The rule mandates that medical plans extend benefits to participants children until they reach age 26.

A recent analysis of the rule’s impact by the National Center for Health Statistics shows that from September 2010 (when the law took effect) to June 2011, the percentage of adults age 19 to 25 with health insurance increased from 64% to 73%, translating into 2.5 million more individuals with coverage.

That’s two-and-a-half times more young adults who’ve obtained coverage than a prior analysis — which the feds released in September — had suggested.

The most recent analysis was the first to compare trends between the 19 to 25 age group and the 26 to 35 age group. It revealed that the percentage of those age 26 to 35 with medical coverage remained stable, while coverage among those in the younger group rose significantly.

The Department of Health and Human Services said in a release: “This comparison makes it clear that the increase in coverage among 19- to 25-year-olds can be directly attributed to the Affordable Care Act’s new dependent-coverage provision.”

The Department of Health and Human Service (HHS) just announced that the results from a national health survey show the percentage of adults between the ages of 19 and 25 with health insurance increased by 3.5% in the first quarter of 2011.

That means about one million young adults who didn’t have coverage last year are now insured.

Under the healthcare reform law, medical plans must extend coverage to participants’ children until age 26.

Federal researchers are saying the increase is a result of the reform law mandate.

“While it is theoretically possible that the increase in insurance coverage for young adults in 2011 is due to some factor other than the Affordable Care Act, it is hard to identify a plausible alternative explanation for the increase in coverage among young adults,” said a statement released by the HHS.

The HHS also said its conclusion is supported by findings from other organizations.

Some stats the HHS points to:

• A recent Gallup survey shows the rate of insured adults ages 18 to 25 went from 71% in the first quarter of 2010 to 75.1% in the second quarter of 2011, and
• Results from a U.S. Census Bureau Current Population Survey found roughly 400,000 additional adults ages 19 to 25 were insured during 2010 compared to 2009.

First impressions are it may actually be true. Two completely independent studies have come to the same conclusion: The amount employers will pay for health insurance coverage in 2012 will increase between 5% and 6% on average.

That projected cost increase could be the smallest recorded in 15 years.

The first study

A Mercer study, which interviewed about 1,600 employers, says health insurance costs will rise 5.4% on average.

Two contributing factors the study lists for the reduction in premium increases:

• many employers plan to trim back their plans and shift more costs to employees, and
• healthcare utilization has decreased.

Some analysts at Mercer believe the decrease in utilization is the result of higher deductibles and the economy causing employees to have less disposable income to spend on care.

Others say it could a sign that wellness programs are beginning to pay off — by keeping employees healthier and in less need of urgent care.

Some plan changes employers said they’re more likely to make next year:

• 36% said increasing employee contributions for dependent coverage
• 33% said increasing contributions for employee-only coverage, and
• switching over to a consumer-driven health plan (CDHP) — usage of these plans is expected to increase to 18% and 58% for small and large employers respectively (an increase from 14% and 51% in 2010).

The employers interviewed said their insurance costs would increase about 7.1% next year if they didn’t touch their plans — still a significant decrease from past years.

The second study

A Towers Watson survey of 368 employers found that health insurance costs are expected to increase 5.9% on average in 2012 — a significant decrease from the 7.6% increase those same employers endured in 2011.

But again, that decrease won’t come without sacrifice.

Some changes employers said they’ll make in 2012

• 46% will increase employees’ share of premium contributions for employee-only coverage between 1% and 5%
• 44% will increase employees’ premiums for dependent coverage between 1% and 5%
• 20% will increase employees’ premiums for employee-only coverage 5% or more, and
• 29% will increase employees’ premiums for dependent coverage between 5% or more.

Are these surveys an accurate reflection of what you’re seeing? Are you expecting a similar decrease in cost increases/benefits? Let us know in the Reply box below.

Dallas Wiens touched a high-voltage power line while making repairs to a church window from a cherry picker. He awoke three months later to find that the incident had burned nearly all the flesh from his face.

Last week, Wiens received the nation’s first full face transplant, thanks to the new healthcare reform law.

Wiens had no health insurance when he was injured. Medicaid paid for several surgeries after the accident until his disability payments put him over Medicaid’s income limit.

But because of the reform law’s dependent coverage requirement — which says dependent children are eligible for coverage under a parent’s employer-sponsored plan until they reach the age of 26 — the 25-year-old Wiens was able to obtain health insurance under his father’s plan.

Following the accident, Wiens spoke about wanting to smile again and feel his three-year-old daughter kiss his face. Now, barring any setbacks, he’ll have a chance to do both.

The main driver of this bolder approach, of course, is costs. According to the Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care, the total anticipated annual costs per active employee are expected to reach $11,176 (up 7.6% from $10,387 in 2010), and the average employee’s share of costs in 2011 is expected to rise 11.8%, to $2,660.

Account-based health plans (ABHPs) — health savings accounts (HSAs) and health reimbursement arrangements (HRAs) are booming, the report said.

In 2002, just 2% of all employers offered ABHPs, but by 2011, that number has exploded to 53%. By 2012, another 13% of all respondents plan to add an ABHP.

