What Happens When You Turn 26? Transitioning Off Your Parents’ Health Insurance

Why Turning 26 Matters for Health Insurance

This article explains what happens when you turn 26 and need to switch off your parents’ health insurance plan.

In 2010, the Affordable Care Act allowed children to be covered by the health insurance of their parents until the age of 26. However, your coverage won’t just end the minute you turn 26. You’ll usually have 120 days to enroll in your own healthcare coverage.

There are many things you can do to prepare for the transition. Depending on your situation, you can look into options like employer insurance, marketplace plans, or Medicaid. It can be quite tricky and daunting. You’ll need to compare plans, premiums, and coverage to ensure you get the best deal.

So, while turning 26 may feel like a huge step toward independence, it’s also a good time to get your health insurance game plan in place. Turning 26 health insurance takes a little effort, but staying ahead of the curve will save you from headaches later on.

Understanding the 26-Year-Old Rule

Turning 26 is known as a “qualifying life event.” You’ll usually have 60 days before and after turning 26 to switch to your own health plan. If you miss this window, you may need to wait until the next open enrollment period at the end of the year to sign up for a plan. The “26-Year-Old Rule” applies regardless of your marital status, whether you’re financially dependent on your parents or live with them.

When you’re turning 26, health insurance laws may apply to you, and they are different in each state. Some states have special rules about when you age out of your parent’s plan. For example, some states allow you to extend your coverage with a special “rider” beyond the age of 26. In New York, you can stay on your parent’s plan until you’re 30 with a rider.

If your parent’s employer-sponsored health plan covers you, your coverage will last until the last day of the month you turn 26. On the other hand, if you’re on a plan purchased through the Healthcare.gov marketplace, your coverage will continue until December 31^st of the year you turn 26. You get ample time to explore other options and sign up for a new plan during open enrollment (November 1^st to January 15^th).

While the specifics can vary, the key takeaway is that you’ll need to have your own health insurance at some point after turning 26. Fortunately, you have several options for health insurance after 26. However, it may take some time to research and compare plans.

Transitioning off parents’ health insurance is often complicated. Don’t rush into choosing the first plan you come across. The right plan for you depends on factors like your health needs, budget, and whether you prefer a plan with lower premiums or lower out-of-pocket costs.

Related Articles:

• What is a Student Health Insurance Plan (SHIP) and How Does it Work?
• The Best Marketplace Health Insurance Plans for College Students in 2024
• Step-by-Step Guide to Applying for Medicaid as a College Student
• Online Colleges with Student Health Insurance: Low-Cost Options
• SHIPs for Graduate and Professional Students: What to Know
• How to Stay on Your Parents’ Health Insurance as a Full-Time or Part-Time College Student
• How to Enroll in Your University’s Student Health Insurance Plan

Health Insurance Options After Turning 26

Here are the top turning 26 health insurance options:

Applying Through the Health Insurance Marketplace

If you don’t have an employer-sponsored health plan or your workplace plan doesn’t quite fit your needs, you can buy a plan through the ACA Marketplace.

There’s no income limit for purchasing a plan. However, if your income is below 400% of the federal poverty level, you might qualify for a tax credit to help lower your health insurance premiums.

To sign up for health coverage through the Marketplace, here’s what you need to know:

• You need to live in the U.S.
• You must be a U.S. citizen, national, or legally present here.
• You can’t be in jail or prison.

What you pay for your insurance depends on a few things, like where you live, how much money you make, and how many people are in your household. You’ll have a monthly premium, which is what you pay for your insurance plan. But if you need medical care, you might also have out-of-pocket costs, like:

• Deductibles
• Coinsurance
• Copayments

To get started, go to Healthcare.gov to find your state’s Health Insurance Marketplace. Each state has its own sign-up steps, so make sure to follow the instructions specific to your state.

Here are a few tips on how to pick one of the many health insurance marketplace options:

• Balance Premiums and Deductibles: If you want to keep your monthly costs low, look for a plan with a lower premium. But be aware that these plans often have higher deductibles, meaning you’ll pay more out-of-pocket before your insurance kicks in.
• Doctor Networks: Check that your favorite doctors and local hospitals are included in the plan’s network. If you go out-of-network, you could face higher costs or even pay the full price for care.
• Medications: If you take prescription meds, it’s important to see if the plan covers them and how much you’ll need to pay for them. Different plans have different formularies, so make sure your medications are on the list, and the cost works for you.

Exploring Employer-Sponsored Health Plans

An employer-sponsored health plan is a policy offered to employees and their families. One of the main benefits of these plans is cost-sharing, which helps reduce the financial burden of healthcare.

Employees pay their portion of the premiums using pretax dollars, which lowers their taxable income and can reduce their overall taxes. This makes employer-sponsored plans an affordable and tax-advantaged option for health coverage.

To ensure that you’re making the right decision, consider these tips:

• Evaluate Premiums and Coverage: First, take a look at how much you’ll pay each month for your health insurance and what’s included in the coverage. Plans with lower premiums might have higher out-of-pocket costs (like deductibles and copays), so it’s important to balance what you can afford both now and in the future.
• Check Networks: Before pursuing employer-sponsored health plans, you must also check if the plan covers your preferred doctors, hospitals, and any specialists. If you need specific care, make sure the plan includes the providers you need in-network, as going out-of-network can be more expensive.
• Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA): If your employer offers an HSA or FSA, you can set aside pretax money to cover healthcare expenses. HSAs are often paired with high-deductible plans, and FSAs can be used with other plan types, so check if these options are available to you.

