If you have a grown child currently on your health plan, they can remain on your plan until they turn 26. Do you know their health insurance options after that?
First, check with your health insurance carrier for the exact date your dependent’s coverage will end. For some carriers, coverage ends on the actual birth date for others, it will extend through the birthday month. If your dependent wants to enroll in an Affordable Care Act (ACA) plan, losing parent coverage when they turn 26 will qualify them for a special enrollment period to enroll in an ACA-qualified plan prior to the next open enrollment start date (November 15 for 2015 plans).
Eligibity for Premium Assistance at Age 26
When your child applies for their own health insurance coverage, they may qualify for premium assistance. If they earn between 138% and 400% of the federal poverty level ($16,105 – $46,680/year) they will be eligible for tax credits to help subsidize the cost of their premium. They would qualify for this tax credit whether they live at home with you, or not.
However, if their income is too low they won’t qualify for premium assistance but may qualify for Medicaid.
Coverage Alternatives for Young Adults
For young adults under 30, the ACA recognizes Catastrophic Plans as satisfying the requirements for health care reform laws. Catastrophic plans come at a lower cost, but don’t include the 10 essential benefits of a major medical plan. Young adults are often referred to as the “young invincibles” because they are typically in good health and don’t require frequent medical attention. For this reason, a catastrophic plan can provide a safety net for unexpected medical issues.
Young adults leaving their parents’ plans may be considering opting out of an Obamacare plan for now. Some see paying the ACA fines to be a less expensive choice than buying a health plan right now. But I don’t recommend going without health coverage. The consequences of paying out of pocket for unexpected illnesses or injury are just too great a risk — especially for young adults just starting out.
There are coverage options outside of Obamacare and outside of open enrollment to protect young budgets. For instance, a low-cost accident plan can be an excellent option. For very little cost, an accident plan is there to cover the thousands of dollars many young people are vulnerable to pay when injured. In fact, many of my clients who have major medical plans also carry a supplemental accident plan to avoid paying thousands in the E.R., hospital or for follow-up care that doesn’t even meet their deductible.
Affordable Coverage with a Short-Term Plan
A short-term medical plan is another option that is extremely popular right now — for any age — but especially for young people in a transition from their parents’ plan, college-based coverage, or in search of a job for employer-based coverage.
A short-term plan can begin the day after you submit your application, and can last from 30 days to 11 months (depending on where you live). Short-term plans are less expensive than full-priced, traditional health plans; however, if your young adult qualifies for premium assistance for an ACA health plan, an ACA plan may be the most affordable option.
If your young adult applies for an ACA plan, premium assistance would be determined based on their income, not the parents’, even if they are still living at home. For example:
If your child’s income is $20,000 per year, this is 174% of the federal poverty level. They would qualify for premium assistance and would be required to pay no more than 5.11% of their income for health coverage. A 2014 Silver plan would run approximately $3,557. Your child would be responsible for $1,021 per year (or $85.08 per month) and would receive a premium tax credit totalling $2,535 for 2014.
You might also suggest to your grown child that he or she consider a fixed-benefit plan. With zero deductibles, they can get covered for the unexpected, with a lump sum benefit for illness or injury.
Contact an HSA for America Personal Advisor to explore options for your young adult at 866-749-2039. I can’t promise that they’ll stop bringing their laundry home, but you can rest easy knowing they’re covered for health care!
Do you have dependents turning 26? What are your plans for their plans?
Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.