Most companies surveyed recently by consulting firm Hewitt Associates say they will hold off on extending coverage to their workers' eligible adult children up to age 26 until 2011, when they must comply with a provision in the new health care reform law.

However, some companies are moving forward with the requirement early. Hewitt's survey of more than 500 large U.S. employers, representing 6.9 million covered employees, shows approximately 950,000 workers will be able to obtain health coverage for these dependents earlier than Jan. 1, 2011.

Of the companies that plan to extend coverage, 10 percent will voluntarily extend coverage early for all eligible adult children and another 9 percent will do so for graduating students already covered under the health care plan, according to Hewitt's survey.

Still, a little more than three-quarters (77 percent) plan to wait to extend health care coverage until they are required to do so; another 4 percent of employers are undecided.

"Employers that are choosing to extend coverage early are doing so because it earns employee goodwill, particularly when many adult children today can't find jobs or were laid off during the recession," said Ken Sperling, Hewitt's global health care leader, in a statement.

"However, most companies are holding off on extending coverage for a variety of reasons. The cost and administrative complexities of early adoption are key factors, but it's really about their view of access. Many employers believe most adult children are healthy and can find affordable coverage in the individual market. They view COBRA as another option, particularly for those adult children with preexisting health conditions. So for many employers, they don't see a coverage gap they feel compelled to immediately close."

According to Hewitt, most employers have already estimated the cost of expanding coverage to adult children. Eighteen percent expect to see less than a 1 percent increase in total annual health care costs between 2011 and 2014; Twenty-six percent of companies project a 1 to 2 percent increase; and 11 percent expect costs to increase between 2 and 5 percent.

Hewitt estimates that an average employer might cover 5 percent to 10 percent more adult children than they do today under the new provision. This includes dependents ages 19 to 23 who are not full-time students and adult children ages 23 to 26. For an employer with 5,000 employees, Hewitt estimates that the additional cost of covering these adult children could range between $350,000 and $720,000 per year in premiums and claims costs.

"Most employers feel the wait for required coverage is relatively short and will extend coverage to adult children in January 2011 when their next plan year begins," says Sperling. "Parents should pay careful attention to their open enrollment materials this fall, and closely evaluate the coverage options and associated costs in both their employer-sponsored plans and the individual insurance market."

Instant Insights /

Some firms to comply early with dependent coverage provision

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