What to do When You Age Out of Your Parent’s Insurance

No Longer Covered Under Parent’s Insurance

You knew this day would come.  There was the day when your parents said you had to start paying your own cell phone bill. Then came auto insurance. No wonder twenty-somethings everywhere breathed a sigh of relief when the Affordable Care Act (ACA) was signed in 2010. Under the new laws, you could stay on your parents’ health insurance until you were 26!  (That is, unless they kicked you off before that.)

You don’t have to be a student. You don’t have to live with them You don’t have to be a dependent on their tax returns. No ifs, ands, or buts. You can stay comfortably insured with mom and dad.

Turning 26 & No Health Insurance?

But now you’re turning 26. Time to venture out into the world of health insurance coverage on your own. What are your options? Don’t fear. You have many. Before we get into them, make sure that you know this term: qualifying life event.  Sounds major, right?  It basically just means that turning 26 (like getting married, having a kid, or losing your existing coverage) is one of those “life events” that allows you to sign up for new coverage no matter what time of year it is.  All the other suckers have to wait until “open enrollment”. What’s open enrollment? We’ll get into it later. For now, just know that you have 60 days from your qualifying life event to get that insurance going.

When Are You No Longer Covered Under Your Parent’s Health Insurance?

By the way, it’s worth mentioning that you should research it and see if your coverage on your parents’ plan will evaporate at the stroke of midnight on your birthday, or at the end of the calendar month or year. Depending on the kind of healthcare coverage your parents have, you may lose coverage immediately on the day you turn 26. Some plans allow young adults to remain on their parents’ plans until the end of the month following their 26th birthday. Others let them stay on their parents’ plans until the end of the tax year.

Ok, so here are the options…

  1. Enroll in your employer’s health plan. This is clearly the most grown up option, right? You got a great job.  They have benefits. And now you’ll be on them. Make sure you know what the plan covers. Is it a PPO or HMO? What is the deductible (the portion for which you will be responsible)? How much does your employer contribute and what will you pay? Perhaps you work for some hotshot startup that pays the full amount of your premium. If so, decision made – Go with that.
  2. Choose a plan from the healthcare.gov insurance marketplace. Open enrollment for the marketplace is typically November 1 to December 31 of the preceding year.  However, because it’s the 26th anniversary of you being born, you can sign up for a marketplace plan anytime of the year! Just remember to do it within 60 days of the ole b-day.  (Or 60 days before. Yes, you have a whole 120 day window!)
  3. Choose a catastrophic health insurance plan. Since you are under 30, you could get a catastrophic health insurance plan. These are offered by the usual insurance companies. The deductible, your responsibility, is often extremely high for these – sometimes in the $7,000 to $10,000 range. You will be responsible for most all medical care up to this point.  The tradeoff is that your premium will be a lot lower! And the plans by law still have to cover some preventive care.  So even before your deductible is met, they’ll cover preventive services including up to three primary care visits per year.
  4. Join a health sharing plan. These are not insurance plans, but protect you in a similar fashion.  Basically, they are a group of people with similar values who enter into an agreement to share medical expenses.  It’s not as weird as it sounds. Basically, you pay a monthly amount that is similar to a health insurance premium.  That funds a pool which can be drawn from when you or others have health expenditures that exceed your predetermined sharing limit.  The sharing limit works like a deductible, so you agree to basically pay for everything out-of-pocket up to that point. After that point, your expenses are covered by the pool. Some examples of these are Liberty HealthShare, Medi-Share, and Sedera.  Medi-Share is an example of medical sharing plan that is faith-based and has certain proscriptions while Sedera is a more secular type of sharing plan.  (Disclosure: I am a doc, and I have one of these plans in lieu of health insurance for my family of 4! But, I’m also a doctor, so.)
  5. Stay on your padres’ insurance via COBRA.  Not the venomous snake found in India. (COBRA stands for Consolidated Omnibus Budget Reconciliation Act – so that’s neat.)  This could be a really attractive option, but it’s only available up to 36 months.  Typically, when a family or person is already insured, the monthly premium for one additional dependent is priced at a fairly attractive rate. So, if your parents are cool with you staying on their coverage until age 29, COBRA might be a good option for you.
  6. You could decide not to get health insurance.  We really don’t recommend this. Why take risks with your health?  The media is full of stories of people who took that risk and ended up with the double-whammy of a serious medical condition and bankruptcy.  Not a good place to be.  Even if you opt for the cheapest premium, highest deductible, get something.  This is one area in your life where you can’t afford to be uninsured.

Staying Insured for Your Wellbeing

For young, healthy people aging off, consider catastrophic coverage. As a corollary, think of how your auto insurance works.  You pay for all the regular maintenance, oil changes, car washes, etc. Your insurance is there in case you really demolish the thing.  Catastrophic health insurance is actually the closest thing to true insurance there is. It is there if you get truly “catastrophically” sick or injured.  The other plans are really just medical care plans, not medical insurance. They pay for everything, and you likely don’t need that. Negotiate self-pay rates for things, pay out of pocket. Use the preventive services covered by the plan. Save up a cash reserve (which, we might add, you need anyway in case you lose your job or something).  Then, if it just so happens that you end up with a $100,000 hospital stay, you’ll be covered.

Ensuring a Smooth Transition with Insurance

Finally, one last thing to keep in mind.  Try to sign up for coverage before the 15th of the previous month you hope to have coverage.  Most insurance will start on the first of the month, and having signup completed 15 days ahead of time will ensure smooth activation of coverage on that day.

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