J ULY February 2014 Expanded Young Adult Dependent Coverage under the Affordable Care Act and Its Implications for Risk Pooling Kristen Lloyd, M.P.H., Derek DeLia, Ph.D., and Joel Cantor, Sc.D., Rutgers University Center for State Health Policy; Alan C. Monheit, Ph.D., Rutgers University School of Public Health Under an earlier SHARE grant, authors Joel Cantor, INTRODUCTION Alan Monheit, and Derek DeLia began assessing the impact of young-adult dependent coverage expansions in The Patient Protection and Affordable Care Act 19 states using data from the Current Population Survey (ACA) introduced multiple provisions designed to (CPS). They found that, while expanding eligibility for young-adult dependent coverage had been a popular expand health insurance coverage. Some of the major state-level policy strategy, it was not an effective one, as provisions are an individual mandate requiring most young adults tended to drop their own health insurance residents to enroll in a qualified health insurance plan coverage in favor of coverage under their parents’ or face tax penalties; an employer “shared policies, resulting in no net change in overall young responsibility” mandate requiring employers with 50 adult coverage levels. This brief discusses their later or more full-time equivalent employees to offer SHARE-funded analysis of the ACA’s dependent employer-sponsored insurance or pay a financial coverage provision. penaltya; and federal funding for states to extend Medicaid eligibility to most individuals with income up to 138 percent of the Federal Poverty Level (FPL). the fall of 2010, all young adults, regardless of student The ACA also creates regulated health insurance status, marital status, financial dependency and other exchanges or marketplaces for all 50 states, characteristics are eligible to remain on a parent’s Washington DC, and U.S. Commonwealths & health insurance policy until their 26th birthday. Territories to administer sliding-scale insurance Initially, “grandfathered” plans were not required to premium tax credits for most individuals below 400 provide this coverage and plans were not required to percent FPL and not eligible for Medicaid. offer coverage to young adults with an employer- One of the earliest ACA coverage provisions sponsored insurance offer, but as of 2014, all plans are implemented after the passage of the law was the now required to cover all young adult dependents. expansion of young adult dependent coverage, which Prior to passage of the ACA, approximately two-thirds was designed to address the disproportionately high of states had young adult dependent expansion laws, rate of uninsurance among young adults (in 2009, 31.4 but these laws did not apply to self-funded plans, percent of young adults aged 19 to 25 were uninsured, often had limitations on eligibility, and did not nearly double the overall national rate1). Effective in necessarily require that the expanded coverage About SHARE The State Health Access Reform Evaluation (SHARE) is a National Program of the Robert Wood Johnson Foundation (RWJF) created in 2006 to support the evaluation of health policy reform at the state level and develop an evidence-based resource to inform health reform efforts in the future. Key goals of the grant program are to develop a coordinated approach to the study of health reform issues – particularly as they relate to the state implementation of national reform – and to produce and disseminate informative, user-friendly findings for state and federal policymakers and agencies, as well as leading researchers. SHARE operates out of the State Health Access Data Assistance Center (SHADAC), an RWJF-funded research center in the Division of Health Policy and Management at the University of Minnesota School of Public Health. Information is available at www.shadac.org/share. State Health Access Reform Evaluation, a national program of the Robert Wood Johnson Foundation ® Expanded Young Adult Dependent Coverage under the Affordable Care Act and Its Implications for Risk Pooling population be charged the same premium as other olds regardless of student status (i.e., the young adult dependents on the same plan.2 group targeted by ACA) were compared to 27 to 30 year The ACA’s expansion of dependent coverage has olds in order to evaluate the effect of the first full year of been widely considered to be successful in reducing the young adult coverage expansion. Coverage, uninsurance among young adults.2, 3 There is some demographic, and health status variables from the CPS evidence, however, of disparate impacts of the expansion were linked to state-level unemployment rates from the by young adults’ sex, race/ethnicity, citizenship, and Bureau of Labor Statistics and employer-sponsored English-speaking ability.3, 4 This variability raises insurance variables from the Medical Expenditure Panel questions about the young adults who choose dependent Survey (MEPS). A difference-in-differences framework coverage under a parent’s plan and whether they differ was used to estimate linear probability models predicting from other young adults in terms of health service the likelihood of coverage changes for the ACA young utilization and expenditures. For example, if healthier adult target group relative to the comparison group in the young adults enroll in a parent’s plan, then a relatively post vs. pre-ACA period. The pre-ACA period was higher-risk group of young adults are left to enroll in defined as calendar years 2004 through 2009, and 2010 other risk pools (e.g., private subsidized plans in the and 2011 made up the post-ACA period. Interaction marketplaces), possibly contributing to upward pressure terms were incorporated to examine the results for on premiums in these alternative pools. Conversely, if gender, health risk, and income subgroups and the sicker young adults choose the dependent coverage relationship between federal and state policies on change option, then premiums could rise in the risk pools in coverage status among young adults.b Individuals in all accepting their enrollment. Similar issues are raised for states, except Hawaii and Massachusetts, were included in the distribution of income-based subsidies in health the analyses. (These two states were excluded because insurance marketplaces if the dependent coverage option coverage was likely influenced by their respective attracts young adults with higher or lower income than employer and individual coverage mandates.) A total of average. 