With the Supreme Court set to rule on the Affordable Care Act, the entire law could well be nullified if the individual mandate is ruled both unconstitutional and inseparable. With it would go a provision that allows young adults to stay on their parents’ health insurance plans until they turn 26, providing a safety net for the young and unemployed in an adverse hiring market.
How much would it cost young Americans to move from their parents’ employer-based plans to the individual market? By NerdWallet’s estimates, the nationwide cost difference between the average cost to add a dependent to an employer-based plan, and the average individual market premium for 18 to 24-year-olds, ranges from $539 to $773. But certain states and cohorts would pay far more, in one case facing $2,000 more in health care premiums on the individual market.
Employer-based plans cover the majority of Americans: 55% of the insured receive health care through work. What’s more, the employer covers on average 2/3 of the bill. For youth under 26, losing the Obamacare provision would deliver a triple blow. Adding a dependent to an employer-based family plan is relatively inexpensive, but purchasing single coverage and going through individual market both send costs spiraling. Out-of-work youths would also have to pay the premium themselves, rather than share the cost with an employer.
NerdWallet analyzed employer-based health premiums as well as premiums purchased on the individual market and found the cost differences to be significant, with the potential to price out-of-work youth out of the health insurance market.
Among the key findings:
- Youth aged 18 to 24 nationwide would pay an average of $656 more on the individual market.
- Women fared the worst: females in that cohort would pay $773 more.
- Rhode Islanders would face the worst losses. Because of high premiums on the individual market, 18 to 24-year-olds as a whole would pay over $1,800 more than under Obamacare.
- Rhode Island women were the worst off of any state and cohort, paying over $2,000 more.
- 18 to 24-year-olds overall would pay more than $1,000 extra every year in:
- Connecticut, Montana, Nevada, New Hampshire, Rhode Island and Virginia
- Women of that age would pay more than $1,000 extra in those states, as well as:
- Georgia, Oklahoma, Pennsylvania, South Carolina and Tennessee.
Differences in individual market premiums largely drove the inter-state disparities: while the cost to the worker of adding a child may be slightly higher, residents of some states paid far more in individual market premiums.
Caveat: The study compares the average employee contribution to add a dependent and the average premium on the individual market for 18 to 24-year-olds. Certain plans (PPO’s, for example) would cost more than the average, while high-deductible plans would cost less. A 2009 study of individual market health savings account/high deductible plans found that 21% of enrollees were under 19, and an additional 11% were between 20 and 29. The cost to buy on the individual market is also highly dependent on age and gender; the ACA prohibits gender- or age-based pricing when adding a dependent.
Nationwide cost to 18 to 24-year-olds
Taken nationally, an 18 to 24-year-old would face an average premium of nearly $1,400 on the individual market, an increase of $656 from the additional cost to the family plan. Women faced disproportionate increases: from a premium of $722 on their parents’ plan, gender disparities and the individual market would push their premiums to nearly $1,500.
|Market||Age 18 to 24||Women Age 18 to 24||Men Age 18 to 24|
|Cost to Add to Parents’||$722||$722||$722|
|Average Individual Market Premium||$1,378||$1,495||$1,261|
Disproportionate effect on economically disadvantaged
The loss of the under-26 provision would have the most direct effect on unemployed, non-student young adults, who would not have access to insurance through traditional groups.
According to the Bureau of Labor Statistics, the overall unemployment rate in May 2012 stood at 8.2%. But unemployment was far more pervasive among youth:
- 13% for 20-24-year-olds
- 24% for 18- and 19-year-olds
- 37% for African-Americans aged 16-19
- 26% and 14% for men aged 18-19 and 20-24 respectively
- 21% and 12% for women aged 18-19 and 20-24 respectively
Further, young adults face high underemployment rates holding part-time jobs that are less likely to offer health insurance:
- 31.1% of high school graduates aged 17-20
- 19.1% of college graduates aged 21-24
According to the White House, 6.6 million young adults who would otherwise have to face the individual market were able to join their parents’ plans under Obamacare. The loss of the provision would have a disproportionate impact on young women, who face higher premiums, and minorities, who are more likely to be unemployed.
Appendix A: Full results of premium analysis
Cost Increases to 18 to 24-year-olds by state
Premiums on both a parent’s plan and on the individual market vary greatly from state to state. While Florida, Texas and Missouri tended to have higher family premiums, Rhode Island had starkly higher individual premiums, charging nearly $2,500 for 18 to 24-year-olds on average. Because of these discrepancies, youth in some states would face far higher increases without the ACA.
|State||Cost to Add to Parents’ Plan||Individual Market, Age 18||Difference|
Premium changes for 18 to 24-year-olds by gender
With the removal of ACA-mandated gender parity in premium pricing, women would pay significantly more on the individual market than on the employer-based market. Since adding a dependent costs the same no matter the dependent’s gender, women are protected from this increase under Obamacare. However, losing both family coverage and gender parity laws would significantly raise costs for women.
