Most young adults drop their parents’ health insurance plans shortly after their 26th birthday. Depending on the type of insurance plan, 26-year-olds could lose coverage at the end of their birthday month or at the end of the calendar. year. This limit is due to the Affordable Care Act (ACA), which only requires health insurance providers to cover a dependent on the parent’s plan until age 26.
the 26-year health insurance rule
This health insurance rule was established by the Affordable Care Act (ACA). Before this, insurers used to remove young adults from their parents’ insurance policies after they reached a certain age or stopped attending school full-time after age 19, which meant they no longer qualified as dependents under Internal Revenue Service rules. As a result, many young adults lost their insurance sooner.
Prior to the ACA law, more than 30% of young Americans were uninsured, making them the largest group of uninsured people in the country. the provision here has closed this coverage gap, making it possible for millions of young Americans to maintain health care coverage through their parents.
With this rule, young adults age 26 and younger can stay on their parents’ health insurance plan even if:
states that allow extended coverage after age 26
eight states (florida, illinois, nebraska, new jersey, new york, pennsylvania, south dakota, and wisconsin) have enacted measures that allow beneficiaries to remain in their parents’ health insurance plans long after age 26 . this provides a grace period allowing continuation of health insurance coverage.
Requirements to stay on a parent’s health insurance policy vary by state. In Pennsylvania, for example, you can stay on your parents’ health insurance policy until age 29 if you meet certain conditions. The first requirement is that the insurance plan must be group coverage through the parent’s Pennsylvania-based employer. cannot be married and cannot have dependents. You must also be a resident or enrolled as a full-time student at the university.
best health insurance options when you turn 26
There are seven ways to get insurance if you’re approaching the age of your parent’s insurance plan. But before you choose an insurance plan as a young adult, you should assess your own situation, determining, for example, what you need in a health plan and how much you can afford.
If you’re in good health, you may not need a more expensive, comprehensive health plan designed for people with chronic conditions. Likewise, if you’re a young adult with a chronic illness, you may need a more comprehensive plan.
there are other considerations. A young adult planning to start a family will have different coverage needs than a single young adult starting their first job and living alone.
employer plans: best for those who can get coverage through a job
Employer-based coverage should be one of the first places you look for coverage if you’re employed and aging out on your parent’s insurance plan. this is how most people in the country get their health insurance.
Employer plans are often relatively inexpensive because the employer contributes to the cost of insurance. But employer plans can have drawbacks, limiting employee options, such as offering only one plan or offering only one plan with a restrictive network.
cobra: expensive but good for a donut hole
Beneficiaries who are approaching their parents’ insurance age can stay in the same plan through the Consolidated Omnibus Budget Reconciliation Act (COBRA).
Insurance through Cobra is often very expensive because the parent’s employer no longer pays for the young adult’s coverage. that’s why cobra should only be used as a temporary measure, closing short coverage gaps until beneficiaries transition to more permanent health care plans.
For example, if you’ve already met the plan’s annual deductible, you may want to use cobra to stay in the same plan until the end of the policy year.
short-term plans: cheap and offer some coverage during a window
Similarly, beneficiaries can turn to short-term policies to fill gaps in coverage. this can be useful in situations where you are waiting for another insurance policy to start.
It is important to note, however, that short-term plans do not have to cover pre-existing conditions and may deny coverage entirely based on medical conditions. short-term plans are generally used for protection against catastrophic events until long-term insurance kicks in or can be found.
Marketplace plans: the best long-term option for those without an employer plan
If you’re self-employed, gig work, or don’t have coverage through a job, choosing a plan from the Marketplace here can make sense, especially if you qualify for tax credits to help defray the cost of a plan.
Aca’s market-based plans are divided into metallic tiers.
student health plans: private insurance plans that are good for students
Student health plans are another way for college students to access health insurance. Some insurance companies offer these plans for students between the ages of 17 and 29, allowing them to pay premiums annually or, in some cases, semi-annually. Unlike a school-based plan, these plans travel with you wherever you study in the United States.
If you start at one college and then transfer to another college, coverage transfers with you.
College and College Plans – Good for Campus Health Care
Full-time students attending a college or university may be able to obtain insurance through their school’s health insurance plan if a plan is offered. This could be a good health insurance option for older students who are unable to continue their parent’s coverage. It’s also helpful for any student attending school out of state.
say, for example, a student from texas, who is covered by the parent’s health maintenance organization (hmo) in texas, attends college in ohio and cannot access the list of medical providers designated that are located in texas. It would make sense for the student to have their own health insurance plan in Ohio through a college or university.
One of the advantages of selecting a school policy is that the monthly premium can be bundled with your tuition and room and board expenses, making it possible to use student loans to pay for your health insurance costs.
School-sponsored health care may not cover services received outside of the university. if you need to access services outside of school, for example, the policy may not cover the expenses.
Also, some college or university health plans don’t adhere to ACA standards, meaning they may not cover pre-existing conditions or put limits on how much they’ll pay. therefore, it is important to read the terms of the health plans provided by your college or university to determine if the plans cover the necessary benefits and services.
Medicaid coverage: best for those with low incomes
Medicaid offers free or low-cost health insurance for people with low incomes, if you meet the eligibility criteria.
for young adults, medicaid is a good option if they are unemployed or their job does not provide health insurance benefits. one of the benefits of applying for a marketplace plan here is that the system automatically assesses if you qualify for medicaid.
Income eligibility varies by state, and is higher in 38 states that have expanded Medicaid eligibility. In these states, residents qualify for Medicaid if their household income falls below 138% of the federal poverty level. twelve states (alabama, florida, georgia, kansas, mississippi, north carolina, south carolina, south dakota, tennessee, texas, wisconsin, and wyoming) have not expanded their medicaid programs and, as a result, medicaid eligibility is stricter in these states.