New emphasis on accountability

Other plan changes being mulled by employers:

• Dependent coverage subsidies: 68% are moving to increase contributions for dependents, with 19% targeting per-dependent contributions, and 35% using or planning to implement spousal waivers or surcharges.
• Retiree medical coverage: 26% of employers plan to cease employer sponsorship; 25% plan to convert a current subsidy to a retiree health account, and 23% plan to eliminate employer-managed drug coverage for post-65 retirees and rely on Medicare Part D plans.
• Incentives for high-value providers: 28% of employers plan to differentiate cost sharing for high-performance networks or centers of excellence in 2012, and 21% plan to adopt value-based designs over the next year. In addition, 18% plan to offer incentives or penalties to providers for coordination of care, use of emerging technologies or use of evidence-based treatments.
• Accountability for engagement: A third of employers plan to reward or penalize their employees based on biometric outcomes (for weight and cholesterol), compared with just 7% in 2011 and 6% in 2010. Social media is one of the emerging creative strategies employers (9%) are using to improve employee health and well-being.

The survey also revealed that employers believe the opening of insurance exchanges in 2014 will have some impact on their active (70%) and retiree (78%) medical programs.

In addition, more than a quarter of employers (27%) believe the opening of the exchanges will have an extensive impact on their retiree plans.

The implementation of the excise tax is expected to have an impact on both active (81%) and retiree (66%) medical programs as well, with 24% and 20% of employers anticipating an extensive impact on their active and retiree programs, respectively.

First, a caveat: If your company offers a calendar year plan, the changes take effect next Jan. 1.

A brief rundown of the new rules:

Plans can’t deny coverage due to a pre-existing condition to children under age 19. A similar provision for adults will become effective in 2014.

Insurers can’t rescind an employee’s coverage for virtually any reason, except when the worker has engaged in fraud.

Lifetime dollar limits on coverage are now prohibited.

OB/GYNs and pediatricians get primary care physician status. That eliminates the need for patients to get prior authorization from the insurance carrier.

No more prior authorizations for emergency room services.

Dependents must be covered until age 26. And those dependents no longer have to be students, or disabled — they can even be married.

Employers are on the hook for preventive care. Companies can’t impose co-pays or deductibles on such things as mammograms, colonoscopies and other measures designed to catch serious conditions early.

Insurers are required to set up a more patient-friendly claims appeals process. And while a claim is being appealed, the insurer can’t hold up payments on subsequent claims.

For the official word on the new requirements, go here.

One thing you, as the employer, are responsible for: Change all of your company’s printed and electronic information — enrollment materials, summary plan descriptions, benefits websites, etc. — to reflect the new definition of an eligible dependent.

Reform: Who is and isn’t eligible now

The new definition of an eligible dependent is a biological or legally adopted child up to age 26 — even if married.

Some key points to include in your materials:

• Dependents don’t need to be enrolled in school or be financially dependent on parents to be eligible.
• Working adult dependents employed at an organization that provides health coverage aren’t eligible for enrollment in parents’ plans.
• Eligibility doesn’t extend to adult dependents’ spouses or children.
• All dependents — including those previously dropped or whose parents have opted out of the employer’s plan — must be invited (in writing) back during your enrollment period.

Note: Employers whose plan years begin on or just after Sept. 23 must comply with the new eligibility rules this fall.

Info: A helpful FAQ can be found here.

Your employees will ask you about how reform’s going to impact their health coverage. Here are some answers you can give them now:

When will changes start?

First off, your health plan doesn’t have to change much. The law “grandfathers” existing employer plans. Your plan just has to conform to a few mandates that take effect this September, like:

• plans that offer dependent coverage must extend that coverage to children up to 26 years old — even if they’re married, and
• insurers will be prohibited from denying dependents under 19 coverage because of pre-existing conditions.

Between 2011 and 2014, regulators will lay the rest of the groundwork for the main parts of the overhaul.

Am I going to have to pay more?

Employees with higher incomes will pay for part of the reform law’s coverage expansions.

For example, in 2013 individuals making more than $200,000 a year and couples earning more than $250,000 will see their Medicare payroll taxes increase from 1.45% to 2.35%.

Also beginning in 2013, certain income from interest and stock dividends will be taxed at a higher rate for those with higher incomes.

Starting in 2011, limits will be placed on what’s covered by flex account dollars. For example: Over-the-counter meds will no longer be covered without a prescription.

Will I have to change doctors?

This will primarily depend on whether your company switches providers — and which physicians are in that new provider’s network.

Nothing in the reform law says that a physician will have to continue seeing existing patients, but many say they’ll continue to do so as long as they can afford to provide the care.

Thanks to the Patient Protection and Affordable Care Act employers and insurers with health plans that offer dependent coverage must make that coverage available to employees’ children until they turn 26.

That mandate is scheduled to take effect on Sept. 23, 2010.

And the first in what’s expected to be a long line of guidance and regulations from the DOL answers two key questions about the dependent coverage rule:

1. Can benefits for young adults (say those between 18 and 26) be limited so they are narrower than what’s offered to other dependents? No. Young adults must be offered the same level of coverage as younger dependent children.
2. Can employers or insurers charge higher rates to insure young adults who remain on their parents’ plans than they charge for younger children? No. Employers and insurers can’t charge more for the coverage of young adults than they charge for other dependents.
   

The DOL also revealed that employers will not be required to offer coverage to children of dependent children, or spouses of eligible dependents — and the coverage requirements are terminated as soon as dependents turn 26.

Info: The new guidance can be found here, and an FAQ sheet on the coverage mandate can be found here.

You’ll recall that the recent healthcare reform law called for extending coverage for employees’ dependents up to the child’s 27th birthday. But the law doesn’t become effective until next September. So, employers asked, would this additional coverage be taxable?

In Notice 2010-38, IRS officials said no. Neither the value of the coverage nor flex plan reimbursements for the adult child will be subject to taxes. The benefits are also not considered wages for FICA and FUTA purposes.

Another clarification: Employees can amend their flexible spending account withholding to cover additional out-of-pocket costs for the adult child, the IRS said.