Turning 26: How to Buy Your First Health Insurance Policy
Posted by March 23, 2016in Life Transitionson
Under the Affordable Care Act, your parents are permitted to include their adult children on their health insurance policy until they turn 26. The actual termination date for coverage for adult children will depend on whether you're on a Marketplace — or government-subsidized plan — or covered through private insurance through a parent's employer.
If you're about to light 26 candles on your birthday cake, here's what you need to need to know to remain insured:
How the ACA works
The ACA operates a Marketplace through which individuals and families can shop for coverage and –– depending on income –– receive “premium tax credits and other savings" to subsidize coverage, according to HealthCare.gov.
If you are covered by a parent's Marketplace plan, you may remain on the plan until it ends on Dec. 31 of the year you turn 26, per ACA rules.
When the coverage terminates on Dec. 31, you may purchase a plan through the Marketplace and receive tax credits if you have ceased to be a “tax dependent." You can still opt for a Marketplace plan if you remain a tax dependent, but you will not be eligible for a tax credit or other savings.
If you receive coverage through a parent's job-based insurance, you will typically lose coverage during your 26th birthday month, according to HealthCare.gov. Under this scenario, you would be able to obtain insurance during a "Special Enrollment Period," which would begin 60 days prior to your 26th birthday.
More on Special Enrollment Periods
Typically, you may only purchase a Marketplace health plan during the annual Open Enrollment Period. For 2016, Open Enrollment was held from Nov. 1, 2015, through Jan. 31, 2016.
However, turning 26 –– and losing coverage under a parent's plan –– qualifies as a reason to add insurance during a “Special Enrollment Period," according to HealthCare.gov.
Buying a plan
Outside of the Marketplace; you have 3 other ways to purchase a health insurance plan:
- Buy directly from an insurance company: HealthCare.gov includes a Plan Finder that offers information about private insurance coverage outside the Marketplace.
- Buy via an insurance agent or broker: An agent works for one insurance provider, while a broker can help you select an insurer “that best fits your budget and meets your needs," according to this post.
- Buy from an online source: The site eHealth is among the online sellers of insurance products for general health and specialized care, such as vision and dental.
Consequences of not buying insurance
As the clock ticks on 25, you may be questioning why you even need health insurance, if you are rarely sick or have to visit a doctor.
Aside from the importance of preventative care for long-term health, think of your wallet. “The costs of an ER visit or doctor bill can quickly add up, often far exceeding what it costs to get insurance," Ashley Norman writes.
The ACA provides another financial incentive: the penalty for not having health insurance in 2016 is $695 per adult ($347.50 per child) or 2.5% of your household income –– whichever is higher — up to a maximum of $2,085.
You will owe the fee (to be paid when you file your 2016 federal tax return) for any month you, your spouse, or your tax dependents don't have an ACA-compliant plan.
Short-term insurance is an option
If you're not quite ready to commit to a regular health plan, you may opt for a short-term health insurance plan, which typically provides coverage for periods of one month to 364 days.
Short-term policies can cover unexpected illness and injury, including hospitalizations and emergency room visits, but do not typically cover pregnancy or childbirth, pre-existing conditions, or preventive care.
These plans are not ACA-compliant, so you will still owe the ACA tax penalty unless you have a short-term policy (or go without ACA-compliant coverage) for no more than 2 consecutive months and claim a “short gap in coverage" exemption.