What young adults need to know about health insurance

Finding the right health insurance may not always seem easy. For young adults, it may feel a little more challenging. But it doesn’t have to be. Understanding what to look for in a plan is the first (and most important) step.

Since 2010, young adults have been able to stay on their parents’ health insurance plan until they turn 26.¹ They can even stay on it if they have a job that offers health insurance, are married, are in school or no longer live with their parents.²

It’s important to get health insurance — even if you’re young and healthy — to help protect your wallet if you need medical care. After all, a 3-day stay in the hospital might set you back $30,000 if you don’t have a plan that can help cover some of those costs.³

If you’re a young adult, here’s what you need to know about health insurance options — and how to pick the best plan for you.

Here are the most common types of health insurance plans that may be available to you:

Once you turn 26, you’ll need to get your own health plan.¹ You can do this by shopping for one on the health care Marketplace, also called the Exchange (a government-run website that sells ACA plans). Some states have their own state-based exchanges that also sell local ACA plans.⁴ ACA plans won’t deny you coverage if you have a preexisting condition, like cancer or type 2 diabetes.⁵ They also all offer certain essential benefits, like:⁶

• Pregnancy, maternity and newborn care
• Prescription medicines
• Preventive and wellness services

Usually, you can only sign up for ACA plans during the annual Open Enrollment Period, which starts Nov. 1 and ends Jan. 15 (in most states).⁷ But when you turn 26, you don’t have to wait for Open Enrollment. You get what’s known as a Special Enrollment Period (SEP) that lets you buy a plan outside that timeframe.^2,8

You might get a health plan through your employer if you have a job that offers health care benefits. Normally, you get a 30-day enrollment period when you can sign up for your employer’s benefits, likely around the time you’re hired.⁸ But it can be different from job to job.

Turning 26 is considered a qualifying life event, allowing you to get an employer-based plan during a different time. Talk to your employer’s human resources manager to find out how to enroll.

If you get married and your spouse has health insurance, you can be added to their plan. You don’t have to wait for the Open Enrollment Period for that to happen: You’ll get an SEP to do it.⁸

These are plans you can buy for a short amount of time when you’re transitioning from one health insurance plan to another.⁹For example, if you have a gap in coverage like coming off your parent’s health plan or changing jobs, you could get a short term plan instead.

Keep in mind, short term plans typically offer less coverage than long-term plans and the provider network may be limited. Plus, short term plans don’t offer the same protections as an ACA plan might. That means with some short term plans you might be denied coverage if you have a preexisting condition, like asthma.⁹

Be sure to understand what’s covered and how the plan works before purchasing short term insurance.

Now that you understand some of the types of health insurance plans, here are some tips to help guide your insurance-buying process.

You might feel overwhelmed having to choose a plan when you turn 26. So, instead of waiting until you blow out your candles, plan ahead. Your first question might be: Which plan is right for me? Even though turning 26 kickstarts the process, there are more factors to keep in mind beyond just your age. You also have to think about:

• How healthy you are and if you have preexisting conditions
  
• Your income
• Your job status
• Whether you have kids
• Whether you are married

Also, you’ll want to research your options and figure out which type of plan might work best for you. If you’re currently on your parents’ plan, but have a job, you’ll want to compare the benefits you’d get through your employer with plans you might find on the health care Marketplace. Ask yourself questions like:

• Can I afford to pay for this plan every month or every year?
• Does this plan cover my (or my family’s) health needs?
• If my current job offers health benefits, which health plan is better: one through my employer or one through the Health Insurance Marketplace?
  

When you sign up for health insurance, it’s important to consider your out-of-pocket costs. One of those costs is the amount you pay each month for the plan, called a premium. The other is called the deductible. This is the amount you pay for covered health care services before your insurance kicks in. For example, if you pick a plan with a $3,000 yearly deductible, you have to reach that $3,000 deductible before your plan helps pay for covered health care services you use.

You might be tempted to go for the plan with the lowest monthly premium and highest deductible. After all, if you’re young and healthy, you may not need as much medical care as someone who’s older or has a chronic condition. But that may not be the best choice to make, explains Noor Ali, M.D., a physician and founder of Dr. Noor Healthcare Advisor.

“It’s less money out of pocket, up front. But it puts you into this false cycle. If something does happen, you’re going to be paying out of pocket to meet the deductible,” Dr. Ali says.

Her advice? Go with the plan with the lowest deductible and a premium you can comfortably afford. That means if you can afford to pay $200 a month and have a lower deductible like $2,000, go for it.

Let’s say you turn 26 and you get that SEP. But you miss your window to enroll. A short term insurance plan could be a good choice.

That’s especially true if your parents have a health plan through their employer. Those plans typically end insurance coverage the month you turn 26.¹⁰ That window of opportunity might sneak up on you.

If your parents have an ACA plan, you have until the end of the calendar year — in which you turn 26 — before you lose your coverage.¹⁰ So, you can use that time to find a health plan that truly fits your needs for the coming year instead of opting for short term coverage.

What you need from a health insurance plan may be different from what other people your age might need. Be sure to take your needs, income, lifestyle and any chronic conditions into consideration.

For example, you may know you don’t want to start a family right away. That would mean you probably don’t need prenatal coverage, which may be included in a higher premium plan. On the other hand, if you have a chronic condition that requires high-cost medications or several visits to a provider or specialist each year, you may want to make sure your plan covers those things at a price you’re comfortable with.

“Take a look at the limitations and exclusions and make sure the service or coverage you’re seeking is not part of the exclusion,” Dr. Ali says. Do the same for prescription coverage that comes with the plan you sign up for.

There’s no right or wrong answer when it comes to choosing the best health insurance plan for you. The most important thing is to compare all your options. That way, you can pick a plan that meets your needs — and your budget.