When It’s Time to Get Off Your Parents’ Health Plan

The Fiscal Times

One provision of the Affordable Care Act that has garnered pretty universal praise is the policy change allowing young adults to remain on their parents’ health insurance plans through age 26. Previously, young adults were knocked off the plans at age 19. (Full-time students were able to stay on until age 22.)

The provision, which took effect in September 2010, has been so successful it’s enabled nearly 8 million previously uninsured young adults to gain coverage, according to The Commonwealth Fund. That’s good news for young adults. More than 7 in 10 of them say that having health insurance is very important, even if they’re the group least familiar with the particulars of Obamacare.

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While in many cases staying on a parent’s health care plan is the best option for young adults (especially if their parents are footing the bill), in some instances that plan may not be the most cost-efficient or offer the best coverage for that individual. Grown children and their parents should sit down to determine whether remaining on a family plan is the right decision.

In many cases, family plans are the least expensive option, particularly if parents are enrolled in a family plan that charges the same premium regardless of the number of dependents covered. Young adults with siblings are likely to benefit from such a situation. There are, however, some instances in which staying on the family plan is not the right option, such as when the young adult works for a company that has more generous benefits than the parent’s employer.

In addition, if a family plan has a limited network, and the young adult lives in a different geographic region, out-of-pocket expenses for accessing care can add up quickly (with the exception of emergencies). Some young adults aim to schedule doctors’ visits for when they’re home visiting parents, but that limits options when health issues arise during the year.

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Remaining on a parent’s plan also means that parents may receive a full explanation of medical services provided, which could pose problems for young adults who want privacy on medical issues. Not all family plans cover a dependent’s maternity costs, either, so if you’re pregnant or planning to become so, it may make sense to get your own coverage. You’ll have to find insurance for your future child anyway, since your parents’ plan doesn’t extend to grandchildren.

Keep in mind, too, that for parents approaching age 65 and considering retirement, Medicare coverage does not extend to children.

Parents and their young adult children should look carefully at all their health care coverage options, including copays, deductibles and plan types. Here are options you’ll want to explore:

Option #1: Get employer-based coverage
While the latest open enrollment period may have passed at many companies, the next time you can choose coverage you should research the plans offered by your company before automatically opting out in favor of your parents’ plan. The fine print and jargon found in most company health plans can be intimidating, so young adults should seek help from parents or in-house HR experts to help parse the details.

Option #2: Purchase a marketplace plan
Prior to the ACA, purchasing an individual plan was a costly option for most young adults, as coverage was expensive regardless of factors such as young age or low income. A report by the Health and Human Services Department’s Office of the Assistant Secretary for Planning and Evaluation predicts that nearly 50 percent of young adults will be able to pay less than $50 per month for coverage.

Keep in mind, however, that plans available at that rate are bronze-level plans, which offer bare-bones coverage, and the subsidies are not an option for those who have access to adequate and affordable employer-based plans. Additionally, “The average individual deductible for a bronze plan is a whopping $5,081,” according to CBS Market Watch.

Also, in order to qualify for a subsidy, young adults would likely need to file their own taxes. If parents continue claiming the child as a dependent, eligibility for subsidies would be based on the family’s income rather than the child’s income. Check in with a certified public accountant to ensure that the tax benefit parents receive by claiming a child as a dependent (and reducing taxable income by paying for a family plan) don’t outweigh the benefit of the subsidy available.

Option #3: Get coverage through your school
If you’re a student, you may be eligible for insurance through your school that’s both affordable and provides access to local providers. Be aware, though, that some schools have dropped insurance plans for students, while others have increased rates to conform to the ACA. The latter group is also likely to offer more robust coverage than school plans did a few years ago. Check with your school to see if it offers an affordable plan that fits your health care needs.

Option #4: Medicaid
About half the states have opted to expand Medicaid coverage under the Affordable Care Act. If you live in one of these states, you may be able to get coverage via that program if your income is less than about $15,000 per year. Young adults comprise more than half of those consumers who became newly eligible for Medicaid this year, according to a recent report by the Robert Wood Johnson Foundation.

Napala Pratini writes for NerdWallet Health, a website that empowers consumers to find high quality, affordable health care and insurance.

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