By Sandra Block, USA TODAY
When you're young, you're more willing to take risks. Want to spend the summer herding sheep in New Zealand. Sure! Up for a cross-country road trip in a 1993 Mazda? Cool! Interested in bungee jumping? You bet!
But even the most adventurous young adults know that it's foolhardy to go without health insurance. Now, millions of young people won't have to take that risk. A provision in the health care reform bill allows adult children to remain on their parents' group health insurance policies until age 26.
Last week, the Obama administration released regulations that provided details on this provision. Here are some answers to questions about the law.
Q : Can insurance companies charge a higher premium to cover an adult child?
A: No. The regulations are very clear on this point, says Randy Abbott, health care consultant for Towers Watson. If you add an adult child to your policy, your insurer has to charge the same amount it would charge for any children covered by the plan, he says.
That doesn't mean, though, that insurers can't raise their overall premiums to pay for the additional cost of covering more people. The government has estimated that extending coverage to adult children will increase family premiums by 0.7% in 2011.
That would come on top of increases in premiums to reflect rising health care costs, says Helen Darling. president of the National Business Group on Health, which represents large employers. Employers estimate that health care costs will rise 6.5% this year, according to a survey by Towers Watson and the National Business Group on Health.
Q : My child is no longer a dependent on my tax return. Is he eligible for coverage?
A: Yes. The law redefines what constitutes a "child" for purposes of coverage under a parent's plan.
Previously, many insurers placed limits on coverage for older children. Some wouldn't cover children older than age 19 unless they were full-time students; others required older children to live at home to be eligible for coverage.
Now, all children up to age 26 are eligible, as long as they don't have access to an employer-provided plan. "The child doesn't have to be your dependent, doesn't have to be living with you, can be married or unmarried, and doesn't have to be attending school," Abbott says.
Q : My child isn't eligible for coverage
under my plan's existing rules, but is younger than 26. When can I add her to my plan?
A: If your child has "aged out" of your plan, you'll be able to add her back, but you may not be able to do it right away. The provision takes effect Sept. 23 — six months after enactment of the health care bill — but insurers aren't required to offer the extended coverage until they start a new plan year. For plans that operate on a calendar year basis, that means Jan. 1.
Some large insurance plans have announced that they'll extend coverage to adult children ahead of the deadline. However, most companies plan to wait. A recent poll by Towers Watson of large and midsize companies found that 78% plan to wait until the required effective date to extend coverage.
If your child is graduating from college this spring and doesn't have a job, talk to your employer or the company that's administering your insurance plan. Your child may need to buy a temporary insurance policy to cover her until your coverage becomes available.
Q : What if I want to add my child to my plan after the enrollment period ends?
A: The law requires insurers to give parents 30 days to enroll an adult child who becomes eligible for coverage after the enrollment period, Abbott says.
For example, suppose your child graduates from college in early 2011, is younger than 26 and doesn't have employer-provided health insurance. Your employer is required to give you 30 days to enroll your child in your plan, even if that doesn't coincide with the plan's regular enrollment period.
Q : Will I have to pay taxes on this benefit?
A: No. Ordinarily, employees have to pay taxes on the value of insurance coverage for someone who isn't a spouse or dependent, such as a domestic partner.
But the health care reform law states that providing extended coverage for adult children isn't taxable, even if they're not dependents, says Tracy Watts, a partner in Mercer's health and benefits business practice.
The Department of Labor has issued a fact sheet and some FAQs about the law. You can find it at: www.dol.gov/ebsa/healthreform.
Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. Click here for an index of Your Money columns. E-mail her at: email@example.com. Follow on Twitter. www.twitter.com/sandyblock