Turning 26? Here’s how to find your own health insurance plan

Young adults can be covered by their parents’ health insurance until they turn 26. After that, they’ll need to choose their own health plan. This can be a confusing transition under normal circumstances, but during the coronavirus pandemic it’s especially important to make sure there’s no gap in coverage. If your employees have young adult children covered by their insurance plans or are young adults on their parent’s health insurance, here is some helpful information on how to find a new plan.

In the insurance world, the 26th birthday is known as a "qualifying event" indicating that a parent's plan no longer provides coverage. If you or a child are approaching this milestone, it’s time to start thinking about choosing a health insurance plan. By planning in advance, you’ll be able to weigh the pros and cons of the policies available. That way, you can make the best choice that meets your medical and financial needs during open enrollment period. And ensure that you are continuously covered, especially in case of a medical emergency.

For individuals employed full-time, a simple and smart choice is to enroll in your employer's plan. If you're a parent of a 25-year-old who is a student, unemployed, working part-time or consulting as independent contractor, it gets a bit more complicated. The following frequently asked questions can help point both parents and their children in the right direction based on their specific circumstances.

Q: I'm young and healthy? Do I need medical insurance?

Going without health insurance is a risk—both medical and financial. The common belief that 20-somethings can afford a gap in coverage is misguided. According to the U.S. Dept. of Health and Human Services, the statistics tell a different story:

• One in six young adults has a chronic illness in need of continuous medical care.
• Nearly half of uninsured young adults report problems paying medical bills.
• Depending on the state, there may also be a fine associated with gaps in health care coverage after a certain age.

Right now you may feel healthy and rarely visit a doctor. But, accidents do happen and opting out of health insurance can have disastrous financial consequences. A hospital stay alone can cost tens of thousands of dollars. Medical bills can drain your bank account or burden you with credit debt. Health insurance is just that--it helps you recover both physically and financially from an illness or accident.

Q: How much time do I have to get my own health insurance policy?

Fortunately, there is a 120-day special enrollment window in which to purchase a new health insurance policy: 60 days before your 26th birthday and 60 days after. While you can wait until after your 26th birthday to apply, it’s best to begin researching and comparing plans as early as possible.

A good rule of thumb is to sign up for a plan no later than the 15th day of the month if you want your plan to begin the following month. Otherwise you may end up with a coverage gap requiring you pay full price out of your own pocket during that period for any health care services you require (including emergencies).

If you're a full-time employee, there's no better time than now to request enrollment and application information from your Human Resources department. An employer's plan is often the best alternative when turning 26. Most feature high-quality HMOs and PPOs while sharing the cost of the premium. Employer plans also may offer a variety of wellness programs, such as a discount on gym memberships or free flu vaccinations.

Q: I'm not eligible for an employer plan. What are my options for an individual health plan?

Perhaps you’re working part-time, enrolled part-time in school, or consulting as an independent contractor. Fortunately, there are several alternatives to an employer plan that offer a full range of coverage—from comprehensive to minimal.

Under the Affordable Care Act (ACA), you can purchase one of many individual health insurance plans through the federal health insurance marketplace. Each state has its own online exchange. You can shop on the exchange for up to 60 days after your 26th birthday, regardless of where it falls on the calendar.

The Marketplace exchange offers several metal tiers of coverage with different levels of cost-sharing. Generally, the more costs you cover, the more affordable the premium. If you're eligible, the tax credit is automatically included when you purchase a Silver plan.

Check out what options you have within the state you live and whether you qualify for subsidized coverage. If you live in Massachusetts the health insurance marketplace is called the Massachusetts Health Connector.

Outside of the marketplace, consider the following alternatives if they apply to you:

• Student Health Insurance: if you’re currently enrolled full-time in a college or university degree program, you may be required to purchase the school’s plan.
• Alumni Association Plan: If you’re a college graduate, contact your alumni association for more information.
• Trade Association Plan: If you’re self-employed and a member of a trade, many organizations offer group health plans.
• Spouse’s Plan: Ask your spouse’s employer to add you to their plan within 30 days of your loss of coverage under your parent’s plan. 
• Intermediaries: Individuals can also purchase a policy through a private health exchange. For example, AllWays Health Partners’ preferred intermediary partners are HSA Insurance or Mosaic Insurance from the Small Business Service Bureau.

Q: Are there any inexpensive plans that offer coverage just for emergencies?

If you're burdened with student loan debt, high rents, car payments, and other expensive necessities of modern life but don't need as many doctor visits, hospital stays, and chronic illnesses as older people, a typical health play may seem like an unnecessary expense.

For this very reason, the ACA offers the choice of a catastrophic plan for people under 30. Catastrophic coverage is typically inexpensive on the marketplace exchange, although coverage is minimal. So you need to weigh the pros and cons based on your own medical and financial situation:

• Monthly premium payments are low.
• Annual deductibles, however, are high. You could end up paying for all routine medical services out of your own pocket.
• It does cover emergencies and "worst case" scenarios that could wipe out your savings or put you deep in debt.
• Preventive services are also covered at no cost.
• It may not cover prescription drugs or vaccinations, depending on the plan.

If you're healthy, rarely seek medical care, and are not eligible for a tax break, then a catastrophic plan may be a good choice until you turn 30.  Visit the Massachusetts Health Connector for more information and to find out which insurance carriers available on the Marketplace offer a catastrophic plan

Q: I'm unemployed. What kind of coverage can I get? 

If you have limited income, you might qualify for free or low-cost coverage through Medicaid. Unlike the state's marketplace exchange, Medicaid is a joint state/federal social welfare program you can apply for at any time on HealthCare.gov. If you're eligible based on your income level, coverage begins immediately. You must be a legal resident of the state in which you're applying for coverage, and you must reapply for eligibility each year.

Massachusetts Medicaid program is called MassHealth. This program offers health care benefits directly or by paying part or all of your health insurance premiums. You can learn more about eligibility requirements and if this may be appropriate for you at the Massachusetts Health Connector.

Q: Is there any way I can extend coverage on my parent's health insurance plan?

Like most insurance issues, the answer is not clear cut. In most states, the answer is "no," with some exceptions. Some states extend coverage to ages 30 or 31 with limitations. In other states, some plans provide a grace period--for instance, until the end of the month or the end of the tax year following the 26th birthday. Also, if you are disabled you may be able to stay on your parent's plan as a covered dependent.

Another option is COBRA coverage. Through the Consolidated Omnibus Budget Reconciliation Act (COBRA), you may qualify to retain coverage under your parent’s plan for 18 to 36 months after turning 26. Keep in mind, however, that COBRA only applies to plans offered by employers with at least 20 employees.

While this alternative makes sense for some families, COBRA is typically pricey. Many employers do not share the cost of any part of the added COBRA premium, which can be a drain on finances. In addition, you have to pay a 2% administrative fee. And if you miss a COBRA premium payment, your coverage ends, and you can’t reinstate it. For more information, visit the U.S. Department of Labor's COBRA FAQ page.

Q: Overall, what should a 26-year-old consider most when buying health insurance?

The answer is simple: the very same considerations of anyone buying insurance at any age. In a nutshell, you should consider:

• The cost of the premium, copayments, deductibles and coinsurance.
• The flexibility to access specific doctors and specialists within the plan’s network.
• The scope of benefits which are most important to you.
• Whether you need vision or prescription coverage.
• How often you seek medical care and will use the health insurance.

If you plan well in advance, work with HR representatives, and consult the resources in this post, you can rest assured that when you turn 26, you’ll be covered for medical services, and have a truly happy birthday.