As you approach your 26th birthday, you might find yourself wondering about your health insurance options. Thanks to the Affordable Care Act (ACA), young adults can stay on their parents’ health insurance plan until they turn 26. But what happens after that? This comprehensive guide will help you navigate the complex world of health insurance and make an informed decision about your coverage.
Staying on Your Parent’s Insurance Past 26
Under the ACA, young adults can stay on their parents’ health insurance plan until they turn 26. This applies regardless of whether they’re enrolled in school, listed as a parent’s tax dependent, have an offer of coverage from an employer, or even if they’re married. However, some states may allow young adults to stay on their parents’ insurance past the age of 26, depending on specific circumstances.
Health Insurance Options After Turning 26
If you’re turning 26 and work a full-time job, your employer may offer health insurance benefits. Turning 26 is considered a “qualifying life event,” which means you’re eligible for a special enrollment period outside of the standard open enrollment. You only have 60 days to enroll, so it’s best to know your plan before your birthday.
Health Maintenance Organization (HMO)
An HMO has the most limits of the plans. This plan’s coverage only includes doctors who work with the HMO, and out-of-network care is not covered except in emergencies. If you need to see a specialist, you’ll need a referral from your primary care physician, or else your insurance won’t cover the cost.
Preferred Provider Organization (PPO)
A PPO contracts with a network of medical providers that you can use, such as doctors and dentists. With this plan, you have to pay a certain amount for your healthcare services before your insurance kicks in and pays the costs for you. This is known as a deductible, and these out-of-pocket costs vary depending on the plan your company offers. If you want to use a medical provider outside of the plan, you have to pay an additional cost.
High-Deductible Healthcare Plan (HDHP)
An HDHP offers lower premiums, which is the amount you are billed every month to keep your coverage, but your deductible is higher. Plans with deductibles of at least $1,400 for individuals and $2,800 for families fall into the HDHP category.
Health Savings Account (HSA) and Flexible Savings Account (FSA)
If you enroll in an HDHP, you qualify for a health savings account, or HSA, which both you and your employer can contribute to. You can contribute, invest, and withdraw dollars to cover qualifying medical expenses tax-free. Plus, the money rolls over every year. However, there are contribution limits. For 2023, the annual limit for individuals with self-only coverage is $3,850. For family coverage, the limit is $7,750.
A flexible savings account, or FSA, functions like a medical expenses-specific bank account to pay for out-of-pocket costs with tax-free dollars. An FSA can be used with any health insurance plan if your employer offers it. However, FSAs come with a few restrictions. First, you need to figure out how much you want to contribute at the beginning of the year. For tax years beginning in 2023, contributions are limited to $3,050 a year. If your employer makes contributions, it won’t count toward your designated maximum. Second, unused dollars don’t roll over.
Health Insurance Options for Non-Full-Time Employees
If you work in the gig economy, work part-time, or are unemployed, your health insurance options include Medicaid for individuals with lower income, Health Insurance Marketplace for individuals with unpredictable income streams, and Consolidated Omnibus Budget Reconciliation Act (COBRA) for individuals who lose their jobs and can continue their existing coverage for a limited amount of time through this program.
Medicaid
Medicaid may be available for some students with qualifying incomes. Under the ACA, 38 states and the District of Columbia have expanded Medicaid eligibility to adults with incomes up to 138% (higher in D.C.) of the federal poverty level. You can check your eligibility by using a federal poverty level (FPL) calculator.
Health Insurance Marketplace
The Health Insurance Marketplace is a service that helps people shop for and enroll in affordable health insurance. The federal government operates the Marketplace, available at HealthCare.gov, for most states. Some states run their own Marketplaces.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
COBRA gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.
The Importance of Health Insurance After Turning 26
Medical debt affects both the uninsured and insured. According to a study from the Kaiser Family Foundation, 41% of adults carry debt from medical or dental bills. It’s essential to make a plan before turning 26 to avoid unexpected costs.
Navigating Health Insurance After Graduation
If you were insured through your college or university, you will likely no longer be eligible for its coverage after you graduate. Be sure to plan ahead and make sure you don’t have a gap in coverage:
Staying on Your Parents’ Insurance
You’ve got an option to remain on your parents’ health plan until you turn 26, but it’s important to note that the plan’s network might not include hospitals and doctors in the area where you’re going to school, and might not provide maternity coverage for dependents. It’s also important to understand that the health plan will likely send the explanation of benefits (EOB) to your parents if you receive medical care as a dependent on their plan. If this is a concern for you, a policy obtained in your own name might make you more comfortable.