Some employer-sponsored health insurance options for college graduates offer extra perks like dental, vision, mental health coverage, or wellness programs. If any of these are important to you, be sure to consider them when choosing your plan.

Understanding COBRA Coverage

Depending on the circumstances, the Consolidated Omnibus Budget Reconciliation Act provides continued health insurance coverage for a limited time. COBRA coverage is the same as the employee’s plan while employed, including the same benefits, networks, and costs (with the employee now responsible for the full premium).

Employees who lose their jobs or work reduced hours (to less than 30 hours per week) may be eligible. Spouses and dependent children who were covered under the employee’s plan may also continue coverage under COBRA are also qualified.

COBRA health insurance can be costly because the individual must pay the full premium, including both their and the employer’s shares. Employers may charge up to a 2% administrative fee on top of the insurance cost.

If COBRA coverage is too expensive, you may qualify for a Student Health Insurance Plan (SHIP) or Medicaid, depending on your income. These health insurance options for young adults are often more affordable and may offer similar coverage. SHIPs are available in some colleges and universities as a lower-cost option for those who lose job-based health insurance.

Key Deadlines and Enrollment Periods

The ACA Marketplace has specific open enrollment periods. During this time, you can either sign up for a health insurance plan or change it.

• Annual Open Enrollment (Marketplace): Typically, it occurs from November 1 to December 15. During this time, you can enroll, switch, or update your plans for the next year.
• Extended Open Enrollment: The Marketplace may extend the enrollment period if there are extenuating circumstances (e.g., technical issues).
• Special Enrollment Period (SEP): If you experience what is known as a qualifying life event, you can enroll or make changes within 60 days.
• Medicaid & CHIP: You can apply anytime, and coverage begins as soon as you’re eligible.

For COBRA coverage deadlines, you’ll have 60 days from when you get the COBRA notice or when your job-based coverage ends to decide whether to continue your coverage under COBRA. Here are the deadlines you need to watch out for:

• First Premium Payment: After you elect COBRA, you must make your first payment within 45 days. After that, payments are due on the regular schedule your plan sets.
• Grace Period for Payments: If you miss a payment, you usually get a 30-day grace period to catch up before your COBRA coverage is canceled.

Tips for Choosing the Right Health Insurance Plan

Here are a few practical tips on choosing affordable health insurance for young adults:

1. Evaluate Premiums
   Compare monthly premiums. Lower premiums may mean higher out-of-pocket costs, so balance them with potential deductibles and copays.
2. Understand Out-of-Pocket Costs
   Look at deductibles, copays, and coinsurance. Know your out-of-pocket maximum to avoid surprises.
3. Check Coverage & Networks
   Make sure your doctors and preferred providers are in-network. Confirm the plan covers the services you need.
4. Consider Your Health Needs
   If you have ongoing health issues or take regular medications, choose a plan with lower copays and access to specialists.
5. Review Plan Types
6. PPO: More flexibility, higher premiums.
7. HMO: Lower premiums, require referrals.
8. HDHP: High deductible, lower premiums, often paired with an HSA.
9. POS: Combo of PPO and HMO; referrals needed but more out-of-network coverage.
10. Look for Extra Benefits
    Check for added benefits like dental, vision, wellness programs, or gym discounts.
11. Marketplace or Employer Plans
    Employer plans may offer better rates. Compare both options if available.
12. Read the Fine Print
    Make sure you know the plan’s exclusions, limitations, and hidden fees before committing to it.

Financial Assistance for Health Insurance

The Health Insurance Marketplace is a key resource for financial aid for health insurance and college graduates. It allows you to shop for health insurance plans and may offer financial assistance based on your income.

• Premium Tax Credits: If your income falls between 100% and 400% of the federal poverty level or FPL, you may qualify for subsidies that lower your monthly premiums.
• Cost-Sharing Reductions (CSRs): For incomes between 100% and 250% of FPL, CSRs can reduce out-of-pocket costs like copays and deductibles when choosing a Silver plan.
• Medicaid: Depending on your state and income, you may qualify for Medicaid, which provides comprehensive coverage at little to no cost.

You may also be eligible for catastrophic health insurance. They are designed to protect you in case of a serious illness or injury. To qualify, you need to be under 30 or pass the hardship exemption rule. These plans offer low monthly premiums. However, they might come with high deductibles.

Some universities offer student health plans if you’re a recent graduate who is continuing their education or just finishing. These plans are often more affordable and can extend to recent graduates, providing comprehensive coverage at lower rates.

Conclusion: Taking Control of Your Health Coverage

Now, you have a bit more time to get yourself sorted out before paying for your own insurance. But it’s still a good idea to think ahead. If you’re about to turn 26 or your parents are getting ready to qualify for Medicare (and won’t be able to add you to their Medicare plan), you’ll need to find your own health insurance soon.

Take time to compare plans, consider your health needs, and find a policy that fits your budget. Acting early ensures you have the best protection without unnecessary stress or unexpected costs.