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More on health-care legislation and extended dependent coverage

This article first appeared in the St. Louis Beacon, Nov. 13, 2009 - In response to movement in Congress on health-care legislation, I wrote several weeks ago about how various proposals would affect people in their 20s, about 30 percent of whom don’t have health insurance, research shows. 

The focus was on measures in the House and Senate that would require insurers to allow many young people – including those who are no longer in school -- to remain on their parents’ health-care policies.

Since that post, the U.S. House of Representatives has passed its sweeping health-care plan. Here’s the language that deals with this issue of extended coverage:

"A group health plan and a health insurance issuer offering health-insurance coverage in connection with a group health plan that provides coverage for dependent children shall make available such coverage, at the option of the participant involved, for one or more qualified children of the participant."

The legislation says that, to qualify, a child must be under 27 and not enrolled in an individual or group health plan. Similar legislation approved by the Senate health committee this summer included a provision that all group and individual coverage policies must continue dependent coverage for children through age 25.

But even if a federal mandate were put into place, would companies have some wiggle room?

For an answer to this, I turned to Jay Savan, of the St. Louis office of the consulting firm Towers Perrin. Savan has been closely monitoring federal health-care legislation and how it could affect local companies and employees.

Savan explained that the extended coverage provision in the House bill amends the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that sets minimum standards for retirement and health-benefit plans in private industry. It’s important to note that the act doesn’t require companies to offer such plans, but it mandates that those that do meet certain standards.

It's also important to know that states have long determined at what age young adults can no longer be covered by their parents’ insurance. In Missouri, many companies are self-insured. And a provision in ERISA exempts those plans from state insurance requirements, meaning that only some young adults have the safety net of being covered through their parents' insurance.

Thus the question about wiggle room with federal legislation.

Savan said that because this would be a federal mandate, the extended coverage provision would apply regardless of whether a company is self-insured or insured by an outside party.

Then there’s the question of how employers might respond. On my last post, a reader made this comment:

"You assume that because employers must extend coverage to older children, that there will be more people insured at [an employer’s] expense. It could end up being the opposite: Employers might decide that they can’t afford to provide dependent coverage for an additional six years, and rather than doing so, might eliminate employer-paid coverage of children entirely."

Savan said this concern is real. But he pointed out that the House bill requires that the vast majority of Americans be covered by a qualified health plan, and that a plan that excludes dependent children or dependents at all would likely not meet the definition of a qualified group plan. Thus, an employer wouldn’t be able to say that its contribution is tax deductable.

“It would be dumb for someone to enroll in that plan, and it would essentially be ineffective for the employer to offer it,” he said.

Savan rightly pointed out that the situation remains fluid. Even though the Senate health committee has put forth a comparable provision about extended coverage, it’s too early to tell how the full Senate will act. The issue is “definitely on their radar,” he said.

If all this becomes law, there’s also likely to be wrangling over what is meant by “dependent,” Savan said.

In the meantime, people in their 20s who have been ineligible to be covered through their parents' insurance for one reason or another remain vulnerable.