Turning 26 and losing your parents’ health insurance: 3 options for coverage

If you're turning 26, health insurance is probably on your mind. A mom and young adult daughter talk and smile about it while on vacation.Image: If you're turning 26, health insurance is probably on your mind. A mom and young adult daughter talk and smile about it while on vacation.

In a Nutshell

If you’re too old to stay on your parents’ health insurance plan, getting covered doesn’t have to be expensive. Know your options, and get the coverage you need.
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The Affordable Care Act, also known as Obamacare or the ACA, opened the door for many people to get health insurance who previously didn’t have access.

A provision of the law allows young adults to stay on their parents’ health insurance until age 26. As a result, millions of young adults became eligible to have health insurance on their parents’ plans who wouldn’t have qualified otherwise.

The Affordable Care Act has been popular with this demographic. According to the Department of Health and Human Services, between 2010 and early 2016, 6.1 million young adults have gained coverage by opting to stay on their parents’ plan. However, many of those young adults may soon be facing their 26th birthday — and the end of their current coverage.

So what do you do now if you’re losing your parents’ coverage? Here are some options you might want to take.

  1. See if you qualify for catastrophic health insurance
  2. Check to see if you qualify for Medicaid
  3. Shop for a plan on the marketplace

Read on to learn which option might be best for you.

1. See if you qualify for catastrophic health insurance

If you’re really struggling financially, a catastrophic plan may be a good option for you. Catastrophic plans are available in most states to young adults under 30 or anyone who qualifies for a hardship exemption.

These hardship exemptions include having medical expenses you were unable to pay that resulted in substantial debt, the death of a family member, eviction and more.

Catastrophic coverage is typically inexpensive on the marketplace and can be bought outside the open enrollment period if you lose your parents’ health insurance because you turn 26. However, the coverage is minimal. It generally covers emergencies and some preventative care and is worst-case-scenario coverage.

You’ll pay most routine medical expenses yourself up to the deductible limit, which is relatively high.

2. Check to see if you qualify for Medicaid

Before Obamacare, you were unlikely to qualify for Medicaid through income alone.

Thanks to Obamacare, some states expanded Medicaid coverage so that, in those states, you can now qualify solely through income. In the 33 states (including the District of Columbia) that expanded coverage, you may qualify if your income is below 138% of the federal poverty level, although some states may have a different eligibility level. According to the Department of Health and Human Services, the federal poverty level in 2017 was $12,060 for a one-person household.

However, if you live in one of the 18 states that didn’t expand Medicaid or one of the states with a lower threshold, you may not be able to qualify for coverage through income alone.

3. Shop for a plan on the marketplace

Millions of lower-income Americans who purchase health insurance through the federal or state marketplaces might qualify for a subsidy (also known as the premium tax credit). The Kaiser Family Foundation estimated that in 2016, nearly 14.8 million people were eligible for these credits.

The impact of these credits can be huge. The Department of Health and Human Services analyzed 2016 health plan premiums and found that 77% of people who purchased a plan in 2017 through the federal marketplace and qualified for a subsidy would pay $100 or less per month after the premium tax credit.

And you may qualify even if your income is relatively high. For example, if you live alone in Florida and earn between $12,060 and $48,240, you likely qualify for a subsidy.

The federal health insurance marketplace offers five tiers of health insurance coverage: bronze, silver, gold, platinum and catastrophic. Each of the “metal” plans has a different level of cost-sharing; generally, the more costs you cover, the cheaper the premium.

If you get a bronze plan, your insurer covers an average of 60% of out-of-pocket costs, across all bronze plans on average. But this may not translate as your insurer covering 60% of your costs. To know the true cost-sharing of your plan, you should read your plan’s benefit sheet.

One drawback to note when shopping for an ACA health plan is that generally, you can only shop during the open enrollment period, which ended on Dec. 15, 2017. However, you may be eligible for special enrollment after you “age out” of your parents’ plan. If eligible, you must enroll within 60 days of aging out of your existing plan.

Why Obamacare is important for young adults

Young adults traditionally have had many problems with access to health insurance.

According to a U.S. Department of Labor fact sheet, young adults are less likely to get health insurance through an employer. They state that “the uninsured rate among employed young adults is one-third higher than older employed adults.”

You might be thinking,“So what? Young people are reasonably healthy and can probably get by without health insurance.”

As it turns out, this is a myth. The Department of Labor says that one in six young people has a chronic illness, such as diabetes or asthma. Being uninsured can also put their financial health at risk. Nearly half of uninsured young adults reported having problems paying their medical bills.

Bottom line

While you might not feel ready to lose your parents’ health coverage, there may be options for you, even if you’re struggling financially. Do your research to determine which is the best for your situation.