Expanding Coverage For Dependents
Expanding Coverage for Dependents
February 2009
By Christine Barber, Senior Policy
Community Catalyst, Inc.
Analyst, and Quynh Chi Nguyen,
30 Winter St. 10th Floor
Researcher
Boston, MA 02108
617.338.6035
This report was written with support from
Fax: 617.451.5838
the Robert Wood Johnson Foundation
www.communitycatalyst.org
Expanding Coverage for Dependents
About Community Catalyst
Community Catalyst is a national nonprofit advocacy organization dedicated to making quality,
affordable health care accessible to everyone. Since 1997, Community Catalyst has worked to
build consumer and community leadership to transform the American health system. With the
belief that this transformation will happen when consumers are fully engaged and have an
organized voice, Community Catalyst works in partnership with national, state and local
consumer organizations, policymakers, and foundations, providing leadership and support to
change the health care system so it serves everyone—especially vulnerable members of society.
For more information about Community Catalyst projects and publications, visit
www.communitycatalyst.org.
© Community Catalyst, Inc. February 2009
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Expanding Coverage for Dependents
Executive Summary
Young adults are one of the fastest growing groups without health insurance.1 Those between
the ages of 19 and 29 make up about one in three people who are uninsured.2 Young adults need
health coverage to shelter them from medical debt and ensure they get essential care.
One solution is simple: change state laws to allow young people to remain on their parents’
health insurance plans beyond age 18. This is a smart strategy during a fiscal crunch, as there is
no cost to the state and typically little extra cost to parents and insurers. This policy is
particularly important in a time of an economic downturn, when many people are losing jobs and
health insurance.
Thirty states have extended the age to which young adults may remain on their parents’
insurance. However, most states continue to place restrictions on which dependents are eligible
for coverage. [See Chart 1] These restrictions include limiting coverage to those who are
students, live with their parents, or do not have access to other insurance.
To cover as many young adults as possible, advocates can work to reduce the number of
eligibility restrictions on dependent coverage expansions in their states.
Some useful tactics in campaigns to expand dependent coverage include: building a broad
coalition that includes parents and children; developing strong messages about young adults’
health needs; and using examples from other states to rebut opponents' arguments. [See Chart 2]
Extending the age that young adults can remain on family health plans is one tool to stem the
rising numbers of the uninsured, but it is not a panacea. Other options are discussed in “Rite of
Passage? Why Young Adults Become Uninsured and How New Policies Can Help, 2008
Update,” a publication by the Commonwealth Fund, which can be found at
www.commonwealthfund.org.
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The Problem
Nationally, young adults are at higher risk of being uninsured than any other age group.3,4 Some
may feel “invincible” and choose not to purchase insurance. But, in many cases, young people
without insurance are in a period of transition; they may be aging out of Medicaid, the State
Children’s Health Insurance Program (SCHIP), or their parents’ health plans. In other cases,
they may be students without access to affordable health care or entry-level employees without
an affordable employer offer of health insurance.
Young adults are often left with few options for coverage. They may purchase a health plan in
the individual market, but this is typically more expensive than group coverage and does not
carry an employer subsidy.5
There are two major reasons to cover uninsured young adults. One is to protect against financial
hardship, medical debt, and preventable disease that comes with having health insurance. While
young adults are typically in good health, certain medical conditions such as pregnancy,
HIV/AIDS, and injury from accidents occur at a higher rate in younger people than in older
adults.6 Contrary to the view that young people do not need health care, the Commonwealth
Fund has found that more than half of uninsured young adults report going without necessary
health care services.7 In addition, young adults today are more likely to support universal health
coverage than any age group polled in the past 30 years.8
The second major reason to cover young adults is their general good health. Young people are
relatively inexpensive to insure and can help to spread “risk” in the insurance market, potentially
lowering costs for older and sicker people.9
One Policy Solution: Legislating Expanded Dependent Coverage
To increase coverage for young adults, lawmakers can extend the age to which dependents may
remain on their parents’ health plans. Thirty states have already done this.
