Health Care Bill Impacts: Insurance Options for Young Adults

Over the next two weeks, we’ll be taking an in-depth look at the health care bill and how it might impact your finances. Today, we’ll cover how the bill will change the insurance landscape for those in their 20s.

Health Insurance for Young Adults

A few days ago, we talked about the new individual mandate for health insurance. This might have the largest impact on those in their 20s. According to one source, forty-five percent of those ages 19 to 29 were uninsured for at least part of last year.

If you or your children are under 26 and currently uninsured, you may be interested in the coverage options provided by the new healthcare bill, some of which have already started.

This is especially important for recent or soon-to-be graduates, many of whom may be facing life without certain employment and/or benefits and may have previously been dropped from mom and dad’s plan after life as a student ended.

The options

• Your own plan: The health care bill does not force you give up the insurance you have now. If you are offered health insurance at work, you can keep your existing policy or sign up for a new one. If you prefer and can afford a traditional private policy, you are also welcome to begin or continue to go that route. Coverage and premiums vary drastically.
• Your parents’ plan: This is perhaps the most sweeping change. If your parents’ policy covers dependents, the insurer must extend that coverage to children 26 or under. This applies to both employer-sponsored AND private insurance plans. The insurer cannot charge any more than it currently charges for dependents, and cannot offer different levels of coverage. This applies regardless of the child’s residency, financial or marital status and regardless of being in school and/or a dependent for tax purposes. Until 2014, this does not apply to a child offered insurance through his/her own employer. After 2014, this applies to ALL children under 26, even if insurance is offered elsewhere. Keep in mind that while this does extend to married children, it does not require coverage for that child’s spouse or children. This provision officially becomes law in September of this year, but many insurers have agreed to start coverage immediately (scroll to bottom of linked page for names). This is excellent news for recent graduates who were previously looking at a coverage gap between now and September. The government currently estimates this option to cost close to $3,400 per year for each added young adult dependent. But if your plan is simply “employee plus family” and you currently cover other dependents, your costs actually may not go up at all.
• The government plan (under-30): CNN discusses a provision of the bill that calls for a new plan administered by state-sponsored exchanges and targeted at those under 30 who do not have employer-sponsored insurance or qualify for Medicare. Details are still fuzzy, and this would likely not be enacted until 2012. The plan looks to be structured as a high-deductible plan, and experts are currently predicting monthly premiums at between $100 and $140.
• The other government plan (Medicaid): Medicaid has previously been targeted at children, pregnant women, the elderly and the disabled. As a result of the new healthcare law, Medicaid benefits will now extend to anyone who makes less than 133% of the poverty level, including childless adults. That currently amounts to $14,400 for a single adult or $29,300 for a family of four. This provision is not currently scheduled to be enacted until 2014.
• No plan: Of course there’s always the option of forgoing health insurance altogether. If you get sick or hurt, you’ll have to shoulder all costs yourself, but if you don’t, you save the money on insurance premiums. Starting in 2014, this option will come at a cost.

Making the choice

In the short-term, there aren’t many options – the Medicaid expansion hasn’t started yet and neither has the government-run under-30 plan. The biggest current change is a parent’s ability to add coverage for children under 26. If the child is not offered his own employer-sponsored plan, that option is likely to be the most cost effective for the family unit, except for forgoing coverage altogether since there is currently no penalty. But if you can afford even a basic plan, purchasing it is a pretty effective risk management strategy as few people can cover astronomical hospital bills should an emergency strike.

In the end, you will have to run the numbers on each option to see what works best for you and your family. As the years go by, more pieces of the bill will be enacted and the options will expand. And of course there’s always the possibility that the whole thing could be repealed or massively changed. But for now, take the information you have and make the best of it. Remember that medical expenses are one of the leading causes of bankruptcy, and do your best to find a policy that works for you!

Be sure to check out the entire health care series:

• Part 1: Individual Mandate
• Part 2: $250 Medicare Donut Hole Checks
• Part 3: Health Insurance for Young Adults
• Part 4: 1099 Changes in Health Care Bill
• Part 5: Flexible Spending Account Changes
• Part 6: Health Savings Account Changes
• Part 7: Student Loan Forgiveness Program

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