Rhode Island women fared the worst of any state and gender. They would pay over $2,000 more every year if they lost employer-based coverage through Obamacare.
|State||Cost to Add to Parents’ Plan||Women Aged 18-24||Difference||Men Aged 18-24||Difference|
Appendix B: Methodology
All figures are in 2012 dollars.
Cost of adding to parents’ plan
To arrive at the cost of adding a dependent to his parents’ plan, we used 2010 state-level data on the average worker contribution to a family health care plan (the latest available) and 2011 nationwide data on the average family premium by number of members on the plan.
We then calculated the cost of adding a child to the family plan compared to the premium before adding that child. Based on state-level data on the average number of members on the family plan, we calculated what it would cost to increase the family size by one relative to the family’s premium. We then multiplied that ratio by the average family premium for that state.
- The National Conference of State Legislatures analysis of health insurance premiums
- EHealthInsurance’s 2011 Cost and Benefits Report
Cost to 18 to 24-year-olds on the individual market
To separate distortions caused by the ACA, we used 2009 data for average premiums on the individual market. We used national-level data to index premiums for 18 to 24-year-olds relative to the average, then applied that ratio to state-level data of single individual market insurance premiums. Only states for which this data was available were included.
Cost to 18 to 24-year-old men and women
Again using 2009 national-level data, we calculated the average cost of 18 to 24-year-old men’s and women’s premiums relative to the average. We then applied that ratio to our estimated individual market premium for that age cohort. We excluded states with existing gender parity laws.
- EHealthInsurance’s 2009 Cost and Benefits Report
- The America’s Health Insurance Plans Individual Health Insurance 2009 report
Appendix C: State-by-State Coverage Laws
Some states have additional regulations on how long insurers must cover dependent adult children. Many have additional conditions (financial dependency enrollment status marital status) that are prohibited by the ACA. Information is current as of June 2010 and data is taken from the National Conference of State Legislatures unless otherwise specified.
|California||22||Declared a financial dependent on federal income tax filings
Some policies (often small group) require that the child be a full-time student
|Colorado||25||Unmarried and declared a financial dependent OR
Same permanent address as primary policyholder
Resident of Connecticut OR Full-time student
Resident of Delaware OR Full-time student
Insurers may charge 102% more for dependent coverage past age 18
|Florida||25 / 30||Unmarried AND
(25) Living with parent OR full-time student
(30) Previous conditions AND no dependents of their own
|Georgia*||25||Full-time student at least 5 months of the year OR
Have pre-existing condition that prevents them from enrolling in health care
|Idaho*||21 / 25||(21) Unmarried
(25) Unmarried AND full-time student
|Illinois||26 / 30||(26) Unmarried
|Indiana*||24||(24) No preconditions|
Is an Iowa resident a full-time student or disabled
|Kentucky||25||Unmarried but insurers may charge more|
|Louisiana||21 / 24||(21) No preconditions
(24) Full-time student
|Maine||25||Dependent and has no dependents|
|Massachusetts*||26||Dependent; may stay on two years past dependency or until age 26, whichever comes first
Youth age 19-26 are eligible for low-cost insurance
|Nevada*||19 / 24||(19) Unmarried
(24) Unmarried and full-time student
|New Hampshire||26||Unmarried AND
New Hampshire resident OR Full-time student
Youth under 26 may purchase through the state Healthy Kids CHIP program
|New Jersey||31||Unmarried and with no dependents|
|New Mexico||25||No precondition|
|New York||30||New York resident AND unmarried|
|North Dakota||22 / 26||(22) Unmarried AND living with parents
(26) Unmarried AND full-time student
|Ohio*||28||Unmarried dependent AND
Ohio resident OR Full-time student
|Pennsylvania||30||Unmarried with no dependents AND
Pennsylvania resident OR Full-time student
Full-time students whose studies are interrupted by military service must receive extended coverage beyond the terminating age equal to their length of service
|Rhode Island*||19 / 25||(19) Unmarried
|South Carolina*||22||Unmarried AND Full-time student
AND parent is covered by small-group insurance
|South Dakota*||19 / 29||(24) No preconditions
(29) Full-time student
|Virginia||19 / 25||(19) No preconditions
(25) Resides with parent OR Full-time student
|West Virginia||25||No preconditions|
|Wisconsin||27||Do not have insurance through employer
Full-time students called to active duty may receive extended coverage
|Wyoming||23||Unmarried AND Full-time student AND parent is covered by small-group policy|
*No age limit if the child has an incapacitating illness or disability