Guide to Health Insurance for Students & Young Adults
Here's the good news about health insurance for young adults: there's affordable insurance out there, and lots of options. The bad news? You may have to do some research to get the best bang for your buck.
This guide will help you understand key health insurance concepts and make informed decisions should you travel abroad, become pregnant or graduate college. It will also help you decide whether, as an adult under 26, you should stay on your parents' plan or take out your own.
Five Myths Young Adults Have About Health Insurance
I don't have to spend money on health insurance if I don't want to
Technically that's true, but let's do a little cost-benefit analysis. Without health insurance, if you're injured or diagnosed with a serious illness, you could face financial catastrophe for years to come. With coverage, you'll have insurance to help pay the cost of your medical services as well as free preventive care.
Plus, you'll pay a stiff penalty if you're uninsured. To avoid fees, you must have what is called Minimum Essential Coverage. Most student health plans offered by colleges and universities qualify (see Myth #2 for more information).
If you don't have Minimum Essential Coverage, your penalty will be calculated one of two ways—either per person or as a percentage of your annual income. You pay whatever amount is greater when you file your federal tax return for the year in which you didn't have coverage.
The Per Person Fee Method
For 2017, the fee is $695 per uninsured adult and $347.50 per uninsured child (under age 18). The maximum payment per household is $2,085.
The Percentage Fee Method
If you pay using the percentage method, only the part of your household income that's above the yearly tax-filing threshold ($10,350 for individuals; $20,700 for couples filing jointly in 2016, the most recent year available) is counted.
The fee is 2.5 percent of your household income (above the yearly thresholds).
- If you DID have coverage for part of the year, the fee is 1/12 the annual amount for each month you (or your tax dependents) don't have coverage.
- If you're uncovered for only one or two months, there's no fee at all due to the short gap exemption. Any month in which you have coverage at least one day is considered a month in which you are covered.
The Marketplace may offer a decent health insurance plan for about what you would pay in penalties for not having insurance, so it's worth researching what you can get.
The Marketplace is an online resource that allows people to research their health insurance options, compare plans, and enroll in coverage. The Marketplace also provides information on programs that help make insurance affordable and calculates the tax credits available to you based on your estimated income to help you determine your actual out-of-pocket costs for health care coverage. In some states, the Marketplace is run by the state. In others, it's run by the federal government.
Everyone is required to have insurance, with a few exceptions. Exemptions may be available to you based on income, hardship, some life events, existing health coverage, financial status or membership in some groups. Most notably, if you have Minimum Essential Coverage, you don't have to pay the tax penalty.
How to determine if you have Minimum Essential Coverage:
You have Minimum Essential Coverage if you are covered by...
- Your parent's plan
- A plan bought through the Marketplace
- An individual plan bought outside the Marketplace that meets the standards for a qualified health plan
- Any grandfathered individual insurance plan you've had since March 23, 2010 or earlier
- Any job-based plan, including a retiree plan or COBRA coverage
- Medicare Part A or Part C
- Medicaid (Make sure you don't have a limited coverage plan, which doesn't apply.)
- The Children's Health Insurance Program (CHIP)
- Most student health plans (Check with your school to ensure that the plan qualifies.)
- Peace Corps volunteer plan
- Veteran's health coverage through the Department of Veterans Affairs (Check to make sure your Veteran's health coverage qualifies.)
- Most TRICARE plans (Check to make sure your TRICARE plan qualifies.)
- The Department of Defense Nonappropriated Fund Health Benefits Program
- Refugee Medical Assistance
- A state high-risk pool for plan or policy years that started on or before December 31, 2014 (Check with your high-risk pool plan to see if it qualifies.)
An insurance policy at my college or university will be enough
Not necessarily. Obtaining coverage at your school can be an easy and affordable way to get basic insurance coverage. It's likely your college or university offers a student health insurance policy (SHIP) and may even require that you participate if you don't have other adequate coverage. But beware of the potential limitations of SHIPs:
While the plan may cover you for health care services provided on campus—at the Student Health Center, for example—it may not pay for all of the services you need. For example, it's not uncommon for a school plan to cover a visit with a physician, but not x-rays.
If you're an athlete and play on your college team, your college plan may not cover you at all.
Even if the plan covers you while you're on campus, what happens when you're home during breaks or the summer? Your plan may not cover services by providers who are off campus, in other states or are otherwise out of the network.
