Parents' health insurance could cover children under 27

By Rick Romell and Patrick Marley of the Journal Sentinel
Posted: Oct. 29, 2009 12:34 p.m.
Madison — Parents soon will be able to put adult children as old as 26 on their insurance plans, Gov. Jim Doyle announced Thursday.

The change places Wisconsin among a growing number of states that require insurers to offer parents the option of covering adult children in their 20s - a requirement decried in the industry as adding to already soaring costs.

Many insurance plans here allow some adult children to stay on their parents' plans if they are in school, but a provision in the state budget, passed in June, significantly extends the benefit.
Starting Jan.1, plans will have to allow most children under 27 to stay on their parents' coverage even if they aren't students. Doyle on Thursday announced an emergency rule from the Office of the Insurance Commissioner clarifying the new law.

The governor said the change was needed to help parents whose kids are unemployed, work at jobs that don't offer benefits or take a year off from school. Most parents won't pay more for insurance if they are on family plans because insurers usually offer a flat rate no matter how many children a couple have, Doyle said.

But James R. Mueller, a longtime insurance industry executive in the Milwaukee area, said the change would drive up rates, as have other state-mandated coverage requirements.

"Whenever you insure somebody whom you didn't insure before there's some additional risk," said Mueller, executive vice president of the Wisconsin unit of Willis Group Holdings Ltd., one of the world's largest insurance brokers. A state requirement that insurers cover autism and mental health has added 3% to the premium rates of employer-sponsored plans that renew on Jan. 1, when those mandates also take effect, Mueller said. Extending coverage is good, he said, but doesn't come free.

"The problem with all these good ideas is there's funding necessary," Mueller said.

About 20 states require insurers to offer parents coverage of adult children through what are sometimes called "slacker plans," according to the Council for Affordable Health Insurance, an advocacy group whose membership includes insurers, health-care providers, actuaries and insurance brokers. About 10 states have enacted such laws in the past few years, said J.P. Wieske, the organization's director of state affairs.

President Barack Obama also has proposed a federal requirement that children would continue to be eligible for family coverage through age 26.

Insurers haven't lobbied aggressively against the measures because young adults tend to be healthy and don't add heavy costs to the insurance companies, Wieske said.

But Mueller said that, while that's the commonly held view, young adults can be high risks for such things as car accidents and pregnancies. In any event, he said, employers who sponsor plans are increasingly frustrated about rising costs for coverage.

"Employers do not have the appetite right now or the means to take on additional risk, no matter how noble. . . . People are stretched to the max," Mueller said.

Insurance Commissioner Sean Dilweg said his agency has not yet analyzed how the changes would affect insurance rates.

Under the new rules, unmarried children under 27would be eligible to sign onto their parents' plans. Children who are eligible for insurance through an employer could sign onto their parents' plan if the cost of their employer's plan was more than the added premium of their parents' plan.
If the adult children are unmarried and have kids of their own, the youngsters also would be covered.

Parents who put children who are 25 or 26 onto their plans would pay about $1,600 more a year in income taxes because of federal tax rules, Dilweg said.

The new law will not apply to parents who work for private employers with self-funded insurance plans. It would apply to government workers who participate in self-funded plans, however.Rick Romell reported from Milwaukee and Patrick Marley in Madison.