Taking out a health care insurance policy is smart for your health’s sake, but it’s also smart for your pocketbook. 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 due diligence to make sure you’re getting the best bang for your buck.
This guide will help you to understand key health insurance concepts, to 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.
Young and Invincible
Insurance is important, even for those who are young and healthy. “You never know what might happen,” says Hector De La Torre, executive director of the Transamerica Center for Health Studies, a nonprofit helping consumers and employers navigate the financial implications of their health care options. “A lot of so-called young invincibles are into sports or other physical activities where they can get hurt.”
Perhaps a more important reason to acquire insurance: It’s required by law (with a few exceptions). If you’re required to have coverage and you don’t, you may have to pay a tax penalty—a penalty that has gotten more significant in the years since the Affordable Care Act took effect.
“You need to do a cost-benefit analysis to compare paying your premium for coverage or paying a significant tax penalty,” De La Torre says. “You can either pay a percentage of your income for nothing with the tax penalty–or you can pay an insurance premium and get some peace of mind…” Young adults can use this page to discover all the basics about health insurance. We’ll break down the tough concepts as well as offer some advice and tips for those buying insurance, perhaps for the first time.
Five Myths Young Adults Have About Health Insurance
I don’t have to spend money on health insurance if I don’t want to.
Well, yes, technically that’s true. But let’s do a little cost-benefit analysis. Without health insurance, if you suffer an accident or are 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, the uninsured are charged with a fee 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. To avoid fees, you must have what is called Minimum Essential Coverage. Most student health plans offered by colleges and universities also qualify (see Myth #2 for more information). If you do not have Minimum Essential Coverage, here is how fees are charged:The Per Person Fee Method
For 2016, 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 ($10,150 for individuals; $20,300 for couples filing jointly in 2014, the most recent year available) is counted.
The percentage represents 2.5 percent of your household income (above the yearly thresholds).
If you DID have coverage for part of the year, the fee is half of 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 less money than you would pay for not having health insurance.
The Marketplace is an online resource that allows people to research their health insurance options, compare plans, choose a plan 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 Minimal Essential Coverage, you don’t have to pay the tax penalty.How to determine if you have Minimal Essential Coverage:
You have Minimal 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)
A student health plan (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.)
A TRICARE plan (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.)
I’ll just pick up an insurance policy at my college or university, and I’ll be all set.
Not quite. Yes, it’s likely that your college or university will offer a student health insurance policy (SHIP) and may even require that you participate if you don’t have other adequate coverage. And obtaining coverage at your school can be an easy and affordable way to get basic insurance coverage. But there are a few issues that might arise.
First, 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.
Second, if you’re an athlete and play on your college team, your college plan may not cover you at all.
Third, even if your college or university plan covers you while you are on campus, what happens when you’re home for the summer or for visits during breaks? Your plan may not cover services by providers who are located 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 proactive about finding this information: you want to ensure that you have made a decision that accommodates all your medical needs.
I know I can stay on my parent’s plan until I turn 26, but I’m getting married so I guess I need to find another option.
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, in general, you can join a parent’s plan and stay on it until you turn 26 even if you:
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 true. Health insurance is more affordable today than ever before, thanks to tax credits that are available for people at certain income levels.
When you submit an application for coverage in the Marketplace, you’ll be able to determine if you qualify for a “premium tax credit” that lowers your premium, or the amount you pay each month for your health insurance plan.
The amount of the premium tax credit depends on your estimated household income for 2016, your household size and the state in which you live as well as the level (platinum, gold, silver, bronze) 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 receive the financial benefits. Instead, you can apply some or all of the credit to your monthly insurance premium payments. 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. This is called “taking an advance payment of the premium tax credit.” 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 care to patients in the event of an emergency—even to uninsured patients. And, sadly, in the past many uninsured individuals used the hospital’s emergency room as their primary care physician, popping in whenever they had an issue.
But it costs dramatically more to obtain treatment in the emergency room than at a physician’s office. And in many cases, the required treatment is much more extensive. For example, if you come down with a cold or the flu and you have insurance, you can go see your physician at his or her office and obtain treatment at an early stage of the illness. But, if you are uninsured and lack access to a physician, then 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 Obamacare Mean for Me?
We’ve all heard the term Obamacare. But what exactly is it, and what does it mean to you?
Obamacare is an informal name used to refer to the health insurance plans available through the Marketplace. It also refers to the Affordable Care Act, which was signed into law on March 23, 2010 by President Obama. Here are some of the important changes Obamacare has made that impact students:
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. And 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 Young Invincibles, 80 percent of Marketplace shoppers are likely to qualify for a plan costing less than $100 per month after tax credits.
