Starting Out
Health Insurance for Twentysomethings
When you're dropped by your parents' plan, you can get good, affordable coverage on your own.
By Erin Burt, Contributing Editor, Kiplinger.com
April 9, 2008
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Editor's note: This story was updated in May 2009.
About one in five adults age 19 to 29 don't have health insurance. Sure, you're a young, strapping specimen of good health. But you're not invincible.
Going without coverage is downright risky -- not only for your health but also for your finances. After all, one unexpected visit to the emergency room for an accident or illness could cost you hundreds or thousands of dollars, not to mention the cost of any follow-up care. (Learn why protecting yourself against life's surprises is one of the three steps of solid financial planning.)
Most of us are covered on our parents' insurance plan while we're in college. But depending on the insurer and the state in which you live, you could lose your coverage on your family's policy when you graduate or when you turn a certain age -- usually 25 or 26. For a list of each state’s laws, see the National Conference of State Legislatures Web site.
If you're graduating this year or have a birthday soon, your free ride may be coming to an end. After you apply for a new policy, it can take a month or two to kick in, so act now to avoid leaving yourself vulnerable.
The easiest way to get health insurance is usually through a job. But more graduates are likely to have trouble finding a job with health insurance benefits in this economy. If you do find employment right after graduating, you still may have to wait a few months after starting a job before you're eligible for health benefits, or your employer may not offer that benefit.
The good news is you have plenty of options to fill the gap, often at affordable rates.
First, ask your parents to contact their benefits office and ask about COBRA, the federal law that allows an adult child to remain on a parent's policy for up to 36 months. Most insurers on the individual market will exclude any preexisting medical condition, so maintaining your no-questions-asked coverage with your current insurer may be your best bet if you have a condition.
Note, however, that it can be expensive. COBRA coverage typically costs between $200 and $500 per month, says Sam Gibbs, of eHealthinsurance.com. If you're in good health, you could save substantially by buying individual coverage.
Flying solo
Student policies or short-term coverage to bridge the gap between graduation and a job with health benefits used to be the go-to solution for new grads. But they may not be the best deal. A new study by the U.S. Government Accountability Office found that student health plan annual premiums can range from $30 to $2,400, with some plans excluding or limiting preventative care, prescription drug coverage and other basic health services.
An individual policy with a high deductible can cost as little as $50 to $150 per month, says Gibbs, in states with competitive health-insurance markets (that excludes New York and New Jersey). Such plans carry no expiration date like student and short-term policies do. And benefits can be tailored to fit your needs. It pays to shop around.
By purchasing insurance with a deductible of at least $1,150 for individual coverage or $2,300 for a family plan, you qualify for a health savings account. You can make pre-tax contributions to the account and use the money tax free to cover your deductible and other out-of- pocket medical expenses. Any unused money rolls over from year to year.
Even if you can get health coverage through your job, it doesn't hurt to shop the individual market too, says Gibbs. With the rising cost of employer health insurance, some twentysomethings are finding better coverage or better prices on their own.
To find the best fit for you, compare rates and benefits on student, short-term and individual policies at eHealthinsurance.com, or contact an independent insurance agent through www.nahu.org.
If you're still having trouble getting coverage, see our primer on buying your own health insurance for more options.
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Reader Comments (16)
Posted by: Susan at 04/10/2008 10:05:49 AM
Just a note about the COBRA coverage mentioned above - you don't actually continue your benefits through COBRA under your parent's policy. If you elect benefits through COBRA, you will begin your own policy with your own member number (usually your ssn).
Posted by: Jim at 04/10/2008 07:49:00 PM
My advice -- If you're 20-30 years old just save the money that you would have paid for health insurance. Put $300 per month into a savings account. In a year thats $3600 which would pay for most minor health problems. At least YOU still have the money. Insurance companies tend to deny a lot of claims anyway. The only downside is if you require a major medical procedure.
Posted by: Rita at 04/10/2008 10:32:53 PM
If you have pre-existing conditions it is not a good idea to drop coverage and use a savings account as suggested,because when you finally do get coverage the condition will not be covered. Do not let coverage lapse!
Posted by: JD at 04/11/2008 03:14:58 PM
Jim and Rita are both right. People need to be able to analyze their own situations and make good decisions. This ability is lacking in America today. Now the government proposes to take it out of our hands by forcing us all to pay for nationalized care. The losers in this or any one-size-fits-all social program are everyone capable of managing their own lives.
