Among the most popular parts of the recently upheld Affordable Care Act is the under-26 provision: young people between 19 and 25 can stay on their parents’ health insurance, regardless of whether they are students. Similar mandates have existed at the state level for years, but their requirements vary widely: some require young people to be full-time students, unmarried or co-reside with parents; and eligibility ends anywhere between age 20 and 26. The ACA, working from the federal level, is broader in reach and has the potential to impact far more young adults.
But what has the ACA actually done for young people? A recent study by Indiana University’s Kosali Simon, Yaa Akosa Antwi and Asako Moriya found that the under-26 provision has significantly increased coverage through parental policies, and thereby reduced uninsurance among that age cohort. We sat down with Professor Simon to discuss the details of the study, which is one of the first comprehensive analyses of the ACA’s effect on young adults.
The study: Effects of Federal Policy to Insure Young Adults
The research: The IU study compared insurance in the period immediately before the provision was enacted into law (August 2008 to February 2010) to the post-enactment period (March through September 2010), as well as the staggered implementation period during which the provision was rolled out (October 2010 onwards). They also compared the affected group (19-25-year-olds) to those just older and younger.
The bottom line: The ACA had a clear impact on how young adults were insured. Reliance on parental employer coverage increased by 30 %, and uninsurance dropped by nearly 10%, on average during the period of staggered implementation compared to before enactment.
Of the total increase in parental coverage, most of those covered were either previously uninsured young adults, or those previously on their own employer’s insurance. There was also a substantial number who had previously purchased insurance on the individual market.
Women and 23 to 25-year-olds were more likely to gain coverage in the first place relative to men and 19 to 22-year-olds; whites, the unmarried, and non-students were more likely to go on their parents’ insurance relative to non-whites, the married, and students.
Prof-Talk: Kosali Simon Explains her Research
NerdWallet: Walk us through dependent coverage – what’s different? Who benefits, and who loses out?
Kosali Simon: As far as insurers are concerned, the younger the better. They’re healthier, they’re less likely to have cancer or other diseases – young people are cheaper. Insurers are happy to take on these new customers, but of course even they are not free. Dependent coverage is expensive, compared to insuring just the employee. The cost of additional dependents ultimately is on employers and employees.
NW: Who will pay for the extra cost?
KS: It’s possible that the cost will be passed onto the people who have dependent plans. It should be easy to isolate the cost to just that group, it’s pretty visible.
NW: But nationally, dependent premiums haven’t really risen after the ACA, have they?
KS: Perhaps insurers and employers are adjusting other aspects of their plans to keep premiums the same—its hard to tell. But it’s also possible that insurers or employers may later increase premiums to deal with the higher cost.
NW: Dependent coverage has obviously increased substantially. But what are some effects that don’t get full discussion?
KS: Employer-based insurance is effectively a tax subsidy. Employers can pay for their employees’ insurance pre-tax, whereas if you were to receive your paycheck and use that money to buy your own insurance, it would be post-tax. This effect is often overlooked in public discussion. Whenever we expand employer health insurance, at the margin it’s a better deal for higher income families. On the other hand, there could be transfers that happen within firms whereby higher paid workers effectively shoulder more of the health insurance costs within the firm than lower paid workers.
NW: And are there any other effects that we should be on the lookout for?
KS: There are likely to be social impacts to staying on parents’ insurance. Young people may become less independent, and it may change the way that they relate to their parents. On the other hand, young people may become more independent as they find they can pursue other career development options than just seeking a job with good fringe benefits from the start.
NW: Any final thoughts?
KS: It will be important to watch how health care utilization and health of this cohort is affected: for example, young adults are particularly susceptible to depression and other mental health issues, which aren’t covered by catastrophe insurance and obviously are expensive for those who are uninsured. We hope to see through this insurance expansion that those conditions receive earlier and more appropriate treatment, but exactly how much that happens is still an open question.
NW: Thanks for your time, and for your research.