Many young adults are confused as to when they must switch over to their own health insurance plan. According to ACA (Affordable Care Act), adults must drop out from parents’ plans by their 26th birthday or once they hit any age limiting threshold set forth by each plan (this varies between plans).
However, if a young adult’s coverage ends prior to reaching 26th birthday due to reaching the maximum age limit, they are eligible for an individual marketplace plan and a special enrollment period will apply.
Employer-Sponsored Plans
Employer-sponsored plans (ESI) are a primary source of private health insurance in the US. As of March 2023, over 60 million non-elderly adults (15%) had an ESI plan through their employer; typically employers cover part or all of the premium for employees and in some instances family members as well.
Most ESI plans define who is covered as “family”, including employees, their spouses, and dependents. Under Obamacare rules, coverage for young adult dependents of parents until age 26 was allowed – previously many insurers dropped them when they reached a certain age or stopped attending college.
How fully or partially funded an ESI plan is will determine how long individuals can remain on it. A plan that is fully funded means its sponsor, such as an employer or employee organization, sets aside funds specifically for claims payment from these funds. Plan sponsors may contract with insurance carriers for administrative services like eligibility determination, claims handling, and accessing providers within its network.
Young adults turning 26 can either lose their ESI coverage when they turn 26 or qualify for a special enrollment period to purchase their own marketplace plan. Either way, it is crucial they become knowledgeable of all available plans and their costs in order to make informed decisions when purchasing one that best meets their needs.
Marketplace Plans
Under the Affordable Care Act (ACA), also known as Obamacare, young adults who transition off of their parents’ healthcare plans must purchase individual coverage or continue receiving benefits through work (such as COBRA or New Jersey’s Small Group Continuation law ). The ACA has put into effect policies to make this transition as smooth as possible for young adults without gaps in coverage.
People typically can only enroll or modify their Marketplace plan during open enrollment periods – which typically run from November through January in most states – however the ACA allows young adults who lose parental coverage due to turning 26 to purchase one outside open enrollment, starting 60 days prior and lasting 60 days post coverage expiration (a total of 120 days).
To purchase an individual marketplace plan, visit your state’s Marketplace website or contact your local Blue Cross and Blue Shield company. They can guide you through the Affordable Care Act marketplace, help find a plan that suits both your needs and budget, enroll you into it, as well as check if premium tax credits could lower the costs of coverage.
ACA Marketplace plans can be divided into four categories of coverage: Platinum, Gold, Silver and Bronze. While each plan category can offer various premiums and out-of-pocket costs, all offer essential health benefits. In general, Platinum plans tend to offer higher premiums while Gold plans tend to offer lower. Silver plans typically fall somewhere in between these extremes; thus making it the middle ground in terms of premium costs and out-of-pocket expenses between expensive Platinum plans and less costly Bronze tiers.
Medicaid
Young adults covered by group health coverage through an employer may have the option to remain with it until age 26 via COBRA or New Jersey’s Small Group Continuation Laws; however, individual or family coverage through private insurers does not enjoy these continuation rights; thus most who lose their parent’s coverage at age 26 must immediately begin applying for new plans through either the Affordable Care Act marketplace (or another privately sold plan) in order to remain covered.
Thankfully, the Affordable Care Act has policies in place to assist young adults transition to independent health coverage without an interruption in coverage. One such special enrollment period begins 60 days prior to their previous coverage ending and lasts an additional 60 days, giving ample time for shopping and enrolling in new health coverage policies.
Another key point: once they turn 26, lose their parents’ coverage, and fail to register during special enrollment period, they may need to wait until open enrollment season to purchase coverage for themselves. Finally, they might qualify for low-cost health coverage through either the Affordable Care Act marketplace, their state marketplace if there is one, their job, or by buying direct from private insurers; but this won’t qualify them for tax credits or subsidies.
If they have incomes below the poverty line, they could qualify for Medicaid; those who require regular care due to disabilities or conditions might even be able to apply for Medicare.
CHIP
As part of the Affordable Care Act (ACA), or Obamacare, young adults can stay on their parents’ health insurance plan until their 26th birthday if it is offered through Marketplace or Exchange; otherwise it usually ends shortly before or shortly after this point.
When children lose coverage through a Marketplace or Exchange due to termination or nonpayment of premiums, they will qualify for a special enrollment period, similar to what happens with employer plans – providing 60 days prior and post cancellation of coverage to select and enroll in another plan from that Marketplace or Exchange plan.
However, this new SEP only applies to Marketplace or Exchange plans purchased outside the Exchange/Marketplace (such as from private insurers). Therefore, young adults must maintain accurate contact details in order to receive notice from either their exchange provider or private insurance company about this special enrollment period.
Due to this, it’s wise to prepare well in advance of your 26th birthday for when parental or other health insurance coverage will expire, so as to remain covered without having to wait until open enrollment period in September/October. Furthermore, reviewing available options for future health coverage might also prove valuable.
Individual Plans
Individual plans are purchased either directly from insurance providers or through the Affordable Care Act marketplace, and typically provide coverage for either one person or an entire family. Individuals may qualify for financial assistance to reduce or eliminate monthly costs through this marketplace depending on their unique circumstances.
Young adults moving off their parent’s health plan typically can purchase their own marketplace plan during the annual Affordable Care Act open enrollment period from November 1 to January 15 in most states. If they experience other qualifying life events (like losing employer-sponsored coverage or turning 26), special enrollment periods can also occur throughout the year.
Additionally to the Affordable Care Act marketplace, there are other methods of purchasing individual health insurance policies. Some examples include:
Individual medical cost-sharing plans do not meet all the technical criteria of health insurance policies, yet they function and feel very much like it. Offered by various groups – churches and nonprofits among them – such as churches or nonprofits – members can pool their money together for medical bills that must be shared between all members.
Only certain states offer young adults the option of remaining on their parents’ health insurance past age 26, though this option is becoming less prevalent. At present, Florida, Illinois, Nebraska, New Jersey Pennsylvania and South Dakota allow this. In all other states young adults must secure coverage through the Affordable Care Act once their dependent reaches 26 – which requires health insurers only cover dependents until that point. It can be costly for young adults so it is essential that they understand all their options when entering adulthood.