Economic Snapshot | Health

Health care reform increased employer-sponsored coverage for young adults – even in a poor labor market

This Friday marks the two-year anniversary of the Patient Protection and Affordable Care Act. One provision of health reform for which we see immediate and positive effects is the stipulation allowing young adults up to age 26 to stay on or join their parents’ employer-sponsored health insurance (ESI) policies.

The figure below compares changes in employment rates and health insurance rates for various age groups. Young adults did not fare well in the job market from 2009-10; their employment rate fell further than any other age group. Given the close relationship between labor market outcomes and employer-sponsored insurance, we would expect declines in coverage for all groups. Instead, ESI actually increased among young adults. It rose particularly dramatically among those who received health care coverage through a family member’s policy, most likely that of a parent’s.

In a paper released last month, EPI compared the changes in employment rates and health insurance rates between the period shown in the figure and that of 2008–09, when employment rates and insurance rates fell for every age group. If the simple relationship between employment and overall ESI in 2008–09 had held for 2009–10, there would be a 1.0 percentage-point drop in insurance rates for young adults in 2010. However, in 2010 overall ESI rates actually rose 0.4 percentage points. Given this difference, roughly 414,000 young adults obtained coverage in 2010 because of the health reform provision allowing them to remain on or join their parents’ insurance policy. And, as the figure demonstrates, the majority of this coverage increase came in the form of dependent coverage, the very type of coverage the provision should have affected.

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