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It used to be that young adults lost health insurance coverage when they reached age 23 or sooner, if they ceased to be a full-time student. Today, however, the Affordable Care Act allows dependents to remain on a parent’s health insurance plan through age 26—regardless of marital status or access to employer-sponsored benefits.
Of course, not every young adult has access to health insurance through a parent, and those who do eventually reach age 26 and need to find affordable health insurance coverage until they secure a job with benefits. Going without health insurance can be tempting to twenty-somethings who tend to have lower incomes, student loans entering repayment and few health care expenses. As such, historically, young adults are less likely than any other age group to have health insurance.
However, being a healthy “young invincible” isn’t a good enough reason to take this gamble. Medical insurance gaps put an individual’s health and finances at risk. Avoiding treatment could result in more serious health problems, and a single trip to the ER may tack a hefty sum onto an already stretched budget.
Fortunately, there are many health insurance coverage options available to twenty-somethings today—largely due to the Affordable Care Act.
Young adults who are no longer eligible for health insurance through a parent’s employer-based plan may consider COBRA continuation coverage. COBRA allows individuals who lose group health insurance eligibility under certain circumstances to keep their existing health insurance plan for up to 36 months. Those eligible to elect COBRA must do so within 60 days of the qualifying event—in this case, losing dependent status.
COBRA premiums can be relatively expensive, especially for young adults who are just starting out. Those who elect COBRA continuation coverage must pay the entire monthly premium (including the portion previously paid by the employer) plus a 2 percent for administration costs. This can hover around $500 a month considering the full annual cost of employer-sponsored health insurance for an individual averaged $5,884 annually, according to the 2013 Kaiser/HRET Employer Benefits Survey.1
To learn more about COBRA, visit dol.gov/ebsa/faqs/faq-consumer-cobra.html or contact your employer’s benefits adviser.
Uninsured young adults and those waiting for new coverage to kick in may consider temporary health insurance. While it is by no means comprehensive, temporary health insurance—also known as short-term medical insurance—may be a safety net in the event of an unexpected illness or injury.
Applying and enrolling in a temporary health insurance plan can be quickly and easily done online. Approval comes within minutes, and coverage may begin as early as the next day. To determine eligibility, applicants answer a small number of health-related questions; those with serious health conditions are unlikely to qualify or find care related to these conditions will not be covered by the plan.
Temporary health insurance premiums are usually a fraction of COBRA’s, which can make these plans a good option for healthy individuals who want to keep costs low. But it is important to remember that out-of-pocket expenses will be higher should they need medical care.
Plans may last as few as 30 days or as many as 12 months. Once a plan expires, it is possible to apply for another policy; however, that policy is considered completely new and will not cover illnesses developed under the previous policy. This coverage is best suited for short-term situations and is not intended to replace major medical insurance.
Temporary health insurance plans are not ACA-compliant and therefore are not considered minimum essential coverage. It is important to note that under the Affordable Care Act, most Americans are required to have health insurance that is considered minimum essential coverage. Those who go without health insurance that qualifies as minimum essential coverage for more than a single period of three months in the tax year may owe a tax penalty known as the shared responsibility payment.
Twenty-somethings looking to fill the gap with a temporary health insurance plan may also consider limited benefit medical insurance. Limited benefit medical plans offer inexpensive, creditable, non-catastrophic coverage. Stated benefit amounts are paid for physician office visits, preventative care, diagnostic work, emergency room visits and more.
Because they are guaranteed issue, and therefore do not involve underwriting, these plans are generally attractive for those considered “uninsurable” due to pre-existing conditions and those who cannot afford major medical insurance, but need basic, affordable non-catastrophic coverage. Limited benefit medical is not suited for those who can afford and qualify for major medical insurance through COBRA or an individual plan.
If a young adult lands a job without group benefits or foresees the need for long-term coverage, individual medical insurance offers the most comprehensive protection of any option and fewer out-of-pocket costs; however, premiums are typically higher.
As with temporary health insurance plans, limited benefit medical plans may be quickly and easily purchased online. They are not ACA-compliant and therefore are not considered minimum essential coverage. Having a limited benefit medical insurance plan will not prevent you from owing the shared responsibility payment tax penalty.
Individual health insurance plans are an ACA-compliant alternative to COBRA. Comprehensive in nature, individual health insurance plans closely resemble group health insurance offered through employers. They are considered minimum essential coverage that fulfills the requirement that most Americans have health insurance. As such, individual health insurance plans sold today must adhere to the health care reform law’s provisions and include essential health benefits and certain preventive benefits at no additional cost to the insured, among other things.
Typically, individual health insurance plans are only available during an open-enrollment period; however, a special enrollment period may be available under certain life circumstances such as losing health insurance coverage. Individual health insurance coverage may be purchased through state-based and federally facilitated health insurance exchanges or in the private marketplace through a health insurance agent, health insurance carrier, or multi-carrier website.
Individual health insurance plans purchased through the state-based and federally facilitated health insurance exchanges may be eligible for income-based premium tax credits and cost-sharing subsidies.
Young adults under 30 may be eligible for ACA-compliant catastrophic health insurance plans sold on and away from the state-based and federally facilitated health insurance exchanges. Catastrophic health insurance plans tend to have lower monthly premiums than other ACA-compliant health insurance plans and higher annual deductibles that must be met before benefits, including essential health benefits, kick in. That means all health insurance expenses must generally be paid out of pocket by the insured individual before the health insurance plan contributes.
As of Jan. 1, 2014, catastrophic health insurance plans include three primary care visits per year at no additional cost, regardless of whether or not the deductible has been met. They also include certain preventive services at no additional cost before the deductible has been met. Catastrophic health insurance plans are not eligible for premium tax credits or cost-sharing subsidies.
Under the Affordable Care Act, Medicaid eligibility was expanded in several states. This federal health insurance program offers free or low-cost health insurance coverage to low-income individuals. Medicaid enrollment is open year-round. For eligibility requirements, visit Medicaid.gov or your state’s health insurance exchange.
Call 888-839-7679 to speak to a health insurance agent form healthedeals.com. These licensed and certified agents can help you with temporary and limited benefit medical insurance options, as well as individual health insurance options on and away from the state-based and federally facilitated exchanges.
1The Henry J. Kaiser Family Foundation. “2013 Employer Health Benefits: Summary of Findings.” Aug. 20, 2013.