If you’re a young professional still trying to navigate this whole adulthood thing, you might be wondering: can I stay on my parents’ insurance until I’m 30? some states may allow you to do so, depending on your situation. But for the most part, young adults can expect to lose their coverage shortly after their 26th birthday.
then your best bet is to do some research and start planning before you get to the big 2-6. here’s what you need to know.
Reading: When do you get kicked off parents insurance
After I turn 26, what are my health insurance options?
If you’re turning 26 soon and have a full-time job, your employer may offer you health insurance benefits. You may be familiar with open enrollment, which is an employee’s annual opportunity to sign up for benefits that your company may offer with full-time employment, including health insurance. however, turning 26 is considered a “qualifying life event,” meaning you are eligible for a special enrollment period outside of standard open enrollment. Here’s the rub: You only have 60 days to sign up, so it’s best to find out about your plan before your birthday.
The most common plans on the health insurance menu include health maintenance organization, preferred provider organization, and high deductible health care plan. then, depending on the plan you choose, you can also choose to sign up for a health savings account or a flexible savings account.
how to read insurance alphabet soup: hmo, ppo, hdhp
what is an hmo?
A health maintenance organization, or hmo, has most plan limits. This plan’s coverage only includes doctors who work with the hmo, and out-of-network care is not covered, except in emergencies. if you need to see a specialist, you’ll need a referral from your primary care doctor or your insurance won’t cover the cost. If you expect your regular medical expenses to be relatively high, an HDHP might be right for you.
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A preferred provider organization, or ppo, contracts with a network of medical providers that you can use, such as doctors and dentists. With this plan, you must pay a certain amount for your health care services before your insurance kicks in and pays the costs for you. This is known as the deductible, and these out-of-pocket expenses vary depending on the plan your company offers. if you want to use a medical provider outside the plan, you must pay an additional cost.
what is a hdhp?
as the name suggests, the high deductible health plan, or hdhp, offers lower premiums, which is the amount you’re billed each month to maintain your coverage, but your deductible is higher. Plans with deductibles of at least $1,400 for individuals and $2,800 for families fall into the HDHP category, as defined by the IRS.
On the plus side, people can often use an HSA (or, in some cases, an FSA) to pay for expenses not covered by their plans.
what is the difference between an fsa and an hsa?
a flexible savings account, or fsa, works like a health-specific bank account to pay for out-of-pocket expenses with tax-free dollars. An fsa can be used with any health insurance plan if your employer offers it. however, fsas come with some restrictions. First, you need to figure out how much you want to contribute at the beginning of the year. Beginning in 2021, contributions are limited to $2,750 per year. if your employer makes contributions, it will not count toward your designated maximum. second, unused dollars don’t roll over.
read more about fsas.
If you enroll in an hdhp, you qualify for a health savings account, or hsa, to which both you and your employer can contribute. You can contribute, invest and withdraw dollars to cover qualified medical expenses tax-free. In addition, the money accumulates each year. however, there are contribution limits. For 2022, the IRS announced that the annual limit for people with individual coverage is $3,650. for family coverage, the limit is $7,300.
See also: Changing plans — what you need to know | HealthCare.gov
read more about hsas.
After I turn 26, what are my health insurance options if I’m not a full-time employee?
If you work in the informal economy, work part-time, or are unemployed, your health insurance options include:
- Medicaid: People with lower incomes may qualify for this low-cost plan through the federal government.
- health insurance marketplace: People with unpredictable income streams can apply for a plan based on their estimates.
- Consolidated Omnibus Budget Reconciliation Act, or Cobra: People who lose their jobs can continue their existing coverage for a limited time through this program.
- https://www.healthcare.gov/young-adults/coverage/
- https://www.healthcare.gov/turning-26/
- https://www.healthcare.gov/glossary/
why do I need health insurance?
After you turn 26, health insurance is still required. Medical debt doesn’t pick and choose, it affects both the insured and the uninsured. According to a study by the Kaiser Family Foundation, 41% of adults have medical or dental bills in debt.
Make your plan before this big birthday sneaks up on you – life can take unexpected turns and come with unexpected costs too. take the time to review your options so you can find a plan that fits your needs and situation.
here are some additional sources to help guide you through the maze:
Have more questions about adulthood? Let’s figure out these financial milestones and hurdles together.
