If you're turning 26 soon, it's time to think about your health insurance options. Under the Affordable Care Act (ACA), you can stay on your parents' health insurance plan until age 26, but it's up to you to find coverage afterward. And although there's a lot of information about health insurance, just knowing that you have a choice is the first step.
Here are seven common questions that many young adults may have concerning their health insurance.
The Affordable Care Act (ACA) allows young adults to be covered under their parents’ policy until age 26. But if you're on your parents' insurance plan, your insurance may not automatically end when you turn 26 because there are some exceptions to this rule:
Standard ACA plans have a set enrollment period each year, but adults age 26 have a special 120-day enrollment period. That means you can purchase a medical insurance plan either 60 days before you turn 26, or 60 days after.
The good news is you have several choices. Let's walk through each.
1.) Enroll in your employer's plan. If you have a job, an easy way to get insurance is to join a health insurance plan offered through your employer. If you're just landing a new job, though, it's important to note that there may be waiting periods before your health insurance kicks in.
2.) Join your spouse's plan. If you're aging off of your parents' insurance but are married, you may be able to join your spouse's health plan. Just ask your spouse’s employer to add you to the plan within 30 days of your loss of coverage under your parents' plan.
3.) Shop for a plan through the Health Insurance Marketplace. You can compare and purchase ACA plans, also known as Obamacare plans. One perk of the Health Insurance Marketplace is that you can’t be denied coverage for having a pre-existing health condition. Costs for marketplace plans vary greatly, depending on your location and the level of coverage you need. Tax credits to help offset the plan's cost and make it more affordable are also available for those who qualify.
4.) Get a short-term health insurance plan. Short-term health insurance provides temporary benefits quickly, if you qualify. If your application is approved, your policy can begin as soon as the next day. Plus, short-term plans tend to be less expensive than other plan options (because they do not cover pre-existing conditions and do not offer the full range of benefits of Obamacare) and can last as little as 30 days, which can be useful when you have a gap in coverage.
ACA plans can be a good option for health insurance once a young adult has aged out of their parents' insurance. If you have a chronic health issue, are planning on becoming pregnant, need more health service options, or want the assurance of a plan with the 10 essential benefits, ACA plans may suit you well.
By law, all ACA plans must offer 10 essential health benefits with no annual cap on the benefit amount:
Short-term health insurance, also known as temporary health insurance, is a medical plan that provides you with health insurance coverage for a set period - anywhere from one to 12 months, depending on individual state rules. Some states offer short term insurance plans while others don’t, so it's essential to compare what's offered in your specific area.
The big thing to know is that a short-term health insurance plan is entirely different than an ACA plan. Think of a short term health insurance plan as an option outside of the ACA, not an alternative to an ACA plan.
For example, short-term plans are not required to cover the 10 essential health benefits, but they may be a good transitional fit if you're aging out of your parents' insurance, maintaining good overall health, and aren’t sure where life is taking you next - whether it’s a getting new job, entering the gig economy, preparing for grad school, or backpacking across America.
Short-term plans several common medical services for many young adults, such as:
Short-term health insurance is usually more affordable than other insurance options because it covers fewer medical services. For example, most short-term plans don't cover maternity and newborn care, mental health services, or prescription drugs. Insurers offering these plans are also allowed to deny coverage to those with pre-existing conditions, which also keeps costs down.
To better understand the costs and potential savings associated with short term health insurance plans, it's important to get familiar with the following terms:
-Premium: the monthly amount you'll pay for your health insurance coverage. Short-term plans generally offer lower premiums than ACA-compliant plans, and you may have the option to choose a higher deductible plan with a lower premium.
-Deductible: the amount that you have to pay towards your medical bills before your insurance company will contribute any money.
-Copayment/Coinsurance: the percentage of your medical costs that you actually have to pay after hitting your deductible. Then, your insurance company will pay for the remaining percentage. So let's say your coinsurance amount is 20%: You'd pay 20% of the medical bill, while your insurance company will pay the remaining 80%.
-Out-of-pocket maximum: the total out-of-pocket amount that your insurance plan requires you to spend your medical expenses each year. Once you have met this amount, your insurer will pay 100% of all your covered medical expenses up to the plan's annual benefit limit.
An out-of-pocket expense is any medical service that you have to pay for with your money. Deductibles and copayments/coinsurance are considered out-of-pocket expenses, but your monthly premium is not. So if your plan does have an out-of-pocket maximum, you won't have to pay for any plan-covered medical services after you reach the set amount for your out-of-pocket expenses.
Here's an example:
If your plan has an out-of-pocket maximum of $8,000, you've reached your out-of-pocket maximum once you've contributed that exact amount: $8,000. From then on, your insurance company will pay 100% of any plan-covered medical services for the remainder of the plan year, up to your plan’s annual limit. So if you're going to your primary care doctor or hospitalized for a few days, you won't have to pay any additional money as long as the service is included in your coverage plan.
A few factors come into play such as plan costs, your health situation, and your specific healthcare needs.
The bottom line: The best thing to do is to simply shop around and compare plans as you age out of your parents' insurance plan. Just be sure to read the fine print so you understand what's covered and what's not, as well as your deductible amount and how much you’ll pay out of pocket.