Check with your school's Health Center to get details on what the student policy does and does not cover. It may be that your school offers services from the on-campus Health Center that don't require insurance at all (just a fee), but other services do require insurance. Be sure your choice accommodates all your medical needs.
I'm getting married so I can't stay on my parent's insurance plan
Good news. Once you're on your parent's plan, in most cases you can stay on it until you turn 26—even if you get married.
In fact, you can join a parent's plan and stay on it until you turn 26 even if you:
- Get married
- Have or adopt a child
- Start or leave school
- Live in or out of your parent's home
- Aren't claimed as a tax dependent by your parents
- Turn down an offer of job-based coverage
"Yes, you can be married and still be on your parent's plan until you turn 26," says Hector De La Torre, executive director of the nonprofit Transamerica Center for Health Studies. "You don't even have to be living in the same state or financially dependent upon your parents. The only thing that matters is age."
Even if I did want health insurance, I wouldn't be able to pay for it
Not necessarily. Between tax credits and the expansion of Medicaid in many states, you may be able to find great insurance at a reasonable price.
When you apply for coverage in the Marketplace, you'll see if you qualify for a "premium tax credit" which can lower your premium (the amount you pay each month for your health insurance).
Premium tax credits are based on your state of residence, estimated household income, household size and the level (platinum, gold, silver, bronze) of health insurance plan you choose.
If you're eligible for a premium tax credit, you don't have to wait to file your taxes to get it. You can apply the credit to your monthly premium. The Marketplace will send your tax credit directly to your insurance company to cover part of the premium, so you will actually pay less each month. For more, see "Quick Tip: Advanced Premium Tax Credits Explained," below.
If I get sick, I'll just go to the emergency room
Sure, the emergency room is a safety net, as hospitals are prohibited from denying emergency care to patients—even if they are uninsured. And unfortunately many uninsured individuals use the hospital's emergency room as their only medical care.
But it costs dramatically more to obtain treatment in the emergency room than at a physician's office. And in many cases, the treatment is much more extensive. For example, if you come down with a cold or the flu and you have insurance, you can get treatment from your physician early on. But if you are uninsured and lack access to a physician, you might delay treatment until your illness is more severe—perhaps that cold has turned into pneumonia. By that time, the cost of treatment is substantially higher.
More importantly, by only seeking treatment when it's become serious enough for the emergency room, you would be denying yourself the benefits of preventive care. Failure to obtain preventive care can pave the road to serious illnesses such as heart disease, diabetes and cancer.
What Does the Affordable Care Act Mean for Me?
Former President Barack Obama signed the Affordable Care Act (ACA) in 2010. What exactly is the ACA, and what does it mean to you?
Here are some of the key features of the ACA that impact young people:
- If your parent's insurance plan offers dependent coverage (some don't), you can now stay on your parent's plan until you turn 26 no matter what state you live in. That applies even if you're in school, employed or married. Former foster youth can stay on Medicaid until they are 26 regardless of their income.
- You can no longer be denied coverage or charged more for a pre-existing condition.
- Most student health plans are now required to be up to the standard of other private plans.
- Health plans are required to provide free preventive care, such as check-ups, vaccines, cancer and blood pressure screenings. Women are entitled to free well woman visits, including pap smears, mammograms and breastfeeding support—all without a copay.
- Free prescription contraceptives are available on most plans.
- States that have opted to expand Medicaid will cover all low-income individuals.
- Discounts in the form of tax credits are available to low- and middle-income adults to help make plans more affordable. According to Health and Human Services, about 85 percent Of Marketplace shoppers were eligible for tax credits in 2016.
- There's a penalty for not having health insurance. You may have to pay a fine when you file your tax return.
What about Medicaid?
Most states have expanded their Medicaid programs under the ACA and now cover people with household incomes under 138 percent of the federal poverty level. States that have not expanded Medicaid under the ACA may have higher income eligibility limits and may use a variety of other factors (including household size, disability, and family status) to determine eligibility. This has created what's referred to as the Medicaid Gap. Whether or not you qualify for Medicaid coverage depends on your state's rules. To determine if you qualify for Medicaid, check your state's website or Healthcare.gov.
Should I Stay on My Parent's Plan?
If your parent has an insurance plan that allows for dependent coverage, then the Affordable Care Act allows you to stay on that plan until you are 26. Many experts say that this is one of the best ways to maintain insurance coverage at a reasonable rate. But, of course, there are pros and cons to staying on your parent's policy.
