A ruling on the constitutionality of the Affordable Care Act (ACA) is expected anytime in the next few weeks. The decision could eliminate or change the core of benefits such as prescription assistance for seniors, community rating programs, pre-existing condition coverage, and no co-pay service plans. But even if the Supreme Court overturns the health care bill, coverage for young adults on their parents’ insurance plans will likely remain intact — albeit a tax increase.
“Adult children aren’t necessarily dependents for tax purposes, but an employer can allow anyone to be on a plan, just like they now allow domestic partners,” said to the Associated Press economist Paul Fronstin of the Employee Benefit Research Institute. “If your employer said, ‘I’m going to let you keep this,’ it would become a taxable benefit for certain people.”
The dependent coverage provision is one aspect of the ACA no one is debating, and its popularity suggests insurers and employers will likely find ways to offer such coverage, even if not required to by law. But at a price.
Under state and federal income regulations, young adult health coverage would be a taxable benefit, meaning payment would come out of after-tax dollars; the higher a family’s income, the more liability they would have in this form of program.
Fronstin suggests the average family would see a tax increase of a few hundred dollars annually.
Coverage for young adults in 2011
Coverage for individuals up to age 26 encompassed 13.7 million young adults in 2011, according to the report Young, Uninsured and in Debt: Why Young Adults Lack Health Insurance and How the Affordable Care Act Is Helping, with the Affordable Care Act directly responsible for covering half of all participants.
Despite a decrease in the number of uninsured people between the ages of 18 to 25, insurance gaps still exist, with 2 in 5 (39%) individuals between the ages of 19 to 29 going without health insurance at some point in 2011.
Among young adults not covered by ACA, 36 percent had issues paying medical debt, and those with debt were forced to use all of their savings (43 percent), go negligent on student loans (32 percent), postpone education or employment plans (31 percent), or go without basic necessities like food or heat (28 percent) in order to pay their medical costs.
Young adults in low-income households were the most likely to remain uninsured. Only 17 percent of young adults in households with incomes under $14,484 per individual joined their parents’ health plans under the ACA, compared to 69 percent of young adults in the highest income brackets.
“While the Affordable Care Act has already provided a new source of coverage for millions of young adults at risk of being uninsured, more help is needed for those left behind,” said Commonwealth Fund Vice President Sara Collins, lead author of the report. “The law’s major insurance provisions slated for 2014, including expanded Medicaid and subsidized private plans through state insurance exchanges, will provide nearly all young adults across the income spectrum with affordable and comprehensive health plans.”
With affordability, the largest hurdle between young adults and health care, record numbers of participants are expected in 2014 when the ACA become fully effective. Should that coverage disappear, even if it can be offered at a cost to the individual tax payer, young people around the country may lose their coverage.
Without health insurance, the Young, Uninsured and in Debt report shows young adults might be more likely to lose contact with a regular medical provider, take on substantial medical debt of $4,000 or more, and delay getting care, filling a prescription, receiving a medical test or going for a follow-up appointment.
“Clearly, young adults recognize the value of health insurance that provides protection against burdensome medical debt and access to needed health care,” said Commonwealth Fund President Karen Davis. “The Affordable Care Act will provide all Americans with affordable coverage, and help young adults achieve healthy, productive, and financially secure futures.”
While young adults are likely to remain one of the least-affected groups should the law be struck down, experts suggest the changes already in place will continue for everyone regardless of the ruling — just more slowly.
“It would have less effect in the short term than most people might think, but it would have much more of a psychological and political effect,” said to the New York Times Gail Wilensky, a health economist who headed Medicare and Medicaid during the administration of President George Bush Senior. She stated striking down the entire ACA law seemed “highly unlikely, and to my way of thinking, highly undesirable, because I think it’s unnecessary.”
Preparations toward ACA
Some medical facilities and insurance companies are looking for their own solutions beyond the scope of the ACA.
“I think much of the transformation of the health care delivery system is moving forward, regardless of the court action,” said Karen Davis, the president of the Commonwealth Fund, a nonpartisan research foundation in New York. “How do we get more efficient? How do we keep people out of hospitals? People are kind of gearing up for this. That’s going to continue. Obviously, it will continue at a faster pace if some of the payments for quality and efficiency in the law continue, but we are already beginning to see a slowdown in hospital costs nationally.”
While the decision is pending, 17 states have also been quietly working toward setting up a foundation for the ACA’s success. The states are backed by $3 million dollars in funding from 8 nonprofit organizations.
On June 8, the joint venture released a tool geared toward helping all states achieve the health insurance exchanges required to be effective by 2014.
“There’s no reason to leave this very important subject up to political vagaries and budget shortfalls,” said Mark Smith, president of the California Healthcare Foundation, which organized the effort.
If a state does not have a plan in place by 2013, the Department of Health and Human Services will step in and take over.
Many states have currently placed their plans on hiatus until the Supreme Court ruling is released. Some states that oppose the bill, as is the case with Alabama, still see the value in being prepared, and are grateful for the pre-emptive work which has already been done by the California Healthcare Foundation.
“It saves our staff a ton of time not having to come up with this in advance,” said Richard Fiore, executive director of the Alabama Health Insurance Exchange. “We do know where the deadlines are as the law currently stands. And we do know that, by being part of this project, that we’re working towards meeting them.”
Affordable state exchange programs effective in 2014 would expand coverage to 30 million uninsured people, many of which are young adults.