For example, Maryland expanded dependent coverage to age 25 in 2007 without advocates
mounting a significant campaign. Insurers supported the expansion as a new line of business,
according to Patrick Metz, a legislative aide for the bill’s sponsor, Delegate Heather Mizeur.
There was also little opposition from the business community.10 In promoting the expansion,
advocates used the following message: "Young adults don’t have coverage because it’s not
affordable, not because they don’t want it. Many go without needed care.”11 A new federal law
signed in October 2008 requires group health plans to continue coverage for dependent college
students on medical leave for one year, or until the date coverage would otherwise end under
their plan.
Eligibility Restrictions
States that allow young adults to remain on their parents’ health plans often create loopholes that
limit the number of young people actually able to access this benefit.12 In order to cover as
many young adults as possible, states must minimize the number of restrictions. Eligibility is
commonly limited to the following:
• Full- or part-time students
• Those living with parents
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• Those without children of their own
• Those without access to other insurance
See Chart 1 for a state-by-state list of eligibility criteria.
Limiting coverage to full-time students particularly hurts young adults in lower-income families,
who are less likely to be able to pursue college full time.13
Restricting dependent coverage based on whether the young person has another offer of
insurance can be problematic because the other insurance may not be affordable. To address this
problem, policymakers could allow this restriction only if the employer plan offered to the young
adult meets minimum standards, such as basic benefits, limited cost-sharing and a given level of
employer subsidy.
In Maine, Consumers for Affordable Health Care (CAHC) advocated for a bill to expand
dependent coverage to age 30 in 2007. Insurers won changes to restrict coverage to age 25 and
included eligibility rules that prevented many from getting coverage. After the bill passed,
CAHC’s consumer helpline received a number of calls from families and young adults unable to
obtain dependent coverage. The bill’s original sponsor also received complaints. In the 2008
session, CAHC staff worked on a compromise to strengthen the law for consumers, partnering
with the bill sponsor and stakeholders, including Anthem, the state’s largest insurer, and the
Maine Chamber of Commerce. Insurers and businesses insisted on certain eligibility limits;
however, advocates succeeded in allowing dependents to enroll in parents’ plans even if they
have other coverage options. The new law also requires insurers to notify all policyholders of
the dependent coverage expansion through multiple mailings.14
Making Coverage for Dependents Optional
Some states expand dependent coverage as a “rider,” or an add-on to an insurance policy. A
rider can make coverage inaccessible or prohibitively expensive to families for a few reasons.
Riders make it optional for employers to offer this coverage to employees. Many employers do
not even know about rider options, according to brokers, and others choose not to offer riders. In
addition, with a rider, the health insurance risks are spread over a smaller population, which can
drive up costs and therefore premiums.
A group of advocates in Kentucky worked on coverage for all dependents up to age 25 as a
major priority in the 2008 legislative session. But, in the version that passed the Legislature,
dependent coverage is a “mandated offer” by insurers, and, therefore, optional for employers.
Advocates note that it is very difficult to organize a constituency to support dependent
coverage.15
Limitations Posed by Federal Policies
Two federal policies pose potential barriers to expanding dependent coverage.
Any state expansion of the definition of dependent will not aid people covered by self-insured
employer health plans, because the Employee Retirement Income Security Act (ERISA)
prohibits states from regulating these plans. In 2007, 55 percent of workers across the country
were covered by self-insured plans.16 However, in a number of cases, self-insured plans have
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elected to cover older dependents. Policy change at the federal level is needed to change ERISA
restrictions.
In addition, federal tax rules may determine how dependent health coverage is counted as
income.17 To qualify as a dependent child for federal tax filing, a person must be under 19 or a
full-time student under age 24; the person must live with a parent for at least half of the year; and
the person must not have provided for at least half of his or her support for the year.18 This
definition of “dependent” is more limited than that recognized by many states for health
insurance coverage.