Posted by: Bill at 04/11/2008 11:22:45 PM
...Any responsible, thinking adult, especially when they are young should invest in good health and life insurance. Here is why. Suppose you were uninsured and suffered a severe injury that did brain or spine damage, or required extensive therapy. Or, lets say you were diagnosed with a disease like diabetes. In either case, there is a one word description for a person who fits this description; uninsurable. As a result, later on when this person needs it, they cant get it. All young people should have quality health coverage, and life insurance. Better to have it and not need it , than to need it and not have it. Furthermore Jim, insurance companies don't "tend to deny a lot of claims" as you put it. They all pay the same way; per the terms and conditions of the contract. Consumers get themselves into trouble because they don't take the time to read and understand the policy...take responsibility for yourself, and read the policy.
Posted by: richard at 04/13/2008 02:32:18 PM
The comments posted by JD are the famous last words of those hit by the unexpected. Then they wonder why they can't qualify for Medicaid and keep their savings.
Posted by: Tiya at 04/14/2008 11:23:16 AM
I's have to disagree. I think universal healthcare is what this country needs desperately. If I have to hear one more story about someone who died or wasn't treated in the way they needed because of lack of healthcare/funds. My mother died 4 weeks ago and her biggest worry in this world before she left it was that I didn't have healthcare (yes I'm in the 20-30 bracket) and that is a sad sign of the times. For a dying mother having to worry about her daughter's lack of healthcare. Neither one of us deserve this.
Posted by: richard at 04/14/2008 08:19:04 PM
Note my comments on 04/13/08 and look at the latest issue of US News and World Report. The cover states "Americans want Uncle Sam to solve their problems." Many of these very people were involved in the mortgage mess. One day it's "government, hands off" and when the unexpected hits it's "we need government help" My biggest problem is whether it's Social Security or health insurance if things don't work out for those who wanted to be so independent, I'll have to pick up the tab for them anyway. Ultimately I believe we all win when our community wins. One can pay no taxes and be the wealthiest man in Haiti or one can pay taxes for the good of the community and live moderately well off or better in America.
Posted by: Lauren at 04/15/2008 10:28:35 AM
SO what about us poor chumps who live in NY or NJ and who don't get covered by our job. I've researched every avenue for health coverage possible for NY and I simply cannot afford it (over $600 a month.) I'm bitter.
Posted by: Desi at 04/15/2008 05:13:29 PM
Jim --It doesn't matter if you have $3600 in the bank when you arrive at a $120,000+ hospital bill...70% of all bankrupcies are due to medical bills. The statistics don't lie...Get health insurance...Just because you are 20 doens't make you invincible...
Posted by: marie at 04/17/2008 03:43:20 PM
Cobra is only for companies that have at least 25 workers. If the parents have a small business and get their own, the students will not be covered by Cobra.
Posted by: conoutofconsumer at 04/20/2008 09:45:27 AM
Legislative attempts to allow parents to cover their young adults up to the age of 30 are referred to by insurance companies as "SLACKER MANDATES". The Council for Affordable Health Insurance uses this term in its arguments against such mandates. Simultaneously, the same publication searches to tap into the young, healthy market and get their premium dollars because they are cash cows, likely to pay premiums without needing medical services (aside from routine checkups which can be more cheaply done annually by paying out of pocket costs rather than monthly premiums)...Instead of advising the young to "SHOP AROUND" because otherwise when you get sick you'll be in trouble (which young people KNOW), use your bully pulpit to pressure insurance companies to use the same reasoning...RISK of having to pay... as a justification for offering young people the best insurance for the lowest price.
Posted by: Billy at 05/05/2008 08:22:48 PM
If you're going out on your own, I'd also suggesting looking for a higher deductible plan, at least at first. You'll pay a lot less in premiums, but note that your services will be reduced...
Posted by: jocelyn at 07/02/2008 10:47:55 PM
...I can't get health insurance because I'm a law student and cannot afford health insurance. I think that anyone who is in grad school should be able to be covered under their parents' insurance because most people in grad school are over 25 and currently do not qualify due to the age limit.
Posted by: mark smith at 07/27/2008 01:29:00 PM
I believe that if we as a society have decided to allow insurance companies to allow same sex partners to insure one another, we would allow parents of college students to cover their children until they graduate.
Posted by: Safeb4sorry at 07/04/2009 05:01:04 PM
The best way to get coverage is to go online and review the different plans like stated in this post. I know that being covered is much better than not being covered. Check out Health2dental.com for an Online Health Insurance Quote.