Buying an Individual Plan Through the ACA Marketplace
For grads who want a more robust, ACA-compliant plan that covers the essential health benefits and pre-existing conditions, a plan purchased through the state health insurance exchange is likely to be an ideal solution. ACA-compliant plans for individuals are available in every state and premium subsidies and cost-sharing reductions are available through the marketplace to make coverage and care more affordable.
Purchasing a Short-Term Health Plan
College grads who need temporary coverage until another policy kicks in may consider short-term health insurance. Even grads who have a job lined up may face a waiting period before employer-sponsored health insurance coverage is available. Note that each state has its own rules and regulations regarding short-term health insurance.
Enrolling in Medicaid
In 38 states, Medicaid has been expanded to cover all adults with income up to 138% of the federal poverty level. For a new graduate living in a state where Medicaid has been expanded, Medicaid could be a perfect solution while job hunting. Medicaid enrollment is available year-round, and Medicaid covers pre-existing conditions. In most cases, there are no premiums.
Getting Coverage Through a New Employer
Getting health insurance through an employer-sponsored plan is a coverage option many college grads envision, and it’s an excellent option if available. Employer-sponsored health insurance generally offers substantial benefits, and employers typically pay a large portion of the premiums.
Making the Right Choice for Your Health Insurance
Choosing the right health insurance plan can be a daunting task, especially when you’re doing it for the first time. Here are some factors to consider when choosing a health insurance plan:
Understand the Costs
Health insurance comes with various costs, including premiums, deductibles, copayments, and out-of-pocket maximums. Premiums are the amount you pay each month for your insurance. Deductibles are the amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself. After you pay your deductible, you usually pay only a copayment or coinsurance for covered services. Your insurance company pays the rest.
Check the Network of Doctors
Each insurance plan has a network of doctors, hospitals, and other health care providers. These providers have agreed to accept your insurance plan’s negotiated rates. If you go outside the network, you may have to pay more.
Consider Your Health Needs
If you have a chronic condition or if you need a lot of health care services, you may want to choose a health insurance plan that has lower out-of-pocket costs, even if the premium is higher. On the other hand, if you’re in good health, you may want to choose a plan with higher out-of-pocket costs and a lower premium.
Review the Drug Coverage
If you take prescription drugs, you’ll want to choose a plan that covers your medication. Each plan has a formulary, or list of covered drugs. Make sure your drugs are on this list.
Planning for the Future: Health Insurance and Beyond
As you navigate the world of health insurance and make decisions about your coverage, it’s also important to think about your overall financial health. Here are some tips to help you plan for the future:
Start Saving for Retirement
Even though retirement may seem like a long way off, it’s never too early to start saving. Consider opening a retirement account like a 401(k) or an IRA and make regular contributions. Even small amounts can add up over time thanks to the power of compound interest.
Build an Emergency Fund
An emergency fund is a stash of money set aside to cover the financial surprises life throws your way. These unexpected events can be stressful and costly. Here are some of the top emergencies people face: Job loss. Medical or dental emergency. Unexpected home repairs. Car troubles. Unplanned travel expenses.
Get Insured
In addition to health insurance, consider getting other types of insurance to protect yourself financially. For example, renter’s insurance can protect your personal property in case of theft or damage, and disability insurance can protect your income if you become unable to work due to an illness or injury.
Learn to Budget
A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. Budgets can be made for a variety of individual or business needs or just about anything else that makes and spends money.
FAQs
Q: What is the age cut-off for children to stay on their parents’ health insurance plan?
A: Under current laws, children can stay on their parents’ health insurance plans until they turn 26 years old. This applies regardless of whether they are married, in school, or living independently.
Q: What happens when I turn 26 and lose coverage under my parent’s health plan?
A: When you turn 26 and can no longer stay on your parent’s health plan, you will need to find alternative healthcare coverage through other means such as employer-sponsored insurance (if available) or by purchasing an individual policy through the Health Insurance Marketplace established under the Affordable Care Act.
Q: Are there any exceptions to the age limit for staying on my parent’s insurance?
A: Yes, there are some limited exceptions to the age limit for dependent coverage. For example, those who have disabilities may be eligible to remain covered under a family member’s plan beyond age 26 if certain requirements are met. Additionally, some states have extended dependent coverage laws that allow young adults to stay on their parents’ insurance policies for a longer period than what is required under federal law – so it’s important to check state-specific regulations regarding dependent coverage limits as well.
In conclusion, navigating the world of health insurance after turning 26 can be complex, but with the right information and resources, you can make informed decisions about your coverage. Whether you choose to stay on your parents’ insurance, purchase your own plan, or explore other options, the most important thing is to ensure that you have the coverage you need to protect your health and financial well-being.
