Thursday, January 20, 2011

Obamacare and Extended Coverage for Young Adults

While the Obamacare debate is reopened, here's a tip: don't take for granted that your existing health insurance coverages will automatically cover your recently graduated young adult. 

Prior to the passage of Obamacare on March 23, 2010, a child on a parent's policy was typically  dropped from coverage at either the 19th birthday, or graduation from college.  Obamacare permits the extension of certain coverage for your recent college graduates up to their 26th birthday, but with certain important exceptions.

1.  If the parents have coverage with an employer that existed as of March 23, 2010 when the health law was enacted (so-called “grandfathered” coverage), then their dependent coverage is only extended to young adults without other access to employer-sponsored coverage.  In other words, if the child can get coverage through a current employer, then the child cannot go back on the parent's policy.  This limitation remains in effect until 2014.

2.  If the parent's existing policy does not have "dependent coverage", then the employer will not be required to provide it.  

3. The change applies to plan years beginning on or after September 23, 2010.  So, if the plan year is a calendar year, then the change applies as of January 1, 2011.   Some insurers may implement the change sooner.  

4.  The employer cannot charge a higher premium for a young adult than what it had charged in the same circumstance for a child with coverage.  However, if under the existing plan, the carrier could charge an additional premium for each additional dependent, then that continues.  A premium can be charged for each young adult.  

5.  The change in law applies for basic medical care coverage. It may not apply to dental coverage and vision coverage. It depends on the employer's particular plan.  An employer may obtain a plan that permits this extended coverage for dental and vision, but these coverages are not required under the recent law changes.  

6.  Children (under age 19) can't be denied coverage for pre-existing conditions.  Beginning in 2014, when many of the new law's more sweeping provisions take effect, no one can be denied coverage based on pre-existing conditions.  But for that young adult who wants to go back on his parents policy, if they have a pre-existing condition, then according to a U.S.A. Today article:

"Some young adults joining their parents' employer-sponsored health plans can face a pre-existing condition exclusion for up to 12 months in which care for the existing illness is not covered. The rules vary by state. Once the exclusion period expires, the young adult will be covered for the illness."  

I have not been able to find the black letter law on this particular topic in the thousands of pages of law, regulations, and commentary about the changes to the law.  

So, before sending your young adults off to the doctor, or dentist or optometrist, call your employer's benefits expert (or call the coverage carrier directly), explain that your child is no longer a full time student, and specifically ask whether they continue to be covered for medical, dental, vision or any other additional coverages. If they confirm that the coverage is available, then take the name of the person you spoke with, or ask for written confirmation.  Don't rely on the fact that the child's name still appears on an insurance card or on a website as a dependent.  When the claim comes in, the carrier may challenge the coverage and deny the claim.  Then you may find yourself fighting a claim denial.  In that circumstance, the adult child, and not the parent,  may find themselves without the coverage they thought they had, and owing thousands of dollars for services that they received and that they thought would be covered.  This is a true pitfall - a hole covered by brush that you may unexpectedly fall into.  And it is a deep hole for a 20-something to find themselves in. 

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