By Associated Press Writer
updated 5/10/2010 1:47:09 PM ET 2010-05-10T17:47:09

Letting young adults stay on their parents' health insurance until they turn 26 will nudge premiums nearly 1 percent higher for employer plans, the government said in an estimate released Monday.

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The coverage requirement, effective starting later this year, is one of the most anticipated early benefits of President Barack Obama's new health care law. Many insurers have already started offering extended coverage to families who purchase their coverage directly. And employers say parents have flooded their benefits departments with questions.

The Health and Human Services Department released estimates of the costs and benefits of the requirement as part of a regulation directing employers and insurers how to carry it out.

The new benefit will cost $3,380 for each dependent, raising premiums by 0.7 percent in 2011 for employer plans, according to the department's mid-range estimate. Some 1.2 million young adults are expected to sign up, more than half of whom would have been uninsured.

Extended coverage will be required starting this fall, for health plan years beginning on or after Sept. 23.

That premium increase will come on top of hikes employers already expect for next year. Large companies forecast that premiums will rise between 6.5 percent and 7 percent without the impact of the health care overhaul, according to an early survey by the National Business Group on Health and benefits consultant Towers Watson.

Family coverage through the workplace now averages about $13,400 a year— counting both the shares paid by the employer and worker. Many employers allow workers to keep college students on the company health plan until they graduate. But under the new law, staying in school would no longer be required.

The regulation also specifies that young adults offered extended coverage through an employer cannot be charged more than other dependents, nor can they be offered a lesser set of benefits. Instead, the cost must be spread broadly.

The situation is different for people buying their family coverage directly from an insurer, as many self-employed parents do. Unlike employers, insurers in the individual market do not have to spread the costs broadly. Parents would face an estimated additional premium of $2,360 in 2011.

Enrollment as well as cost would increase modestly after 2011 for both employer and individual plans. Starting in 2014, the major changes of the new health care law go into effect. New competitive insurance markets would open for business, government tax credits would be available to help pay premiums, and insurers would no longer be allowed to deny coverage to those in poor health. Most Americans would be then required to carry health insurance.

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AP Business Writer Tom Murphy contributed to this report from Indianapolis.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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