96,344 ACA-targeted young adults and 81,237 This brief highlights State Health Access Reform comparison group members were included in the Evaluation (SHARE)-funded research on the health and analysis. socio-economic profile of young adults who obtained dependent coverage in the first full year of FINDINGS implementation of the ACA dependent coverage expansion and the resulting implications for risk pooling. Consistent with previous research, descriptive analyses showed that the proportion of targeted young DATA & METHODS adults with non-spousal dependent coverage increased dramatically from the pre-to the post-ACA period (27.3% This study analyzed data from the Current vs. 18.5%). The overall prevalence of young adults with Population Survey (CPS) for calendar years 2004 to 2011. own-name or spousal coverage and of uninsured young Non-student 19 to 23 year olds and all 24 and 25 year adults also decreased over this time period (own- SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 2 Expanded Young Adult Dependent Coverage under the Affordable Care Act and Its Implications for Risk Pooling name/spousal coverage: 36.8% vs. 27.1; uninsured: profile of the remaining uninsured young adults. In 35.2% vs. 23.8%). other words, our analyses did not yield adverse Findings from the multivariate analysis, seen in selection implications for Medicaid or subsidized Table 1, show that changes in sources of insurance private plans in the health insurance marketplaces. coverage among young adults were unrelated to young The young adult dependent coverage expansion adult health status but were somewhat related to appears to have benefited high income young adults gender and family income. Compared to females, the most, presumably because higher-income young males experienced a two percentage point greater gain adults are more likely to have parents with private in non-spousal dependent coverage (8.2 vs. 6.3 percent coverage. However, in 2014 and beyond, with the increase) as well as a three percentage point greater individual mandate in effect and coverage through the reduction in likelihood of being uninsured (6.0 vs. 3.0 marketplaces available, low and moderate income percent decrease). Overall, however, the magnitude of young adults may be more inclined to take up private these gender differences was relatively small. coverage. Income subsidies provided through the In terms of family income, young adults with a marketplaces may make health insurance coverage higher family income observed more insurance more affordable across incomes, thus making coverage changes between the pre- and post- ACA dependent coverage a more economical choice for period than young adults in lower income groups. families. Young adults with more moderate family Compared to young adults in the highest income incomes may also choose to take up dependent category, those from the middle income range had coverage as their parents gain private coverage only about half of the gain in non-spousal dependent through the marketplaces. coverage (7.4 vs. 15.0 percentage points) and those in the lowest income group had about one-fifth the gain REFERENCES (2.8 percentage points) of the highest income young adults. Additionally, young adults with higher incomes 1. DeNavas-Walt, C., Proctor, B. D., & Smith, J. C. exhibited a 10.3 percentage point decline in own-name (2011). Income, poverty, and health insurance or spousal private coverage in the post- coverage in the United States: 2010. Washington, implementation period, but this type of coverage did DC: U.S. Census Bureau. not decline significantly for either low or medium- 2. Cantor, J. C., Monheit, A. C., DeLia, D., & Lloyd, income young adults. Targeted young adults in all K. (2012). Early impact of the Affordable Care Act income groups showed significant reductions in the on health insurance coverage of young adults. likelihood of being uninsured, and the magnitude of Health Services Research, 47, 1773–1790. this impact did not vary significantly by income. 3. Sommers, B. D., Buchmueller, T., Decker, S. L., Therefore, our analysis provides little evidence that Carey, C., & Kronick, R. (2013). The Affordable any changes in the income composition of the Care Act has led to significant gains in health uninsured are a function of the ACA’s dependent insurance and access to care for young adults. coverage expansion. Health Affairs (Millwood), 32, 165–174. 4. O’Hara, B., & Brault, M. W. (2013). The disparate CONCLUSIONS impact of the ACA-dependent expansion across population subgroups. Health Services Research, 48, The ACA’s dependent coverage expansion 1581-1592. achieved early success. Since implementation in the 5. Mazur, M. J. (2013, July 2). Continuing to last quarter of 2010 and through 2011, the overall implement the ACA in a careful, thoughtful manner. prevalence of uninsurance among young adults Retrieved September 19, 2013, from decreased. The results from this study showed no http://www.treasury.gov/connect/blog/Pages/Con evidence that overall young adult coverage increased tinuing-to-Implement-the-ACA-in-a-Careful- differentially by self-reported health status, income or Thoughtful-Manner-.aspx. gender in such a way to meaningfully alter the risk a Thisrequirement has been delayed until 2015 (Mazur, 2013). bModels including interaction terms for state and federal dependent coverage eligibility showed no significant differential impact on any of our coverage outcomes and negligible increases in explanatory power. Therefore, these terms were removed from the final model specification. SHARE STATE HEALTH ACCESS REFORM EVALUATION WWW.SHADAC.ORG/SHARE 3