There’s a penalty for not having health insurance. You may have to pay a fine when you file your tax return.
What if you’re an international student in the United States?
Consider purchasing insurance while in the United States, through your school or through a private insurance companies. People with student visas are also eligible to use the Marketplace, though they may not qualify for tax credits. Students may have J-1 or F-1 visas, and which kind of visa the student has is significant, because these two types of visas have different strings attached. Students with F-1 visas are not federally mandated to meet specific insurance requirements, but some colleges or universities have their own set of requirements so be sure to check with the school for full details. J-1 visas do come with strings attached: the U.S. Department of State has requirements for health insurance that these students must meet. (See section on international students below.)
What about Medicaid?
Some states have expanded their Medicaid programs and now cover all people with household incomes below a certain level. Other states have not, and that’s created what’s referred to as the Medicaid Gap. Whether or not you qualify for Medicaid coverage depends on whether your state has expanded the program. In all states, you can qualify for Medicaid based on your income, household size, disability, family status and other factors. Every state has different rules. But in states that have expanded Medicaid coverage, you can qualify based on your income alone. If your household income is less than 133 percent of the federal poverty level, you qualify (note that because of the way this number is calculated, it turns out to actually be 138 percent of the federal poverty level). 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 now 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 for staying on your parent’s policy.
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 his or her 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 you are 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 income purchase insurance in the marketplace.
Tax credits may be available to those who apply for insurance from the Marketplace and fall within certain income limitations. In that case, you can elect to subsidize your insurance premiums by use of an advanced premium tax credit. When you apply for coverage from the Marketplace, you’ll estimate your household income for the year. If it’s within the guidelines, and you’re eligible for a tax credit, you don’t have to wait until you file your tax return to take it. Instead, you can “advance” that tax credit and apply it to the monthly insurance premium of your plan. 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, you may be required to enroll when you matriculate. Even if you aren’t required to join, you may want to anyway, as student health insurance plans are often affordable. And, if you join, it’s considered Minimum Essential Coverage under the Affordable Care Act so you’ll be fully compliant.
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 to see if you are required to enroll. But be careful. Often, student health insurance plans provide narrow coverage; in fact, you may be limited to using service providers 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. It’s important to note that even if you have adequate coverage in the United States, your policy may not cover you if you travel out of the country, and that includes taking a cruise.
Getting ill or injured while abroad is no picnic, but paying out of pocket for it is even worse. In the event of serious illness or injury, you may have to afford evacuation back to the United States to seek treatment.
Travel insurance is readily available at relatively reasonable rates, which depend 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?
the claims process
the out-of-pocket costs on the plan
What Can I Expect as an International Student in the U.S.?
If you are from another country but are in the United States to attend college, your insurance requirements and eligibility differ greatly from that of an American citizen. Check with your school to see what requirements it has 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.
Visa types come with different mandates for insurance. International undergraduate students typically hold F-1 visas. Full-time students are eligible for the F-1 visa if they have been accepted into a Student Exchange Visitor School (SEVP). F-1 visa holders will need to comply with any insurance requirements set by their college.
As long as students are considered “non-resident aliens,” those holding an F-1 visa are not required to purchase insurance pursuant to the Affordable Care Act until they have spent five years in the United States.
What if I’m here for CPT or OPT?
Curricular practical training (CPT) is temporary employment for F-1 visa holders that is an integral part of a school curriculum, such as a required internship offered by employers that work together with the school to provide the student with this training. 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 in order 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. Others do not. Be sure to check with your school to learn 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.
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.
If you’re under 30, you can buy a catastrophic health plan. This is true whether you’re a college graduate or not. These plans are an affordable way to protect yourself against high medical expenses from a severe illness or accident.
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.
It’s important to remember that pregnancy 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, which conducted research on the state of mental health on college campuses:
1 in 4 students has a diagnosable mental health illness
40 percent do not seek help
80 percent feel overwhelmed by their responsibilities
50 percent have been so affected by anxiety that they struggled in school
80 percent of college students drink, and 50 percent binge drink
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 the campus offerings. 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 not in your network or who doesn’t take your insurance, ask whether he or she will offer a student discount. Many providers do.
Erin Hemlin, the National Training Director for Young Invincibles, talks to MoneyGeek about her work with underserved students.
Tell us about Young Invincibles. What population does the organization serve?
