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Health care law will allow young adults up to age 26 to stay on a parent’s plan

A provision of federal health care reform that takes effect later this year will allow young adults to stay on their parents' health insurance plan up until age 26.

But some major insurers say they won't make young consumers wait. They plan to start extending that coverage to young adults in June or earlier. And these insurers will offer large employers that self-fund their plans — and often drop young adults once they graduate from college — the chance to get a jumpstart on the federal mandate, too.

This is the time of year that many families start worrying about health insurance for students about to graduate from college and lose coverage from a parent's plan. Many of us get our medical coverage through an employer, and the concern is that a new grad who can't find work in today's weak job market will go without insurance. A study by the Commonwealth Fund found that 45 percent of people ages 19 to 29 went without health insurance for a period last year.

About 25 states, including Maryland, offer some protection against this.

Maryland requires employers that are fully insured — meaning they buy coverage from an insurance company that assumes all the risk — to allow unmarried dependents to stay on the plan up to age 25, says Beth Sammis, acting commissioner of the Maryland Insurance Administration. About one-third of employers in the state are in this category.

The rest are large employers with self-funded plans, which means they pay the claims themselves and take on all the insurance risk. These employers, who usually hire an insurance company to administer the plan, don't have to cover young adults under Maryland law.

But under federal health care reform, young adults — married and single — will be able to stay on a parent's plan up to age 26 even in self-funded plans. (Legislation has been introduced to extend coverage to children of military service members who come under a different system.)

This provision takes effect for new plan years starting Sept. 23. New plan years often launch in the fall or in January, which could mean that some new grads will be without insurance for a few months.

But insurance companies say it doesn't make sense to drop young adults in June and then re-enroll them months later when the federal law kicks in.

Aetna, Humana, WellPoint, CareFirst BlueCross BlueShield, UnitedHealthcare and others announced this month that they would continue coverage for dependents up to age 26 so there would be no interruption. Employers with self-funded plans won't have to extend coverage just yet, although they can always choose to do so.

Some health experts predict these employers will follow suit.

"It creates a standard that becomes the norm throughout the health insurance marketplace," says Ron Pollack, executive director of Families USA.

If you're unsure what will happen to coverage after graduation, check with the employer to find out what type of plan you have and whether coverage will be extended, Sammis suggests.

Some young adults will lose insurance before the federal law kicks in. But they shouldn't go without it. All it takes is a car accident or an injury playing sports that can send them to the emergency room.

Young adults have a few options. They might be eligible to buy coverage through the parent's plan under COBRA, the federal law that allows workers to stay on a former employer's plan for a period, says Karyn Schwartz, senior policy analyst with Kaiser Family Foundation. You will have to pay the full price of the insurance.

You also can buy individual policies if you meet underwriting standards. Cheaper policies are available for a few months. But if you become ill during that time, she says, the insurer might not renew.

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