Make the Most of Health Care Reform

Kimberly Lankford

Q: Who will benefit from the new health-care-reform law over the next few months, and how can those people make the most of it?

A: Two key groups will benefit from the new law within the next six months. Here's what they need to know:

Recent grads and young adults. The law requires insurers to let dependent children stay on their parents' policies until age 26, which will help college graduates who don't have a job with benefits. However, the new rule won't take effect until September 23.

About half the states currently have laws permitting grown kids to stay on their parents' policies until at least age 25 or 26. (See the National Conference of State Legislatures table for a list of each state's rules: http://www.ncsl.org/default.aspx?tabid=14497). But new grads in other states may still need to find coverage for a few months before the law kicks in.

Until then, they could remain on their parents' policies under COBRA, but the price can be steep -- often $200 to $300 per month or more, depending on the policy. If they're healthy, they may get a better deal on their own. In most states, people in their early twenties can buy health insurance for $150 per month. It will be easy to shop for a policy starting in 2014, when the law establishes insurance exchanges to help people buy coverage. But until then, a good place to shop is at eHealthInsurance.com, or find a local agent at www.nahu.org.

And even after the law starts requiring insurers to cover dependents until age 26, it may not help everyone. "The legislation did not specify exactly who will be eligible for coverage through the extension through age 26," says Tanya Schwartz, policy analyst at the Kaiser Family Foundation. Most states that let grown kids stay on parents' policies do not require the kids to be claimed as dependents on their parents' tax returns. But the new law could impose that requirement. The Secretary of Health and Human Services will be creating the regulations over the next few months to spell out those details. Some states may continue to offer more-generous rules.

It will also be important to see how the extended coverage will be priced. Under many state laws now, you do not have to pay extra to keep an adult child on your policy if you would have kept a family policy to insure younger siblings. But if the insurer bases premiums on the number of children, or if you're insuring only one child and could otherwise switch from family coverage to coverage for a single person or couple, compare that extra cost with the price of buying an individual policy for your young adult. Use the same strategy to determine whether it's a better deal to keep your kids on your policy under the new law or to have them get their own policy.

If your child does buy his or her own coverage, a great way to lower the cost is to raise the deductible -- especially if he or she rarely visits the doctor and needs insurance primarily for catastrophic coverage.

If the deductible is at least $1,200 for self-only coverage, the child can qualify for a health savings account and make tax-deductible contributions that can be used tax-free for medical expenses in any year. People with self-only coverage can contribute up to $3,050 to an HSA in 2010. HSAs still exist under the new law but with a higher penalty (rising from a 10 percent tax to 20 percent) on any amount withdrawn for nonmedical expenses before age 65.

People with health issues. The new law appropriates $5 billion to establish a temporary high-risk pool to provide coverage for people with health issues, starting 90 days after the law was signed (June 23) and remaining in effect until 2014, when insurers will be prohibited from rejecting anyone because of preexisting conditions.

The new national high-risk pool will be particularly helpful for people who have trouble finding coverage in states that don't have open high-risk pools now, including Arizona, Florida and Nevada.

But there is a big catch: You need to be uninsured for at least six months to qualify for the new national high-risk pool. Many state high-risk pools, on the other hand, currently let you in if you've been rejected by an insurer and don't require you to be uninsured.

It's dangerous to be uninsured, especially if you have medical issues, so exploring your options now is a good idea. See the National Association of State Comprehensive Health Insurance Plans for a list of states with high-risk pools and contact information to see whether you can qualify for coverage as soon as possible (http://naschip.org/portal/index.php?option=com_content&view=article&id=53&Itemid=1).

Some of the states with high-risk pools that work well may be able to continue running their own pools, but new plans (or one national plan) will still need to be set up to cover the states that don't have a working high-risk plan now. The new plans must follow the provisions of the law, which includes consumer protections such as limiting the maximum out-of-pocket spending to $5,950 for individual coverage or $11,900 for families.

Personal Finance - Make the Most of Health Care Reform