact.”

A Novem­ber sur­vey from con­sult­ing firm Mercer found that en­roll­ment in em­ployer-spon­sored health plans grew by 2% last year as a re­sult of the ex­panded de­pen­dent cov­er­age pro­vi­sion.

Tracy Watts, a part­ner in Mercer’s health and ben­e­fits busi­ness, calls the pro­vi­sion the “most pop­u­lar fea­ture of the health re­form law.” And she notes that the cost im­pact has var­ied among em­ploy­ers. “The rates were im­pacted by ap­prox­i­mately 2% in to­tal costs,” she says.

A sur­vey of health in­sur­ers from Aon Hewitt also found that the plans them­selves did not ex­pect the de­pen­dent cov­er­age pro­vi­sion to be a sig­nif­i­cant fac­tor in cost in­creases. But the im­pact var­ied—with some plans es­ti­mat­ing no ef­fect or even a de­crease in costs and oth­ers show­ing a cost in­crease of about 2% re­sult­ing from the pro­vi­sion.

The cost de­creases were at­trib­uted to the sur­vey’s method­ol­ogy, which asked about “per mem­ber” costs. Since young adults are gen­er­ally healthy, they in­crease the plan’s head count but have a small ef­fect on to­tal costs—re­sult­ing in smaller “per mem­ber” health­care bills.

The re­port noted that other pro­vi­sions that went into ef­fect last year—such as re­mov­ing an­nual/life­time max­i­mums and fully cov­er­ing pre­ven­tive care—are ex­pected to have a much larger ef­fect on cost.

In to­tal, pre­mi­ums were ex­pected to rise 1.5% last year as a di­rect re­sult of the 2011 health­care re­form pro­vi­sions—rang­ing from 4.7% for in­di­vid­ual poli­cies to 0.8% for group plans.

Matthew Wig­gin, an Aetna spokesman, notes that pre­mium in­creases have var­ied by state, since some states al­ready re­quired plans to cover de­pen­dents un­til at least age 26. And he adds that the ex­panded el­i­gi­bil­ity pro­vi­sion has not cre­ated any lo­gis­ti­cal hur­dles for the com­pany. “Ob­vi­ously, this is some­thing that we’ve done be­fore,” he says.

Sim­i­larly, Robert Zirkel­bach, spokesman for in­surer trade group Amer­ica’s Health In­sur­ance Plans, notes that many of its mem­ber com­pa­nies be­gan ex­pand­ing de­pen­dent cov­er­age ahead of sched­ule—to pro­vide more con­ti­nu­ity of care and “avoid dis­rup­tion for con­sumers.”

Rep­re­sen­ta­tives at other ma­jor health in­sur­ance com­pa­nies ei­ther did not re­turn mes­sages or re­ferred re­quests for com­ment to AHIP.

“In terms of lo­gis­tics ... it ac­tu­ally sim­pli­fies life,” Garner says. “It gets rid of the whole stu­dent-ver­i­fi­ca­tion process.” Watts agrees that the pro­vi­sion makes el­i­gi­bil­ity track­ing eas­ier, and notes that em­ploy­ers have also been con­duct­ing fewer el­i­gi­bil­ity au­dits as a means to con­trol costs.

The en­tire health­care law is now in the hands of the Supreme Court, but Watts notes that be­cause of the pro­gram’s pop­u­lar­ity, it’s un­clear what would hap­pen if the law is struck down. “It was very well-re­ceived and well-un­der­stood by the Amer­i­can public,” she says.

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