Generally, health premiums available through an employer are not taxed as part of an
employee’s income. However, the federal government assesses “imputed income” on certain
fringe benefits and counts that as part of the employee’s gross income, which is subject to
taxation. The value of health insurance benefits for a child who does not qualify as a dependent
under federal tax rules will likely count as imputed income.19 A state may amend its tax code to
create identical definitions of dependent for both health insurance and state income tax to fix the
state tax situation, but this does not affect federal taxes.
The Massachusetts Department of Revenue amended the state’s tax code in this way after the
state’s comprehensive health reform law expanded dependent coverage in 2006.20 The state’s
director of the Bureau of Managed Care at the Division of Insurance said the imputed income tax
problem was a surprise to the state.21
Countering Opposition Arguments
Many insurers and businesses argue that expanding dependent coverage could significantly
increase the cost of insurance. These stakeholders fear that only people who are less healthy and,
therefore, have more costly claims would seek insurance under the expansion. However, there is
no evidence of this trend.
In Illinois, for example, Blue Cross and Blue Shield of Illinois, the state’s largest insurer, said
expanding dependent coverage would add just one percent to the cost of group health plans.22
Policymakers and advocates in other states report no increases in family premiums. And
nationally, Mohit Ghose, a spokesperson for America’s Health Insurance Plans (AHIP), has said
that increasing dependent coverage age limits usually adds less than one percent to the cost of
health policies.23
Still, some insurers may charge higher rates for this population. To address this issue, New
Jersey’s dependent coverage law prohibits insurers from charging families significantly more in
cases where they extend dependent care.24
Many health insurers and businesses argue against dependent coverage expansion as a mandated
insurance benefit. Effective messaging and stakeholder engagement can counteract this
opposition.
An advocate in New Hampshire reported resistance from insurers and some business leaders to
expanding dependent coverage, arguing that this policy would be bad for employers. In 2007, a
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coalition of advocates and small businesses challenged this negative message and built support
for covering young adults by explaining it could reduce the problem of cost-shifting care of the
uninsured to people with private insurance. Advocates reported that having small businesses and
nonprofit organizations counter the concerns of insurers and larger businesses helped immensely.
Parents of young people also mobilized around this effort and succeeded in ensuring coverage of
dependents up to age 26.25
Campaign Tactics for Expanding Dependent Coverage
Below are some suggested steps for advocates seeking to expand dependent coverage:
• Create a broad coalition including parents and young people: Consumer advocates
can organize stakeholders such as concerned parents, young people with health
conditions, providers, and businesses that understand the value of coverage. A broad
coalition will have more advantage in moving this policy through the legislature.
Keeping this group organized for future campaigns can bolster support for coverage for
young adults.
• Develop strong messages about health care needs and costs: Bolster the campaign by
including statistics about the high rates of uninsurance and young people going without
necessary care. Uninsured young people who have serious illnesses can be strong
messengers. In addition, information about negligible premium increases in states that
have implemented this law may be helpful.
• Focus on eligibility: Getting coverage extended may not be enough if many restrictions
are written into law or regulations. States that have significant eligibility constraints
greatly diminish the number of young adults able to enroll in health coverage.
Although extending dependent coverage is not a panacea, it does reduce uninsurance and does
not add costs to the state. This is a smart strategy in periods of tight state budgets.
