Health Care Reform: Coverage for Adult Children Survey

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1 Consulting Health & Benefits Health Care Reform: Coverage for Adult Children Survey

2 2 Aon Hewitt

3 About This Survey In May 2010, Hewitt Associates conducted a brief survey of more than 500 U.S. companies representing 6.9 million covered employees to determine when they planned to extend health care coverage to eligible adult children in response to the recently enacted health care reform law. The health care reform legislation enacted in March 2010 represents the largest transformation to the national health care system since the introduction of Medicare and Medicaid in 1965.enting 6.9 million covered employees to determine when they planned to extend health care coverage to eligible adult children in response to the recently enacted health care reform law. The health care reform legislation enacted in March 2010 represents the largest transformation to the national health care system since the introduction of Medicare and Medicaid in Summary of Findings According to the results, 77% of employers plan to wait to extend health care coverage to eligible adult children until they are required by the law to do so (the plan year beginning six months after enactment). Although, almost one in five companies (19%) plan to expand coverage earlier than required under the new health care reform law. Of those companies, which represent nearly 950,000 covered employees and have an average of 11,795 covered employees, 10% will extend coverage early for all eligible adult children and another 9% will do so for graduating students already covered under the health care plan. We will expand coverage when required 77% We will expand coverage for all eligable adult children 10% We will limit the early expansion to graduating students already covered under our plan 9% 27% We have not decided 4% Health Care Reform: Coverage for Adult Children Survey 1

4 The majority of employers (95%) are making the same changes to all their medical plans. We are doing the same thing for all our plans 95% We are expanding coverage early for our insured plans but not our self-insured plans 4% We are expanding coverage early for our self-insured plans but not our insured plans 1% (n=488) Nearly six out of ten employers (57%) have actually estimated the cost of expanding coverage to adult children. About one-quarter (26%) expect to see a 1% 2% increase in total annual health care costs between 2011 and Eighteen percent project the cost increase to be less than 1%, and 11% expect costs to rise between 2% 5%. More than 5% 2% Between 2% and 5% 11% Between 1% and 2% 26% Less than 1% 18% We have not estimated the cost yet 43% (n=501) 2 Aon Hewitt

5 Half of the companies surveyed cover more than 5,000 employees and half cover less than 5,000 employees. More than 50,000 4% Between 10,000 and 50,000 22% Between 5,000 and 10,000 24% Less than 5,000 50% (n=501) Conclusions Employers that are choosing to extend coverage to these adult children earlier 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. But most companies are holding off on extending coverage for a variety of reasons. While cost and administrative complexities are factors, it s really about access. Many adult children can find affordable coverage in the individual market, and COBRA is an option for those with preexisting health conditions. For many employers, they feel there isn t a coverage gap that they need to close immediately. Under the new provision, Hewitt estimates that an employer might cover 5% 10% more children than they do today. This includes children ages 19 to 23 that are not full-time students, and adult children ages 23 to 26. For employers with 5,000 or more employees, our estimates show that the additional cost of covering these adult children may range between $350,000 and $720,000 per year in premiums and claims costs. Most large employers are planning to extend coverage to adult children in January 2011 when their next plan year begins. Health Care Reform: Coverage for Adult Children Survey 3

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8 About Aon Hewitt Aon Hewitt is the global leader in human capital consulting and outsourcing solutions. The company partners with organizations to solve their most complex benefits, talent and related financial challenges, and improve business performance. Aon Hewitt designs, implements, communicates and administers a wide range of human capital, retirement, investment management, health care, compensation and talent management strategies. With more than 29,000 professionals in 90 countries, Aon Hewitt makes the world a better place to work for clients and their employees. For more information on Aon Hewitt, please visit Aon Hewitt 100 Half Day Road Lincolnshire. IL aonhewitt.com No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any way or by any means, including photocopying or recording, without the written permission of the copyright holder, application for which should be addressed to the copyright holder. Aon Hewitt, All rights reserved.