Reuters Money

Sarah Emerman wants to be independent. At 22, the New Jersey native graduated from the University of Vermont last May and is looking for a full-time job with benefits. Until then, however, she’s relying on an old standby for health coverage: Mom and Dad.

“We’ve been paying for COBRA since she graduated, which is expensive,” says Sarah’s father, Ed Emerman. “There really was no better option.”

That’s about to change. Starting September 23, Sarah will be eligible by law to enroll on her parents’ employer-based health policy until she turns 26. This new option for families like the Emermans is one of the most-anticipated provisions in the Affordable Care Act, the health reform bill passed by Congress last March.

Young people are among the least insured populations in the U.S. About nine million Americans ages 18 to 25 go without coverage because they don’t have access, can’t afford the option they do have or believe they don’t need it. Unemployment among this age group is also particularly high, spiking to nearly 20% amid the recession. Half of the young people surveyed by the Commonwealth Fund, a New York City-based healthcare think tank, went without insurance for two years or more. “Even if you’re 23 and have a job, it’s often low-paying and the coverage isn’t good,” says Sara Collins, an economist at the Commonwealth Fund. “So maybe you decide it’s not worth the money.”

Some 1.2 million young people are expected to join parents’ employer-based plan under the new regulations. Most will have to wait until January 1, when the majority of health plans renew. Still, parents should take care to learn when their 2010 open-enrollment period begins, usually in the fall, to sign on older children. “Some employers will have a special enrollment period for these kids under 26,” Collins said. “Others will have to wait until normal open-enrollment season.”

Companies are prohibited from charging any special surcharge for the expanded coverage. Children can’t be denied even if they live away from home, are financially independent or even married. Another provision forbids denying children under 19 coverage due to a pre-existing condition.

But will college students be able to take full advantage of these new benefits? That remains unclear. Two-thirds of college students are already enrolled on their parents’ insurance plan. In addition, most schools also offer their own health plan, and about 4.5 million students sign up each year. Campus health facilities, though, rarely take insurance other than the school-sponsored plan, forcing students with private policies to pay high out-of-network prices upfront.

Some institutions, such as Washington University in St. Louis, go as far as requiring families to purchase its health plan before students can enroll. Others charge above-market rates for medical services to students not on the campus plan. “Parents are overjoyed to hear about the expanded coverage,” said Bryan Liang, who has done extensive research on student health as executive director of the California Western Institute of Health Law Studies. “Then they get to campus and find nothing has changed.”

What’s more, most student health plans, while inexpensive, feature high deductibles and low annual or lifetime limits. The Government Accountability Office found some plans with annual caps as low as $2,500. “If you have cancer, diabetes or another chronic condition, you end up paying an enormous amount out-of-pocket,” Liang said.

Because of the September 23 rollout date, few colleges and universities are expected to update their coverage before 2011 as plans usually span the school year. Schools have, however, asked the U.S. Department of Health and Human Services (HHS) to clarify which reforms apply to student plans and where they are exempt, citing the need to keep costs low.

“The application of these provisions to limited duration [student health plans] would prohibit colleges and universities from providing coverage only to their student population (rather than the whole individual market) and from doing so on a cost-effective basis,” the American Council on Education wrote in a August 12 letter to HHS Secretary Kathleen Sebelius. No ruling has been made so far.

James Boyle, president of College Parents of America, questions whether campuses should be exempt at all. Moreover, he suggests that other reforms in place by 2014 — most notably, the full effects of the under-26 rule, the creation of health exchanges and the expansion of Medicaid — may render student plans obsolete altogether. His hope is the higher education community will voluntarily embrace the changes.

“College costs enough already,” Boyle said, “without students having to pay double for unneeded insurance or being charged exceptionally high prices for services rendered at the campus health center.”

In the long run, it’s possible that at least the quality of student plans will improve, thanks to the reforms. In the meantime, though, families are welcoming the current updates. As Ed Emerman put it, “Until Sarah is settled, we’re just glad she’s not going uninsured.”

Photo: A student walks across the campus of Columbia University in New York. REUTERS/Mike Segar