Expanding Dependent Coverage for Young Adults

Lessons from State Initiatives

The experience that states have had with pre-Affordable Care Act (ACA) insurance expansion to young adults shows the process is non-problematic, but there are undetermined implications for risk pooling, cost distribution, and prolonging the parental dependence of young adults.

The ACA requires that young adults up to age 26 be allowed to enroll as dependents on their parents’ health plans. But prior to the ACA, 31 states had already enacted laws increasing the maximum age of eligibility for dependent coverage. This article reviews the experience of those states through March 2011 and includes detailed case studies of four states that handle premiums in two different ways: New Jersey and Colorado allow insurers to charge separate premiums to parents for insuring young adults, while Maryland and Minnesota, similar to the ACA, require coverage to be included in family premiums.

Key Findings:

  • Stakeholders, including businesses, insurance companies, and consumer groups, have had positive, non-problematic experiences with expanding coverage to young adults.
  • Under state-mandated expansions, take-up of young adult coverage has been low, possibly because of poor outreach and public education.
  • Early indications are that take-up under ACA will be more robust, whether that is due to increased awareness, differences in the premium payment rules, or broader eligibility.
  • The ACA method of including young adult coverage within family coverage, rather than levying separate young adult premiums, seems to be effective; Insurance companies in states with family premium models report being better off than pre-expansion.

The authors point out it is not known whether, by removing too many healthy young adults from the risk pool, expanded parent coverage will negatively impact ACA health exchanges that are soon to be formed. The authors also note equity concerns regarding young adults who do not have access to parental coverage, and social concerns as dependency on parents is prolonged.