Q. I just graduated from college but don't yet have a full-time job. What are my best health insurance options?
A. Thanks to the Affordable Care Act—a.k.a. Obamacare—you have more good choices than you once did. Since 2010, young adults can stay on a parent's employer-sponsored plan until age 26. Of the estimated 15 million young adults enrolled in a parent's plan last year, nearly eight million would not have been eligible before the law took effect, according to a recent report from the Commonwealth Fund.
Even if you have that option, though, you may not want to take advantage of it. If you're living far from your childhood home, for example, doctors near you likely won’t be included in the plan's network, and you'll pay more at out-of-network providers. You might also prefer that your parents not receive any explanation of benefits about your health care. "Your child may decide he or she wants to graduate from the parent plan," says Bryce Williams, managing director of benefits consultant Towers Watson.
The Financial Aid You Can Find
At this stage of life, breaking free of your parents' plan doesn't have to be costly. Even though general enrollment on the new government health insurance exchanges has closed for 2014, you qualify for an exemption if you lost your previous health insurance when you graduated or moved to a new state. You typically must enroll within 60 days of losing coverage. Miss that window, and you're locked out until 2015. Shop for policies at healthcare.gov.
Since that first year out of school can be a lean one income-wise, you'll be glad to hear that low earners qualify for subsidies that make plans more affordable. If your income falls between 100% and 400% of the federal poverty leven, or $11,670 and $46,680, you may be eligible. You can't choose any old plan, though. You’ll need to sign up for a so-called silver level plan to qualify.
You'll be disqualified for a subsidy if you have a part-time job that offers you an affordable plan, meaning it costs less than 9.5% of your income and is designed to cover 60% of the average enrollee's costs. You also won't qualify if your parents claim you as a dependent on their tax return, says Christina Postolowski, a senior policy analyst at Young Invincibles, unless your family’s income is low enough that the whole family qualifies.
Keep in mind that if you land a job and end up making too much money over the course of the year, you'll have to repay at least part of the subsidy, warns Michael Mahoney, senior vice president of marketing at GoHealth.com, an online insurance marketplace. One workaround is to accept only a portion of the subsidy for now and take the rest at tax filing time, when you're certain of your total annual income.
Only Insure For the Worse
If subsidized coverage isn't an option for you, check out so-called catastrophic plans, created specifically for young adults. You'll find them at healthcare.gov. The premiums are lower than what more comprehensive plans charge. The tradeoff: you’ll owe a higher bill if you need care. "One caution with these plans is they have high deductibles, so if you have a chronic condition you could owe quite a bit out of pocket," says Postolowski.
What happens if you forgo insurance all together? Nothing, necessarily, if it is only for a month or two, assuming you remain healthy. If you are uninsured for more than three months over the course of a year, though, you may end up paying a penalty come April 15 when you file your 2014 taxes. The penalty is either $95 or 1% of your income, whichever is greater, though it rises next year.
Will mom and dad be okay with you going without? Likely not. "The worse decision of all in today's world is to let a child remain uninsured," says Williams. "Either put them on your plan, or nag them to enroll in an exchange plan."