While most U.S. employees will have to wait to take advantage of the new health care reform provision that extends health insurance coverage to adult children up to age 26, a new survey by Hewitt Associates, a global human resources consulting and outsourcing company, shows that approximately 950,000 workers will be able to cover these dependents earlier than the law requires. This comes as good news for many of these employees, who may be parents of adult children who are unable to secure health coverage through other means.

Conducted in mid-May, Hewitt’s survey of more than 500 large U.S. employers, representing 6.9 million covered employees, shows almost one in five (19 percent) plan to extend health care coverage to eligible adult children early. Of those companies, which have an average of 11,795 covered employees, 10 percent will voluntarily extend coverage early for all eligible adult children and another 9 percent will do so for graduating students already covered under the health care plan.

A little more than three-quarters (77 percent) plan to wait to extend health care coverage until they are required to do so, which, in most cases, is the plan year beginning January 1, 2011. Another 4 percent of employers are undecided.

“Employers that are choosing to extend coverage early 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,” said Ken Sperling, Hewitt’s global health care leader. “However, most companies are holding off on extending coverage for a variety of reasons. The cost and administrative complexities of early adoption are key factors, but it’s really about their view of access. Many employers believe most adult children are healthy and can find affordable coverage in the individual market. They view COBRA as another option, particularly for those adult children with preexisting health conditions. So for many employers, they don't see a coverage gap they feel compelled to immediately close.”

Hewitt’s recent survey found that nearly six out of ten employers (57 percent) have already estimated the cost of expanding coverage to adult children. Of those, 18 percent expect to see less than a 1 percent increase in total annual health care costs between 2011 and 2014. Twenty-six percent of companies project a 1 to 2 percent increase, and 11 percent expect costs to increase between 2 and 5 percent.

Under the new provision, Hewitt estimates that an average employer might cover 5 to 10 percent more adult children than they do today. This includes dependents ages 19 to 23 who are not full-time students and adult children ages 23 to 26. For an employer with 5,000 employees, Hewitt estimates that the additional cost of covering these adult children could range between $350,000 and $720,000 per year in premiums and claims costs.

“Most employers feel the wait for required coverage is relatively short and will extend coverage to adult children in January 2011 when their next plan year begins,” says Sperling. “Parents should pay careful attention to their open enrollment materials this fall, and closely evaluate the coverage options and associated costs in both their employer-sponsored plans and the individual insurance market.”