CHICAGO — Employers could see an additional increase of up to 2 percent in medical premiums next year because of a mandated provision of the health reform law that extends coverage to college-age dependents through their parents' plans.
The influx of newly eligible dependents up to age 26 will add 0.25 percent to 2 percent to the cost of their parents' health plans, according to a new study by employee benefits consulting firm Mercer. The increase would come on top of premiums for large employers that most analysts estimate will rise by 8 to 10 percent.
The provision goes into effect Sept. 23, though employers and insurers have the option to wait to comply with the mandate once the new benefit year starts, which is generally Jan. 1 for most large companies. It's one of the early benefits of the landmark health reform legislation passed by Congress four months ago and signed into law by President Obama to bring coverage to 32 million uninsured Americans over the next four years.
Although employers generally pass increased costs on to worker premiums, this year, because of new health reform regulations, companies are bracing for ways to absorb new expenses as they negotiate 2011 rates. Employers this time of year negotiate rates with the health plans that administer their benefits prior to the annual fall open enrollment period, when workers find out what next year's premiums and co-payments will be.
Mercer's data come from a sampling of 2 million employees nationwide who work for 791 employers that range in size from fewer than 500 workers to more than 10,000. Most of these companies that fund their own health plans will wait until Jan. 1 to comply with the mandate, Mercer said.
Even though many supporters of health reform say young adults are a relatively inexpensive group to cover — compared with baby boomers and the elderly, who use medical services and products more frequently due to chronic conditions such as hypertension and high cholesterol — Mercer said employers should plan now for the cost increases.
Adults age 19 to 29 represent the fastest-growing segment of the uninsured in the U.S. They lack coverage at a rate twice as high as that of adults 30 to 64, according to U.S. Census figures. Some choose to go without insurance, while others struggle to pay premiums or work at jobs just for the benefits, analysts say.
Companies are encouraged to do audits to determine the number of dependents and the demographics of their work forces.
"Find every dollar you can now to help minimize the likely cost spike that is just around the corner," said Dan Priga, national business leader of Mercer's performance audit group.
Many health insurance firms are already complying with the mandate ahead of the deadline for their state-regulated small group and individual health insurance businesses.
Lake Forest health benefits firm Trustmark Cos., for example, allowed graduating college students and certain other dependent children to stay on their parents' health plans starting June 1. And Blue Cross and Blue Shield of Illinois implemented the change to cover graduating young adults effective May 1.