Should I Stay on My Parent's Plan?
You can stay on your parent's plan even if you get married, have a child, start or leave school, move out of your parent's home or are working and turn down job-based coverage.
Adding a dependent to a plan is usually inexpensive.
If your parent's plan is a group plan through an employer, it's likely to provide comprehensive coverage.
Your parent's employer may subsidize part of the insurance premium for dependents.
If you go to college away from home or otherwise don't live with your folks, the health care provider you want to use may not be on your plan.
While it's usually affordable to stay on your parent's plan, it's possible that more affordable options might be available elsewhere—particularly if you are in school or opt for a plan in the Marketplace and have tax credits available.
If your parents have limited income, it might be a burden for them to pay for your coverage on their plan.
While your parent's plan will cover you until you turn 26, if you are married it will not cover your spouse or children.
If your income is 100-400% of the poverty level, you might qualify for a premium tax credit. Premium Tax Credits are meant to help people with low to moderate incomes purchase insurance in the Marketplace.
When you apply for coverage from the Marketplace, you'll estimate your household income for the year. If you're eligible for a tax credit, you don't have to wait until you file your tax return to take it. You can "advance" that tax credit and apply it to your monthly insurance premium.
If at the end of the year you find that you have underestimated your income, you'll have to pay back the excess when you file your return. If you have less income than you estimated, you'll get the difference back.
Should I Enroll in my School Health Insurance Plan (SHIP)?
If your school offers a student health plan, it can be an affordable way to get health insurance. Some schools require all students to enroll in their student health plan. But even if you aren't required to join, it's worth investigating. Most student health plans qualify as Minimum Essential Coverage under the Affordable Care Act.
Four-year colleges are more likely to offer their own student health plans than community colleges, according to Hector De La Torre, executive director of the nonprofit Transamerica Center for Health Studies. "Most of them provide medical services right on campus or have a medical school or are affiliated with a medical school, so in some way the coverage is right there," he says. "That doesn't help you if you go home for the summer or for breaks, but obviously it's very convenient if you are in school."
Check with your college or university to see what type of plan it offers, if any, and whether you are required to enroll. But be careful. Often student health plans provide limited coverage for care received on or near the campus. That means when you go home, you won't have a provider who's in-network.
De La Torre faced this problem with his own daughter. She attends Bryn Mawr College in Pennsylvania, where she enrolled in the student health plan. "But I live in California, so she's out of network when she is back here," he says. "So she has a SHIP for when she's in school, and she is also on my insurance for when she's at home."
The network for a health insurance plan is the group of providers or health care facilities that are on the plan's list of approved providers. These providers have negotiated discounted prices with the insurance company.
Student Insurance and International Travel
No one—no matter what age—should travel overseas without making sure they are covered by health insurance. Even if you have adequate coverage in the United States, your policy may not cover you if you travel out of the country. That includes taking a cruise.
Getting ill or injured while abroad is no fun, and having to pay for it out of pocket makes it even worse. In the event of serious illness or injury, you may even have to pay for medical evacuation back to the United States.
Travel insurance is available at relatively reasonable rates, depending on where you are traveling and for how long. And trip insurance typically covers the cost of evacuation.
What if I'm a U.S. Student Going Abroad?
PLAN A: SCHOOL HEALTH INSURANCE
If you are planning to travel abroad—whether for summer vacation or a semester of study—check with your school to see if you'll be covered. Even if you are covered out of the country, you might have to pay for your medical expenses out of pocket and then seek reimbursement when you return.
PLAN B: PRIVATE TRAVEL INSURANCE
If your school health insurance plan doesn't cover you abroad, then purchase separate coverage. Some companies selling plans online include Travel Insurance Services, AIG, StudentSecure Insurance and InsureMyTrip. Evaluate each plan to ensure you have the necessary coverage.
- the claims process
- the out-of-pocket costs on the plan
- the deductible
What Can I Expect as an International Student in the U.S.?
Foreign students attending college in the US do not face the same insurance requirements as American citizens. If you are studying in the US on an F, M or Q visa, you're not required to purchase health insurance under the Affordable Care Act unless you have been in the US for over five years, at which time you will have to go through eligibility screening. If you're in the US on a J visa (for example as a teacher, trainee or intern), you are exempt for your first two years in the country.
However, your school may have their own health insurance requirements for foreign students. Some colleges will require you to have their insurance; others may allow you to waive out of the school health insurance plan if you can prove that you have adequate coverage elsewhere.