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Chart 1
States with Expanded Dependent Coverage
Age
State
Eligibility criteria
limit
California None
On medical leave of absence from secondary or post-secondary school
Unmarried, financially dependent, or live with policyholder; at employer
Colorado 25
option*
Connecticut 26
None
State resident or full-time student. Premiums may not exceed 102% of the
Delaware 24
amount charged before dependent turned 18
Florida 25
Unmarried; either live with parent or financially dependent on parent**
21;
Idaho
Unmarried non-student up to age 21; unmarried full-time student up to age 25
25
Illinois 26
Veterans covered up to age 30
Indiana
24
None
Iowa 25
Full-time student or person with disability; unmarried state resident
Kentucky 25
Unmarried, at employer option
Maine
25
Without children; must have continued coverage
Maryland 25
Unmarried, live with parent; at employer option
Massachusetts 25
Two years after leaving full-time school or up to age 25, whichever occurs first
Minnesota 25
Unmarried under 25; or person with disability of any age
Missouri 25
Person with disability unable to sustain employment
Montana 25
Unmarried
New Hampshire
26
Unmarried, state resident or student
Without children, at option of employer. Premium may not exceed 102% of
New Jersey
30
previous premiums.
New Mexico
25
None
23;
Unmarried student up to age 23; unmarried person up to age 25 at employer
New York
25
option
Oregon 23
Unmarried
Pennsylvania None
Full-time student, serve in reserves or National Guard
19;
Rhode Island
Unmarried up to age 19; financially dependent students up to age 25
25
24:
Enrolled in school up to age 24; full-time student up to age 29, at employer
South Dakota
29
option
Tennessee 24
Unmarried, financially dependent on parent
Texas 25
Unmarried, qualify as dependent for federal income tax
Utah 26
Unmarried
Vermont
18+
On medical leave of absence from school, covered for 24 months
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Virginia
25
Full-time student on medical leave, covered for up to 12 months
Washington 25
At employer option
West Virginia
25
None
* Where policy is offered as a rider, noted as “at employer option”
**Implementation of Florida’s dependent coverage law is on hold until the Office of Insurance Regulation can provide
clarity on the details of the law. Specifically, it is unclear if the benefit is at the employer’s option.
Sources:
National Council of State Legislatures. Covering Young Adults Through Their Parent’s or Guardian's Health
Policyhttp://www.ncsl.org/programs/health/dependentstatus.htm
State Coverage Initiatives. Dependent Coverage. http://www.statecoverage.org/coverage_strategies/dependent_coverage .
New York Chapter 58 of the laws of 2007 Part A §65-d, §65-e.
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Chart 2
State Advocates’ Experiences Expanding Dependent Coverage
Colorado
In 2005, Colorado Consumer Health Initiative (CCHI) worked on legislation to
expand eligibility for dependents to 26 for all insurance policies. However,
insurance companies got the policy changed to a rider. The insurers used
arguments they usually make with any new insurance mandate in Colorado -- that
premiums would increase. Few people know about the rider option; there has been
very little take-up. Colorado advocates advise using such messages as: “Young
adults are the largest group of uninsured; family coverage is one of the best ways
to keep them insured; and young adults typically have lower health costs.
Illinois
In 2007, the Illinois Health Care Task Force recommended expanding dependent
coverage to age 29. Advocates advanced that proposal, but it did not pass. In
2008, lawmakers tried again to cover dependents to age 25. However, business
leaders and insurers who were concerned about adverse selection opposed the bill.
Late in the legislative session, the governor enacted an expanded dependent
coverage law though an “amendatory veto.” Advocates report that they were not
able to organize consumers around this issue. Rather, it rose to the surface because
legislators heard from their constituents. Illinois advocates suggest pursuing
dependent coverage as a relatively easy win and a small, targeted building block
toward health reform.
Kentucky
In 2008, a group of advocates worked on extending coverage for dependents to age
25 during the legislative session. An important tenet for the coalition was that all
dependents would be covered, regardless of other eligibility factors. However, in
the enacted bill, dependent coverage is a “mandated offer” by insurers, and
therefore an employer option. In late 2008, the advocates were studying
implementation of the law before planning further action. They suggest working
to forge compromises with other stakeholders. Advocates note that it is very
difficult to organize a constituency to support dependent coverage. Advocates
report that the press was helpful; reporters in Kentucky have done a good job
describing gaps in coverage, especially for young people.
