Most children can’t wait to declare their independence from mom and dad. The glory can fade fast, though, when they turn 26 and can no longer ride on their parents' health insurance. Suddenly they must fend for themselves in the grown-up world of health care.
Navigating unfamiliar territory can be intimidating, but it doesn’t have to be. Much like college or getting that first job, having a strategy can increase the odds of success.
Here’s a primer for surviving when you get kicked off your parents' health insurance plan.
Find out what your employer offers
If you’re fortunate, your search for health insurance begins and ends with a talk with the human resources department at your company.
Explore your employer’s options. There may be several plans. Examine each carefully.
“It’s incredibly important to dive deeper into plan options to make sure that the prescriptions you are taking and treatments you’re receiving are covered and that your preferred health care providers are in network,” says Grayson Blazek, a certified financial planner with Financial Symmetry in Raleigh, North Carolina.
“You want the plan that best fits your health needs and financial situation,” he said.
Don’t procrastinate. Turning 26 qualifies as an event that opens enrollment for you. However, the amount of time you have to enroll in a plan may differ.
“In some cases, you may lose coverage the day you turn 26, you may have 30 to 60 days to find your own insurance, or you may have until the end of the calendar year of when you turn 26. However, regardless of how long you have, you should absolutely be planning ahead,” says Leslie Tayne, a debt resolution attorney with the Tayne Law Group in Melville.
If you aren’t able to get insurance through your employer, you’ll have to go out on your own.
High deductible plans and HSAs
Cheaper plans typically tend to be QHDP (Qualified High Deductible Plans), or High Deductible Plans. They're cheaper because more of the upfront cost is on you.
“When you go to the doctor, instead of a $25 copay, you pay the actual cost of the office visit and tests. It's easy to rack up a doctor bill of over $100 when you're on a QHDP, just for an office visit,” says Kyle Hill, a certified financial planner with Hill-Top Financial Planning in Kansas City, Missouri.
If you're young, healthy and rarely go to the doctor, a QHDP could be a smart choice -- but be sure to have money saved, says Hill. Consider saving in a Health Savings Account for your medical expenses. “HSAs are great because you save money pre-tax, use the funds tax-free on qualified medical expenses, and get to keep the money that is in your HSA; it's yours. Some employers will contribute to your HSA. It's like a health care 401(k). There are few reasons not to contribute to an HSA if you’re enrolled in a QHDP,” says Hill.
The 10 essential benefits that standard health insurance covers are outpatient care (officially called ambulatory patient services); prescription drugs; pediatric services; laboratory services; emergency services; hospitalization for surgery, overnight stays, and other conditions; mental health coverage and substance use disorder services; rehabilitative and habilitative services; pregnancy, maternity, and newborn care; and preventive care.
Know what you want in a plan
School yourself on health care terms like copays, coinsurance, deductibles and in-network, among others. “This will help you get the most out of your health insurance,” says Blazek.
Understand what’s covered and what’s not. “If the policy doesn’t cover what you foresee needing, keep shopping,” says Blazek.
Be clear about what your out-of-pocket maximum is. “Should you not have a large cash reserve and you select a policy with a very large deductible, you could run into a situation where you don’t have the funds needed to cover an unexpected medical event,” warns Blazek.
Make health insurance a priority in your budget. Says Hill, “Health insurance isn't an exciting way to spend your money -- no insurance is -- but you’re minimizing the financial risk if you need medical care.”
Short-term plans and Medicaid
Short-term plans aren’t regulated by the Affordable Care Act, have low premiums, and don’t cover the 10 essential benefit standard health insurance covers. They are considered temporary and as alternative while someone is deciding on a more permanent health insurance solution.
Read the policy closely; short-term plans can have coverage limits. “They are available for up to a year and renewable up to three years,” says John Gjertsen, a senior wealth adviser with BlueSky Wealth Advisors in New Bern, North Carolina.
If none of the above options works for you, look into whether you qualify for catastrophic health insurance or Medicaid.