Photo: Dan Macy
Health reform’s expansion of dependent health coverage may not have a profound effect on expenses in the Dept. of Defense (DoD)’s TRICARE program, according to a recent Government Accountability Office (GAO) study.
Background
Employees’ dependents can be covered by their parents’ employer-provided insurance up to age 26 under the Patient Protection and Affordable Care Act (PPACA). That measure applies not only to private-sector employers but also to those in the public sector.
The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (NDAA) extended TRICARE coverage to qualified dependent children of TRICARE beneficiaries through age 26. In Ma
y 2011, DoD began implementing TRICARE Young Adult (TYA), a premium-based health plan that extends TRICARE coverage to unmarried dependents who do not have access to employer-provided health coverage.
The NDAA directed the GAO to assess what it would cost DoD to extend coverage in this manner. Accordingly, the GAO conducted a performance audit from May 2011 to September 2011
The Findings
DoD estimates that 17,000 individuals would enroll in TYA. The GAO reports that by June 2011, 4,549 individuals had done so.
The GAO said that DoD “expects to incur minimal costs” in implementing this expansion of coverage. DoD estimates that TYA will cost it approximately $4.4 million in fiscal years 2011 and 2012.
The GAO reports that DoD expects expenses to be low because it does not anticipate: (1) having to hire new employees; or (2) needing significant additional resources in order to implement the expansion.
DoD expects that these projected costs will be partially offset by a 2-percent markup in TYA premiums that will exceed the amount DoD believes will be necessary to cover TYA benefits and administrative expenses.
The GAO report includes the caveat that DoD’s actual implementation costs could differ from the projections and will not be known until TYA is fully implemented. In addition, pending regulations may impose some costs; for instance, the Treasury Department has not yet issued regulations that will affect providing written statements to beneficiaries affirming that minimum essential coverage was provided.
What this Means
This is one study about one agency in the federal government. However, it may still be instructive for private-sector employers and suggest broader principles regarding the effect of expanding coverage in this way.
Like the DoD and TYA, it would be possible for a private-sector insurer to increase premiums to help cover the cost of expanding coverage to qualified dependents up to age 26, and it is possible that a private-sector employer may also find that it does not need to hire new staff or obtain significant additional resources to implement this expansion.
However, as with DoD, private-sector employers will have to wait and see what the real costs are before they know exactly what effect expanding dependent coverage will have on their bottom line.