Even if insurance isn't required, you should consider purchasing health insurance while in the US through your school or through a private insurance company. Injuries and illnesses do happen, and health care is expensive. People with student visas are also eligible to use the Marketplace, though they may not qualify for tax credits.
What if I'm here for CPT or OPT?
Curricular practical training (CPT) is temporary employment that is an integral part of a school curriculum, such as a required internship, for F-1 visa holders. Optional practical training (OPT) allows students with F-1 visas who have completed or have been pursuing their degrees for more than nine months to work for one year to get practical training to complement their education.
Many universities will require that you have student health insurance during your CPT if you don't already have it. For OPT health insurance is not required, but some allow you to purchase their SHIP. Be sure to check with your school about its specific requirements and options.
What Are My Options if I'm Graduating this Year?
If you are graduating from college this year and don't live abroad, you have several options for coverage:
Go to the Market
If your student health insurance coverage will be ending, you can sign up for private health insurance in the Marketplace if you qualify for a Special Enrollment Period. A Special Enrollment Period is for people experiencing a life change—marriage, divorce, having a baby or, most important for graduating students, losing your health coverage.
Mom & Dad
Your parents can add you to their plan until you turn 26—even if you are married, don't live at home or are not claimed as a dependent on their taxes.
Work for It
If you graduate and begin working, you might be eligible for coverage under your employer's group plan.
What is Catastrophic Coverage?
Catastrophic plans are an affordable way to protect yourself against high medical expenses from a severe illness or accident. These plans have very low monthly premiums, but very high deductibles. For 2017, the annual deductible is $7,150. If you're under 30, you can buy a catastrophic health plan. This is true whether you're a college graduate or not.
What if I Can't Afford Health Insurance after College?
If you meet certain income requirements, you may qualify for free or low-cost coverage through Medicaid or CHIP. You can sign up for Medicaid or the Children's Health Insurance Program (CHIP) any time during the year.
What are My Options if I Become Pregnant?
All qualified plans, including those sold in the Marketplace, cover pregnancy and childbirth because maternity care and childbirth are considered essential health benefits. Even if you are already pregnant when coverage begins, you're covered because pregnancy is considered a pre-existing condition.
Having a baby entitles you to a Special Enrollment Period, which means that you can enroll in coverage on the Marketplace even if it's not an Open Enrollment Period.
You might find that you now qualify for Medicaid if you are pregnant-even if you applied before and were denied. Check with your state agency for more information.
Mental Health Coverage and Student Insurance
Mental health coverage is an essential part of any student health insurance plan—with good reason. According to the National Alliance on Mental Illness, 1 in 5 students has a diagnosable mental health illness. Many more college students report struggling with stress and anxiety.
All Marketplace plans cover mental health and substance abuse services. These services include:
- Behavioral Health Treatment (psychotherapy, counseling)
- Mental and Behavioral Health Inpatient Services
- Substance Use Disorder Treatment
Marketplace plans are prohibited from putting yearly or lifetime dollar limits on mental health and substance use disorder treatment and from discriminating against individuals with pre-existing mental and behavioral health issues.
I want to obtain mental or behavioral health coverage. What's next?
Review the financial aspects of each plan, such as premium, deductible, copayments and out-of-pocket limits.
Look at treatment coverage to see if there is a limit on the number of days or visits covered, as well as whether you need to obtain pre-authorization before obtaining care.
Check out campus treatment options. Mental and behavioral care services might be available at no cost on your campus, particularly if you are part of the school health insurance plan.
Ask for the discount. Even if you are seeking services from a professional who doesn't take your insurance, ask whether he or she will offer a student discount. Many providers do.
- Tell us about Young Invincibles. What population does the organization serve?
- You mentioned awareness gaps. Do you think there is a lack of awareness about health insurance among young people?
- Do you think there's an awareness gap because young people tend to think of themselves as invincible and don't pay attention to their health? Because they think, "I'm young and I'm healthy"?
- Why is it important for college students to have health insurance?
- What action steps should students take to find a fair insurance plan?
- For those staying on their parent's plan but going away to college, they need to make sure their provider at school is on the plan, right?
- Because money is often an issue for students, is it okay for them to just choose the cheapest plan?
- What is it that young people don't know about insurance that you wish they did?
National Training Director
Associate Professor of Marketing at the Gabelli School of Business, Fordham University
About the Author