Young Invincibles was founded back in 2009. As the fight about healthcare reform was happening in Congress, our founders were students at the time and wanted to bring a young adult voice to the table. They felt that nobody was really bringing up the concerns of young people even though the law very much affects that population. When I say “young people,” I’m talking about 18 to 34 year olds, who tend to come off their parents’ health insurance. But within that population, we’re really working to serve the most vulnerable, underserved groups—those who are most disconnected and tend to have bigger awareness gaps of what’s happening with the healthcare law or health insurance in general. So a lot of those are in the Medicaid population.
You mentioned awareness gaps. Do you think there is a lack of awareness about health insurance among young people?
Definitely. Lack of awareness has really been the biggest obstacle over the past couple years of doing this work. I think we’ve made tremendous strides, especially since we just finished the third enrollment period [under the Affordable Care Act]…we’re getting to the point where people are…more aware of what’s going on. But throughout the last couple of years, the awareness gap has always been bigger among young people, and within young people there is a bigger awareness gap with young people of color, particularly Latino communities and African-American communities.
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”?
Yes. We named ourselves Young Invincibles because it’s a health insurance term referring to young people who think they don’t need health insurance. What we found doing work talking to people on the ground, though, is that it’s really just not true. People really do value health insurance, and they want it. Previously, they just didn’t really have enough options or access to health insurance. We found that the biggest concern with young people is whether they could afford it—especially young professionals or those just starting their careers at entry-level jobs or still going to school and working part-time because they have lower income and cost is a huge factor. We now see a lot of young people get really excited about the fact that they can afford health insurance due to tax credits that lower monthly premiums.
Why is it important for college students to have health insurance?
Accidents can happen to anyone. Young people tend to end up in the emergency room more so than any other group outside of the elderly—and with one accident or one illness, you can rack up huge medical debt. So it’s really important to get covered for your own health and also for your own financial security so you don’t get burdened with hundreds to thousands of dollars in medical bills that you weren’t prepared for.
Are students required to have coverage?
Everyone is now required to have health coverage as of Jan. 1, 2014, or else you may be subject to a penalty. That penalty has gone up each year since implementation. So now, without health insurance for 2016, if you’re not covered for the entire year you could pay a penalty of about 2.5 percent of income, or $695, whichever is greater. So the penalty is getting high, and that can be a pretty big motivator. Why would you pay a nearly $700 fine for nothing when you can probably get a plan that would cost much less? On average, we see people get plans for about $75 per month or less, after tax credits. There are exceptions to the requirement that everyone have health insurance. If you’re on your parents’ plan, you’re totally fine. People below a certain income can be exempt from the penalty so even if they don’t get covered, if they’re below the tax-filing threshold, they’ll be exempt from the penalty.
What action steps should students take to find a fair insurance plan?
They need to compare what’s available to them. It all depends on each person’s different situation. For a lot of people, it will be cheaper to stay on their parent’s plan if that’s an option, but for some lower income families, that might be too much of a burden on the parents, and it might be better for the family as a whole for the student to get his or her own plan either through the university or the Marketplace. And, depending on their income, it’s probably going to be cheaper to get a plan through the Marketplace if they’re eligible for tax credits. But, again, that varies from student to student.
For those staying on their parents’ plan but going away to college, they need to make sure their provider at school is on the plan, right?
That’s definitely very important, especially if they are going to school in a different state. They need to make sure the plan covers where they’re going to school and that they have access to providers that are in-network there.
Because money is often an issue for students, is it okay for them to just choose the cheapest plan?
The marketplace has bronze, silver, gold and platinum plans. The bronze plans tend to be cheaper, but you’ll pay more out of pocket, while the platinum plans are very expensive but will cover almost all of your out-of-pocket costs. So for those who are a little more cost-averse, it might make more sense to get a bronze or silver plan, where you’re paying lower monthly payments, if you’re not expecting to go to the doctor that often. We’ve seen many young adults choose silver plans so that they get both a good price but also some good out-of-pocket coverage in case they do get sick or get in an accident.
What is it that young people don’t know about insurance that you wish they did?
I think the biggest thing people don’t know is that there is really good financial help available to make their plans cheaper. Even if people are aware that there is some sort of a tax credit through the Marketplace, they don’t realize that it’s meant for a range of incomes, not just very low income but low- to middle-income individuals. So one thing we always try to get across to people when they’re thinking about buying coverage on the Marketplace is the fact that a single person making up to $46,000 could be eligible for some tax credits. That’s a pretty wide range.