WASHINGTON—A provision in the health care reform law has enabled hundreds of thousands of employees' adult children to retain or win back group coverage while only modestly boosting employers' costs.

That provision, effective Jan. 1 for employers with calendar-year plans, was one of the first Patient Protection and Affordable Care Act mandates to go into effect. Affecting nearly every employer, it requires employers to extend coverage to employees' adult children until age 26.

Under the reform law the only eligibility requirement that employers can impose is that the employee's child be under age 26. That put an end to such common coverage requirements as college enrollment, financial dependency or residency with a parent, and bumped up the age to which coverage must be extended.

The elimination of the requirements resulted in hundreds of thousands of adult children retaining coverage from their parents' employers that otherwise would have been terminated, or having coverage restored that they had lost due to their age.

While the exact number of adult children who gained coverage in 2011 as a result of the reform law's age 26 provision isn't known, an analysis last year by several federal agencies put the range at between 700,000 to 2.1 million.

On average, the extension of coverage boosted plan enrollment by 2%, according to a recent Mercer L.L.C. survey of nearly 900 employers. But enrollment gains varied widely, with nearly one-quarter of respondents saying enrollment jumped at least 3%, and just over 20% saying that enrollment rose by less than 1%.

That wide variance in enrollment gains is a result of several factors, most notably prior plan design and workforce demographics, said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.

Plan enrollment increases, for example, would be lower for employers that previously cut off coverage at age 24 than those ending coverage at 22. In addition, employers with older workforces would be more likely to have a higher proportion of employees with young adult children than employers with very young workforces.

Definitive statistics are not yet available, but consultants say cost increases likely will fall within a 0.5% to 1.5% range.

“Unless we have a shock claim, I believe we will be at or below our 0.5% increase estimate,” said Joseph Molloy, vp-benefits/employee services at North Shore-LIJ Health System in Lake Success, N.Y.

“We figure our (earlier) cost estimate of less than 1% is still in the ballpark,” said a spokesman for the California Public Employees' Retirement System in Sacramento.

Timely regulatory guidance eased potential compliance problems. “For the most part, implementation proceeded smoothly,” PwC's Mr. Thompson said.

Within one month of the passage of the health reform legislation, the Internal Revenue Service made clear that employers could amend their plans immediately to provide the expanded coverage without employees being taxed on the coverage.

That guidance was welcomed by employers who wanted to provide the expanded coverage before the effective date of the age 26 requirement but were concerned about potential adverse tax consequences. Prior to the PPACA, the U.S. Tax Code allowed tax-free coverage of employees' children up to age 19, or up to age 24 for full-time students.

Additional regulatory guidance issued in May and June resolved other issues. The May guidance, for example, made clear that employers could not impose premium surcharges for the expanded coverage. But other pricing strategies would be permitted, such as basing employee premium contributions on the number of covered dependents. In June, the IRS clarified that health care plans offered only to retirees would be exempt from the adult child coverage requirement.

Yet another potential administrative problem eased when states rapidly amended their laws so the expanded coverage would not be subject to state taxes. Wisconsin is the sole state that has not made such a change.

“The state taxation issue is largely gone,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.

While the provision's implementation went smoothly, employers have mixed feelings about the mandate.

“Is the new age requirement good/bad policy? Well, yes and no,” said Philia Swam, director of health benefits and employee insurance at Lafarge North America Inc. in Reston, Va.

The coverage mandate is an appropriate one in certain situations, such as where employees' children graduate from college and haven't landed a job, Ms. Swam said.

“However, I don't find it acceptable that a married child, living in a different state, with a spouse and family of his or her own should be allowed to remain on their parent's health plan,” she said.

Others say the mandate should not have been applied to situations where employees' adult children are offered coverage through the children's employers.

“The employer of the child's parent is stuck providing the coverage even in situations where the adult child can get good coverage from the child's employer, but doesn't want the coverage from his or her employer because of a modest premium contribution,” said Helen Darling, president of the National Business Group on Health in Washington.

Under the health care reform law, employers with grandfathered plans can deny coverage in such situations, but only until 2014. And many employers with grandfathered plans don't deny coverage because of the time and expense needed to administer such a policy, consultants say.