New graduates: Your guide to health insurance
Nick DiUlio
Commencement season is here, and according to the National Center for Education Statistics, more than 1.6 million U.S. students pursuing bachelor’s degrees will graduate from college in 2014.
In addition to the pressures of looking for a job and maybe a new place to call home, this year’s class of graduates will also be facing another potentially daunting question: How will I get health insurance?
As students start thinking about the shift from a college campus to the real world, they have a lot on their minds, says Claudia Swink, director of personal alliance product performance and oversight at the Michigan-based health insurance company Health Alliance Plan. “Having health insurance is a really important part of making that transition, and graduates have a lot of options at their disposal.”
If you’re a recent college grad — or know someone who is — here are six options for how to obtain health insurance.
Option 1: Get on (or stay on) your parents’ plan.
When the Affordable Care Act (also known as Obamacare) was passed in March 2010, one of its most significant provisions was allowing children to remain on their parents’ health insurance plan until the age of 26, providing millions of young adults with a health insurance option they didn’t have before.
According to a recent report from the Commonwealth Fund—a private foundation that studies various health care policies and practices throughout the U.S.—over half of the estimated 15 million young adults aged between 18 and 26) enrolled in a parent’s plan last year wouldn’t have been eligible before this provision passed.
However, according to Alex Tolbert, founder of Bernard Health, a retail health advisory firm, getting health insurance through your parents’ plan may have drawbacks.
For example, if you live very far from home, your local doctors probably won’t be in your parents’ network, which means paying more for out-of-network healthcare.
What’s more, recent graduates may not need the full suite of coverage offered by their parents’ health insurance plan, says Mark Colwell, director of consumer marketing for the online health insurance comparison service GoHealth.com. And whether the parents are footing the bill or passing along a portion of the cost to their kid, the price tag may be unnecessary.
“If you’re young and healthy, you may not want to pay for all of the health benefits that your parents have. Enrolling on your own allows you to pick a plan that’s right for you,” Colwell says.
Option 2: Get financial assistance from the government.
College graduates can purchase coverage individually through their state’s insurance exchange (or marketplace), and significant federal subsidies might play an important role in this strategy.
According to Sarah O’Leary, founder of ExHale Healthcare Advocates, if a graduate’s annual income is between $11,670 and $46,680, he or she may be eligible for federal subsidies to ease the financial burden of health insurance.
The assistance is administered as tax credits, and the less a person makes, the larger the credit will be.
Your bottom line premium is going to vary wildly depending on income and geography. According to Colwell, about 85 percent of all people buying private insurance receive financial assistance, with an average subsidy of $2,752 annually.
With the help of subsidies, healthy young adults could spend as little as $120 a month for a so-called bronze level plan, which is the cheapest Obamacare health plan.
“I think a lot of young adults aren’t even aware of these subsidies, which is unfortunate because they can be a key factor in helping them afford insurance,” O’Leary says.
But it’s important that recent graduates aren’t just looking at the premium price tag when shopping for individual health insurance plans, Tolbert says.
It’s important to evaluate your own medical needs, such as how often you visit the doctor and whether or not you take regular medications.
“Consider these factors before just jumping into the cheapest plan on the market, because it doesn’t matter how cheap the plan is if it doesn’t meet your health care needs,” Tolbert says.
Option 3: Take advantage of special enrollment periods.
The enrollment period for the health insurance marketplaces has closed for 2014.
The good news, however, is that many college graduates may qualify for an exemption through the Affordable Care Act’s special enrollment period, which gives them up to 60 days after graduation to find health insurance.
“If you have a qualifying life event, such as moving to another state or losing student health coverage, you may be eligible for a special enrollment period,” Colwell says. “During this time frame, you can shop for insurance that covers preexisting conditions and apply for tax credits that lower the cost of insurance.”
According to Swink, recent graduates should take advantage of this extra time to explore all of their health insurance options.
“But don’t miss the boat,” Swink warns. “If you don’t get coverage within that 60-day window, you won’t be eligible to shop the marketplace again until Nov. 15, 2014.”
Option 4: Catastrophic coverage.
According to Tolbert, catastrophic health insurance is specifically designed for young adults under the age of 30 who either can’t afford a comprehensive insurance plan or who may want to bide their time before landing a job that provides health insurance.
If a basic safety net is all you’re looking for, catastrophic coverage is a good option.
These plans come with very high deductibles but very low monthly premiums — maybe as low as $35 a month — and are only meant to protect individuals against worst-case scenarios like an athletic injury, or an accident that requires surgery.
What’s more, for individuals under the age of 30 a catastrophic plan counts as health coverage under the Affordable Care Act, meaning you won’t have to pay the $95 penalty (or 1 percent of your income, whichever is greater).
According to O’Leary, having catastrophic coverage “isn’t ideal but it’s definitely better than not having anything.”
Option 5: Take advantage of expanded Medicaid.
After the passage of the Affordable Care Act, 27 states and the District of Columbia expanded eligibility requirements for Medicaid, providing another health insurance option for new graduates.
“Before these expansions, Medicaid wasn’t really a viable option for recent college graduates,” says Marty Rosen, co-founder of the Pennsylvania-based Health Advocate Inc. “Now it’s on the table in many states throughout the country, and it might be worth looking into.”
If you live in one of the states that expanded Medicaid, you may qualify for coverage if your parents no longer claim you as a dependent and your annual income is less than $16,105. Also, there is no specific enrollment period for Medicaid, which means you can sign up any time throughout the year.
You can learn more about the Medicaid expansion and how to apply on Healthcare.gov.
Option 6: Take advantage of expert advice.
According to O’Leary, too many college graduates put off the search for health insurance because it simply seems too complicated — and that’s a mistake.
“College graduates are smart people, but health insurance can be an intimidating topic,” O’Leary says. “The good news is that … there are a ton of resources to help you.”
O’Leary recommends everyone visit HealthCare.gov as a starting point. Also, health insurance advocacy groups and advisory firms like Bernard Health and ExHale Healthcare Advocates are there to help consumers sort through the complexities.
“When you’re young and healthy, you think nothing bad is going to happen … but the last thing you want is to find yourself suddenly burdened with extremely expensive health care costs,” O’Leary says.
She adds, “If you want to roll the dice, do it in Vegas, not with your health.”
