If you thought your college capstone project was intense, get ready for something a lot more confusing. Meet health insurance: the complicated maze of contradictions, exclusions and exceptions that is about to become yours. Happy upcoming 26th birthday!
Until you turn 26, there’s a good chance you may still be covered under your parents’ health insurance plan. The Affordable Care Act required insurers extend dependent child coverage until adult children reach 26.
But once you add a 26th candle to the birthday cake, that health insurance vanishes. Soon you’ll be on your own. In some cases, the solution comes when your own employer provides you with coverage, and it may come before you turn 26. In other cases, you might need to turn to a state health exchange to find a plan.
Here’s the skinny for what you need to know and do before you reach 26 and “age out” of your parents’ coverage.
1. Just because you no longer are required to have health insurance doesn’t mean you shouldn’t have it.
The new tax bill signed in late December did a bunch of things unrelated to taxes. For one, it repealed the individual health coverage mandate that said you will be fined if you don’t carry health insurance. So if nothing changes, in 2019 you will legally able to go without health coverage and nobody will fine you.
But think twice before you do that and go unprotected. Going without coverage means you are agreeing that you will personally pay for every medical expense out-of-pocket. The average price for a new patient appointment for someone without insurance was $160, according to 2012-2013 research led by Johns Hopkins Bloomberg School of Public Health. And that figure didn’t include any blood work, imaging or other testing. In short, you likely can’t afford to get sick without insurance.
According to the Kaiser Family Foundation, medical debt is the No. 1 source of personal bankruptcy filings in the U.S. In 2014, an estimated 40 percent of Americans racked up debt resulting from a medical issue.
Even those with health insurance aren’t immune from medical debt. Kaiser found that 43 percent of adults with health insurance said they had difficulty affording their deductible. Roughly a third say they have trouble affording their premiums and cost-sharing payments; 73 percent patients with medical bills said they cut back their spending on food, clothing or basic household necessities.
Bottom line: Health care is expensive no matter how you cut it. But insurance could be what stands between you and medical treatment.
You might think young people like yourself are healthier overall and less likely to get sick. Fair enough. But do you really want to spin that roulette wheel with your health?
2. You can’t buy what you don’t understand.
Up until now you probably sat under the protective umbrella of your parents’ plan, and you didn’t need to know a copay from a coinsurance. Now you do. Here is a nifty graphic to help you understand the language of health insurance.
3. Insurance is not one size fits all.
Plans come in multiple price ranges and offer various degrees of coverage. The least expensive ones don’t cover much, unless you have a catastrophic health problem. Not without coincidence, they are called “catastrophic” plans. So if you have essentially been healthy, you might want to take a good look at one of these. They will have lower premiums but high deductibles, which means you will pay for your health care out of pocket until that deductible is met. For this kind of plan to work, you should save the amount of your deductible for the future just in case you need it.
Remember that deductibles are often just for expenses that the insurer allows. For example, if something is not covered by your policy, paying for it out of pocket would not be money applied to a deductible.
There is no way around this: You are going to have to do some homework here. And checking with your state health exchange is a good place to start if your employer doesn’t offer health insurance.
4. Ask yourself these questions.
Do you have a particular doctor who is important to you? Maybe it’s the family doctor who has known you forever, and you can’t imagine ever seeing someone else. Or maybe it’s convenience that matters most to you, and you just want to be able to run into the urgent care walk-in near your office to get your allergy shots.
Now is the time to make sure the doctor or facility you want to use is in-network for the plan you’re considering. In-network means they have contracted with your insurer to accept a certain amount for treating you and have agreed to not bill you any balance. Staying in-network for care will wind up costing you less.
Do you take a medication for a chronic illness? Check your prospective plan’s formulary ― the list of prescription drugs it will cover ― and make sure the medication you take is included. Also ask in which tier your medication is listed. Formularies generally divide drugs into four or five tiers, which will determine what your copay will be.
Find out what is included in the plan’s preventative care program. These are the routine exams ― checkups, mammograms, flu shots, etc ― that a plan covers at 100 percent within intervals (generally once a year). The idea is that by practicing preventative medicine and early detection, the patient will stay healthier and the insurer will ultimately not have to pay so much.
How important is freedom of choice to you? HMOs are a network of health care providers that are self-contained. They generally charge the lowest premiums, but you must stay within the organization for all your medical needs. In other words, you will go to an HMO doctor, get treated at an HMO hospital, be referred to HMO specialists if needed.
The right to choose is more expensive in the health insurance world.
5. Don’t panic, you may have a little time.
The most common age limit for enrolling a child in coverage is age 26, but exceptions may apply. These exceptions are based on the state where your parents’ company insurance policy was established ― something their company’s insurance plan administrator can tell you.
But for everybody else, turning 26, you will need to hustle and find your own health insurance before you are booted off your parents’ plan.
Depending on the kind of health care coverage your parents have, you could literally lose coverage on the day you turn 26. Harsh. Some plans let you stay on your parents’ plans for 60 days, others until the end of the month following your 26th birthday. Others don’t show you the door until the end of the tax year. Different health care plans have different rules, so determining when coverage will end for you will be specific to your parent’s plan.
But there are some things that apply to everyone. For example, your 26th birthday is what is known as a qualifying event. Insurance plans can generally only be bought or switched during the annual open enrollment window of Nov. 1 to Dec. 15, unless there is a qualifying event. In addition to turning 26, qualifying events that allow you to sign up outside open enrollment are things like switching jobs, having a child or moving to a new zip code.
Turning 26 triggers a special enrollment period that lasts for 120 days. You can enroll in your own plan within the 60 days before or the 60 days after your 26th birthday ― so 120 days is what you have to get yourself enrolled elsewhere.
Just remember that once you pick a plan, you are likely to be stuck with it until the next open enrollment period or another qualifying event. Choose wisely.