Costs will rise… but compared to what?

Health care reform allows young adults to remain on their parents’ health insurance until age 26. The Department of Health and Human Services released an estimate showing that policy change will boost employer premiums by about 0.7 percent. See Costs will rise as young adults stay on policies in the Boston Globe.

Obviously an employer’s health care bill will rise if more dependents are on the books, so the finding is not a surprise. From an employer’s standpoint it’s an added cost, which isn’t great. But from a societal standpoint we need to assess what would happen to these young adults otherwise.

About 1.2 million young adults are projected to enroll in their parents’ plans. More than half of them would have been uninsured otherwise. Therefore the policy will bring healthy young people into the risk pool, which is a good thing. It is also likely to boost the number of people in group coverage as opposed to individual coverage. That’s good, too. Administrative costs are lower for large groups than for individual plans, so it will make insurance more efficient, raising the percent of spending that goes to medical costs.

May 11, 2010

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