Fact Sheet: Young Adults and the Affordable Care Act: Preventing Coverage Gaps, Lowering Administrative Costs and Eliminating Burdens on Businesses and Families

The Affordable Care Act raises the age for children who can be covered tax-free on their parents' health insurance policy and provides incentives for employers to immediately extend health insurance coverage to children up to age 27. Today, the IRS posted new guidance for employers, employees, health insurers and other interested taxpayers regarding this provision of the new law. (IRS's press release is here; a blog post from Nancy-Ann DeParle is here.)

Key elements include:

• Coverage Extended to More Children. Under the Affordable Care Act, workplace and retiree health insurance plans can now allow parents to add their children under age 27 to their health coverage on a tax-free basis.

• Available Immediately. Effective March 30, 2010, employers may permit employees to begin making pre-tax contributions under a cafeteria plan – a plan that allows employees to choose from a menu of tax-free benefit options – to provide coverage for children under age 27.

• Broad Eligibility. This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

• No New Burden on Employers. Employers may allow this change under their cafeteria plan even if the cafeteria plan has not yet been amended to reflect the change in coverage options. To reduce the burden on employers, they have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

• Getting the Word Out. The IRS has issued guidance and a press release to explain and promote these changes to employers, employees, health insurers and other interested taxpayers.

Today's announcement follows a series of steps taken by the Administration to move quickly expand health insurance coverage to young adults. On April 19, Health and Human Services Secretary Kathleen Sebelius called on leading insurance companies to begin covering young adults voluntarily before the September 23 implementation date required by the new health reform law. Early implementation would avoid gaps in coverage for new college graduates and other young adults and save on insurance company administrative costs of dis-enrolling and re-enrolling them between May 2010 and September 23, 2010. Early enrollment will also enable young, overwhelmingly healthy people who will not engender large insurance costs to stay in the insurance pool. Thus far, the following insurance companies have agreed to maintain coverage for young adults enrolled on their parents' plans:

Blue Cross and Blue Shield of Alabama

Blue Cross Blue Shield of Delaware

Blue Cross and Blue Shield of Arizona, Inc.

Blue Cross and Blue Shield of Florida

Arkansas Blue Cross and Blue Shield

Blue Cross and Blue Shield of Hawaii

Blue Shield of California

Blue Cross of Idaho Health Service

Regence Blue Shield of Idaho

Wellmark Blue Cross and Blue Shield of Iowa

Health Care Service Corporation

Blue Cross and Blue Shield of Kansas

Blue Cross Blue Shield Association

Blue Cross and Blue Shield of Louisiana

WellPoint, Inc.

CareFirst BlueCross and BlueShield

Blue Cross and Blue Shield of Massachusetts

Blue Cross and Blue Shield of Kansas City

Blue Cross and Blue Shield of Michigan

Blue Cross and Blue Shield of Montana

Blue Cross and Blue Shield of Minnesota

Blue Cross and Blue Shield of Nebraska

Blue Cross & Blue Shield of Mississippi

Horizon Blue Cross and Blue Shield of New Jersey, Inc.

HealthNow New York, Inc.

The Regence Group

Excellus Blue Cross and Blue Shield

Capital BlueCross

Blue Cross and Blue Shield of North Carolina

Independence Blue Cross

BlueCross BlueShield of North Dakota

Highmark, Inc.

Blue Cross of Northeastern Pennsylvania

BlueCross and BlueShield of Tennessee

Blue Cross and Blue Shield of Vermont

Blue Cross & Blue Shield of Rhode Island

Premera Blue Cross

Blue Cross and Blue Shield of South Carolina

Blue Cross and Blue Shield of Wyoming

Kaiser Permanente

Cigna

Aetna

United

WellPoint

Humana

Capital District Physicians' Health Plan (CDPHP), Albany, New York

Capital Health Plan, Tallahassee, Florida

Care Oregon, Portland, Oregon

Emblem Health, New York, New York

Fallon Community Health Plan, Worcester, Massachusetts

Geisinger Health Plan, Danville, Pennsylvania

Group Health, Seattle, Washington

Group Health Cooperative Of South Central Wisconsin, Madison, Wisconsin

Health Partners, Minneapolis, Minnesota

Independent Health, Buffalo, New York

Kaiser Foundation Health Plan Oakland, California

Martin's Point Health Care, Portland, Maine

New West Health Services, Helena, Mt

The Permanente Federation, Oakland, California

Priority Health, Grand Rapids, Michigan

Scott & White Health Plan, Temple, Texas

Security Health Plan, Marshfield, Wisconsin

Tufts Health Plan, Waltham, Massachusetts

UCARE, Minneapolis, Minnesota

UPMC Health Plan, Pittsburgh, Pennsylvania