States must take action on health care change

OF ALL THE PROVISIONS in the health care reform law, one of the least controversial is one that requires employers to extend coverage to employees' adult children up to age 26.

We can understand the popularity of the provision.

For employees, it means their children can retain coverage—for example, between college graduation and landing a job—at a relatively low cost.

For employers, the extension of coverage has added to their costs, but the increases are certain to be modest due to the good health of the affected population.

But employers are discovering that expanding their group plans to meet this new requirement is turning out to be a lot more complicated than anyone thought.

That is because, as we report on page 1, many states haven't made the necessary changes to their laws to ensure that the value or cost of the coverage is not added to employees' state taxable income even though federal law makes very clear that the coverage can be provided tax-free for federal income tax purposes.

Certainly, this is a change that states should make pronto. The administrative hassles employers face in complying with varying state rules on computing the value of the coverage for tax purposes far outweigh the modest amount of additional tax revenue states would gain by keeping their old tax laws on the books.

We also think states would want to encourage employers to continue their health care plans, and removing an administrative complication would seem to be one very reasonable way of doing that.