Maine
In 2007, Maine Consumers for Affordable Health Care (CAHC) advocated for a
bill to expand dependent coverage to age 30. Insurers amended the bill to cover
dependents to age 25 and included numerous eligibility restrictions. After the bill
passed, CAHC’s consumer helpline received a number of calls from families and
young adults unable to access this coverage. The original bill sponsor also
received complaints. In the 2008 legislative session, CAHC staff worked on a
compromise to strengthen consumer protections, working with the bill sponsor and
stakeholders, including Anthem, the state’s largest insurer, and the state Chamber
of Commerce. Insurers and business leaders insisted on eligibility restrictions: the
policy is an employer option and dependents must be unmarried, not have children,
and be either Maine residents or students. However, advocates were successful in
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allowing dependents to enroll in their parents’ plans even if they have other
coverage (for instance, individual coverage or Medicaid). Advocates also
succeeded in requiring insurers to notify all individual policyholders of dependent
coverage through multiple mailings. CAHC advises working with stakeholders to
find compromises. CAHC also organized young adults with serious health
conditions to testify at public hearings.
Maryland
In 2007, lawmakers passed expanded dependent coverage without a need for
advocates to mount a significant campaign. An aide to the bill sponsor found
insurers helpful in getting the law passed. The insurers saw dependent coverage as
a new line of business for people with good health risks. There was no opposition
from the larger business community. The aide reports using the message, “Young
adults don’t have coverage because it’s not affordable, not because they don’t want
it. Many go without needed care.” Also, the aide said it was important to explain
that this was just one way to cover young adults. Others suggested organizing
young people on college and high school campuses.
Massachusetts
The legislative staff person who worked on expanding dependent coverage
(enacted as part of the 2006 comprehensive health care reform law) said that this
policy did not concern insurers. Massachusetts insurers do not report premium
rates to the Division of Insurance, but the state’s director of the Bureau of
Managed Care, Nancy Schwartz, said that she has not heard about premium
increases due to this change from either insurers or consumers. This may be
because the policy affects a small population with good health risks, she said.
Advocates at Health Care for All in Massachusetts also said that insurers and
businesses have been supportive of expanded dependent coverage, and that there
have not been reports of premium increases.
New
An advocate in New Hampshire reported resistance in 2007 to expanding
Hampshire
dependent coverage from insurers and large businesses, who argued that this policy
would be bad for employers. A coalition of advocates and small businesses
challenged the negative messages from insurers. Advocates argued that covering
young adults would reduce the problem of cost shifting for care of the uninsured to
people with private insurance. The strategy that worked best was having
individual, one-on-one meetings with legislators. Using small business and
nonprofit organizations as messengers to counter concerns of insurers and larger
businesses also helped immensely.
Washington
Advocates report that they did not mount a campaign and did not face insurer
opposition when the Legislature expanded dependent coverage in 2007. However,
a Senate staff member said insurers and businesses objected to potential increases
in costs from what they labeled a new insurance mandate. The opposition was
successful in amending the policy to allow insurers to charge higher rates for
dependents up to age 25.
Sources:
Interviews with the author: Lorez Meinhold, formerly of Colorado Consumer Health Initiative, February 2008;
Doug Clopp, Hilary Schneider, and Mia Poliquin Pross, Maine Consumers for Affordable Heath Care, February
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2008 and October 2008; Nancy Schwartz, director of the Bureau of Managed Care, Massachusetts Division of
Insurance, February 2008; Lisa Kaplan Howe, formerly of Health Care for All, Massachusetts, February 2008;
Randi Wiggins, formerly of Health Care Financing Committee in Massachusetts House of Representatives, February
2008; Tom Bunnell, Franklin Pierce Law Center Institute for Health, Law and Ethics, New Hampshire, February
2008; Jim Duffett, Campaign for Better Health Care, Illinois, October 2008; Rich Seckel, Kentucky Equal Justice
Center, October 2008.
