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Retirees Can Find Insuring Young Adult Children Difficult

Nov 23, 2010

Q. My husband and I are on Medicare, and we have his retiree health plan as our secondary insurance. Our son is covered under my husband's plan while he is a full-time student. Now he's 23 years old and about to graduate. Our insurance company has informed us that he does not qualify under the provision of the new health law that allows adult children to stay on their parents' plans until age 26 because my husband is no longer working. Medicare is the primary insurer. Is this true?

A. The short answer is yes: It's likely true that your son doesn't qualify for continued coverage under the provision of the health-care law that allows children to stay on their parents' plans until they turn 26.

According to the Department of Health and Human Services, the key is whether the retiree health plan is made up only of retirees and their dependents or a mix of both active and retired employees and dependents. If it's a retiree-only group plan – the typical setup, according to experts -- then it doesn't have to abide by the market provisions of the health law. (Whether your Medicare coverage is primary or secondary doesn't really matter in this context.)

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Since it appears your retiree plan doesn't have to allow your son to stay on the plan until he's 26, the plan can kick your son off when he no longer meets the criteria it has set for dependent coverage, whether it's because he has reached a certain age or left school or is financially independent, for example.

Speaking broadly, your question raises interesting health insurance issues for people who become parents a bit later in life. This is a group whose numbers are growing, and more people are likely to find themselves facing a dilemma similar to yours.

Among women ages 40 to 44, the number of live births per thousand more than doubled between 1987 and 2007, to 9.5 from 4.4, according to the Centers for Disease Control and Prevention's National Center for Health Statistics. That's still only a fraction of the 106.3 births per thousand for women ages 20 to 24 in 2007, but that rate has declined slightly from 107.9 in 1987. The birth rates for fathers follow similar trends.

Unfortunately, older parents can't look to Medicare for help providing coverage for their kids. It's only available to individuals who qualify for the program, generally because they're 65 or older or because they're disabled. There's no option for dependent coverage.

So, many people turn to their retiree or secondary insurance. But the proportion of employers that provide retiree coverage continues to shrink. Just 1 in 4 employers with 500 or more workers offer early retiree coverage, and 19 percent offer a plan for Medicare-eligible retirees in 2010, according to a recent survey by Mercer human resource consultants. Those figures are new lows.

Although employers aren't required to cover dependents in health plans for either active or retired members, many do so. Ninety-six percent of large employers that offered retiree benefits in 2006 made coverage available to spouses, and 84 percent did so for other dependents, according to a survey of 302 employers with more than 1,000 employees by benefits consultant Aon Hewitt and the Kaiser Family Foundation (KHN is a program of the foundation).

But that does not solve the problem of covering your son when he graduates. You have several options to explore.

There are a number of life changes that would entitle your son to continue with his current coverage under the federal law known as COBRA for up to three years, according to the Department of Labor. One of these so-called qualifying events is what just happened: losing his status as a dependent under the health plan rules. A parent's divorce, death or new eligibility for Medicare can also trigger COBRA options for dependents. But COBRA has a catch: The plan member is responsible for paying the entire premium.

A more affordable alternative may be an individual policy. If your son doesn't have health problems, buying a policy may be relatively inexpensive. But make sure to eyeball not only the premium but also other cost-sharing responsibilities such as deductibles, coinsurance and copayments, as well as the plan's out-of-pocket maximum. That's how much you could be responsible for paying if he gets sick.

If your son has health problems, consider the new pre-existing condition insurance plans that were created under the health reform law. Those state-based plans are aimed at people who can't get coverage on the private market because of health conditions.

Premiums can't be more than the average rate for an individual policy in the state, but he must be uninsured for six months to be eligible. Alternatively, you could look into existing high-risk pools that don't have that six-month rule. They may be similar to your state PCIP, but they're likely pricier as well.

Do you have a question about health insurance or the health reform law? Periodically, we'll devote this space to answering reader queries. Please send yours to us at questions@kaiserhealthnews.org.

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