Companies Encouraged to Expand Medical Plans Now

Published: Fri 28 May 2010

Larry Roth

The secretary of the Health and Human Services Department, Kathleen Sebelius, encouraged employers on Thursday to immediately extend or continue medical insurance coverage for employees' children as old as 26, at minimal or no additional cost.

Employers must offer this coverage under the new health care reform law, and Secretary Sebelius said companies should act now, without waiting for the provision to take effect.

Over 65 health insurers have already acceded to the Obama administration's request let young adults remain on their parents' medical plans before the insurance companies are forced to do so by the new law in late 2010 or early 2011.

Employers, however, have not been so quick to get on board.

A new survey of 661 large companies conducted by Tower Watson, an employee benefits consulting firm, discovered that 16 percent planned to extend coverage to adult children prior to the deadline-the beginning of the first plan year starting on or after September 23. For many companies, with medical plans that adhere to a calendar-year schedule, the law's deadline is January 1.

Some companies remain undecided about whether to comply now or later. And some employers contemplating the option have said workers will have to pay higher premiums if they include adult children on their coverage.

"We are reaching out to large employer groups, asking them to open their plans earlier than mandated and make this coverage available," Secretary Sebelius explained at a news conference.

"This is likely to be an overwhelmingly healthy group of individuals," so the added expense should be negligible, she said.

Businesses React

However, the director of health policy at the U.S. Chamber of Commerce, James P. Gelfand, said: "I would not expect businesses to jump at the chance to change their health plans sooner than required. It's more important for businesses to comply with the law and control costs than to score points with officials in Washington, D.C."

Gelfand says that healthy young adults "can often get insurance very cheaply on their own." He voiced concerns that young people who join "mom and dad's employer-sponsored plan" are probably unhealthier than average, and thus more expensive to cover.

Sebelius Pleads with Insurers

Secretary Sebelius said she met with several health insurance executives on Thursday and encouraged them to keep premiums down and cooperate with the Obama administration to implement the law with a minimal disruption to health insurance markets.

During the meeting, Sebelius said that insurance companies worried that "rates are now at a crisis point," and that "more and more people are dropping coverage because of the increase in prices."

"The worst of all worlds is to have more Americans driven out of the market in the next couple of years," before important provisions of the new health care law go into effect in 2014, Sebelius explained.