Conducted in mid-May, Hewitt’s survey of more than 500 large U.S. employers, representing 6.9 million covered employees, shows almost one in five (19%) plan to extend health care coverage to eligible adult children early. Of those companies, which have an average of 11,795 covered employees, 10% will voluntarily extend coverage early for all eligible adult children and another 9% will do so for graduating students already covered under the health care plan.
According to a press release, a little more than three-quarters (77%) of employers plan to wait to extend health care coverage until they are required to do so, which, in most cases, is the plan year beginning January 1, 2011. Another 4% are undecided.
Ken Sperling, Hewitt’s global health care leader, noted in the announcement that companies are holding off on extending coverage for a variety of reasons. “The cost and administrative complexities of early adoption are key factors, but it’s really about their view of access. Many employers believe most adult children are healthy and can find affordable coverage in the individual market. They view COBRA as another option, particularly for those adult children with preexisting health conditions. So for many employers, they don’t see a coverage gap they feel compelled to immediately close,” he said.
The survey also found that nearly six out of ten employers (57%) have already estimated the cost of expanding coverage to adult children. Of those, 18% expect to see less than a 1% increase in total annual health care costs between 2011 and 2014. Twenty-six percent of companies project a 1% to 2% increase, and 11% expect costs to increase between 2% and 5%.
Hewitt estimates that under the new provision, an average employer might cover 5% to 10% more adult children than they do today, including dependents ages 19 to 23 who are not full-time students and adult children ages 23 to 26. For an employer with 5,000 employees, Hewitt estimates that the additional cost of covering these adult children could range between $350,000 and $720,000 per year in premiums and claims costs.