Emails to author: Bill Dailey and Joshua Welter, Washington CAN, February 2008; Mich’l Prentice Needham,
Senate Health and Long Term Care Committee, Washington State, February 2008; Vincent DeMarco, Maryland
Citizen’s Health Initiative, and Patrick Metz, legislative aide to Maryland Delegate Heather Mizeur, February 2008.
1 Kriss, Jennifer, Sara Collins, Bisundev Mahato, Elise Gould, Cathy Shoen. 2008. Rite of Passage? Why Young
Adults Become Uninsured and How New Policies Can Help, 2008 Update. The Commonwealth Fund.
2 Young adults are about 17 percent of the population, but comprise 30 percent of the non-elderly uninsured. Ibid.
3 Kronstadt, Jessica, Safiya Mojerie, Sonya Schwartz. 2007. State Efforts to Extend Dependent Coverage for Young
Adults. National Academy for State Health Policy. State Health Policy Monitor.
4 Research shows that when a person turns 19, her or his probability of becoming uninsured more than doubles.
Kriss, 2008.
5 For further information on barriers in the individual insurance market, see: The Commonwealth Fund. 2006.
Nearly Nine of Ten who Seek Individual Market Health Insurance Never Buy a Plan.
6 Kriss, 2008. There are 3.5 million pregnancies each year among women ages 19 to 29. In addition, one-third of all
HIV diagnoses are made among young adults.
7 Ibid. See also Commonwealth Fund Biennial Health Insurance Survey 2005.
8 Madland, David and Amanda Logan. 2008. The Progressive Generation: How Young Adults Think About the
Economy. Center for American Progress.
9 Kriss, 2008.
10 DeMarco, Vincent, Maryland Citizen’s Health Initiative. 2008. Interview with the author, February and Patrick
Metz, aide to Delegate Heather Mizeur. 2008. Email message to the author, February.
11 Metz, Patrick. 2008. Email message to the author, February.
12 See H.R. 2851.
13 Quinn, Kevin, Cathy Schoen, Louisa Buatti. 2000. On Their Own: Young Adults Living Without Health
Insurance. The Commonwealth Fund.
14 Doug Clopp, Hilary Schneider, and Mia Poliquin Pross, Maine Consumers for Affordable Heath Care, interviews
conducted by author, February 2008 and October 2008.
15 Seckel, Rich, Kentucky Equal Justice Center. 2008. Interview with the author, October.
16 Kaiser Family Foundation and Health Research and Educational Trust. 2007. Employer Health Benefits: 2007
Annual Survey. Kaiser Family Foundation.
17 The federal government has not defined the term “dependent” for group health insurance. However, federal rules
do dictate how dependents are claimed for tax purposes.
18 Massachusetts Department of Revenue. 2008. TIR 07-16: Personal Income Tax Treatment of Employer-Provided
Health Insurance Coverage for an Employee's Child. www.mass.gov/dor.
19 Ibid.
20 Massachusetts Department of Revenue. 2008. TIR 07-16: Personal Income Tax Treatment of Employer-Provided
Health Insurance Coverage for an Employee's Child. Also, Lisa Kaplan Howe, Health Care for All Massachusetts,
interview conducted by author, February 2008.
21 Schwartz, Nancy, Bureau of Managed Care, Massachusetts Division of Insurance. 2008. Interview with the
author, February.
22 Japsen, Bruce. 2008. Oh, to be Young and Insured: Cost of New Mandate to Extend Coverage Remains in
Dispute. The Chicago Tribune. August 21.
23 Kaiser Network Daily Reports. 2008. Coverage and Access: States Look to Increase Number of Insured Young
Adults by Allowing them to Stay on Their Parents’ Health Coverage Longer. The Kaiser Family Foundation.
24 The New Jersey law allows insurers to charge only two percent more than previous premiums for dependents.
Kronstadt, 2007.
25 Bunnell, Tom, Franklin Pierce Law Center Institute for Health, Law and Ethics. 2008. Interview with the author,
February.
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