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

More payer news at READ modernhealthcare.com/payers

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.