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Pennsylvania law raises cost of child coverage

Kim Morris | June 12, 2009

Pennsylvania passed a law that requires employer-provided insurance to offer coverage to the adult children of employees up to age 29, regardless of their legal dependency status. The new law is expected to raise the cost of coverage for all dependant children's group insurance coverage by up to 45% according to local employee benefit administrators. The median estimate of the cost of this mandate is about 20% of dependant coverage, or about $6 per covered dependent per month. This new mandate is expected to increase the overall cost of Pennsylvania group health insurance between 3% to 5%. The premium increases will be phased in over the next several years so the effect of this law will not be felt at once. Still, this law is expected to have a significant effect in the overall rate of inflation in group health insurance rates.

Insurance companies welcome the change since they have previously found difficulty enrolling 20-somethings who are short on cash and do not consider health insurance to be a high-priority expense. National surveys show that this 20-something age group contains the highest percentage of uninsureds. By tapping into parents and the parent's employers, insurers expect to increase the number of young adults they insure.

Employers are not supportive of this new law. Pennsylvania has enjoyed lower than average group health insurance rates in the past, partly because the state avoids many of the more expensive health insurance mandates that increase costs in other states. Still, the number of people covered by group health insurance declines each year and this law is expected to accelerate the trend in Pennsylvania. More employers will seek coverage under more affordable low cost individual insurance plans that are not subject to these legal mandates.

The law will also increase employees' contributions to their group health insurance. Since insurance laws require additional costs to be spread among all employees, and not just those with adult children, dependent health insurance premiums will rise for all employees. Some Pennsylvania employers who currently contribute to the cost of employees' insurance are unwilling to pay for the adult children of their employees. Some companies have already announced plans to reduce or eliminate their contribution to health insurance. MedSave.com expects that Pennsylvanians will look for more affordable coverage options as the effect of this new law takes hold. Those low cost health plans that offer child-only coverage that not subject to the new law are likely to gain members.

While this law is good for MedSave.com's business and will likely result in more people switching to low cost individual health insurance, we oppose the underlying logic and legal basis of the new law. Those adversely affected by the new law should see the article "Trends in Children's Health Insurance" and the articles on student health insurance for a listing of some possible solutions. This article is updated periodically as new children's health insurance solutions become available in Pennsylvania.

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