When You Turn 26, You Must Get Health Insurance



January 19, 2014

By Lindsay Gellman

Once she turned 26 years old, Rebecca Rubenstein, a freelance writer and editor in San Francisco, was too old to remain on her parents’ health-insurance plan. And since her freelance status makes her ineligible for coverage through her employers, she was left to weigh the options for health insurance on her own.

“Freelancing means paying for your own health insurance,” says Ms. Rubenstein, who earns between $1,200 and $1,700 a month. “I take a lot of pride in being able to pay my own rent and pay my own way.” Ms. Rubenstein says she lives with two roommates and pays about $660 in monthly rent, and she has occasionally supplemented her income with temporary jobs, such as bakery work.

But applying for her own health insurance turned out to be more difficult than Ms. Rubenstein had imagined.

Before the Affordable Care Act, commonly known as Obamacare, took effect Jan. 1, Ms. Rubenstein says she was rejected twice from a large insurer due to pre-existing conditions—like lactose intolerance and asthma. (Under Obamacare, insurers cannot discriminate on the basis of pre-existing conditions.) She is currently in the process of enrolling through California’s state exchange.

For young adults aging out of their parents’ plans, navigating the shifting health-insurance landscape for the first time can be tricky. Here’s what you need to know to get coverage and avoid paying a penalty under the new rules:

You’re not invincible.

Experts agree: You need health insurance, plain and simple.

“There’s a temptation to go without health insurance” for healthy young adults, says Doug Whiteman, insurance analyst at Bankrate.com. But in doing so, “you could be derailing your financial future,” he says, if, for example, you are in an accident and wind up with sizable medical bills in addition to student-loan payments.

Plus, under the Affordable Care Act’s new rules, if you’re not enrolled in an approved health plan by March 31, most people will be liable for a penalty of at least $95 or 1% of your annual household income, whichever is higher (and increasing each year), according to HealthCare.gov.

Look to your employer or school.

If you are a current full-time employee or student, you are likely eligible for a plan through your employer or school, respectively, Mr. Whiteman says.

Even if you’re not yet 26, you might opt for such a plan over your parents’ if it offers better coverage, he says.

Although she could have remained on her parents’ plan as a dependent, Laura Vinci, 24, enrolled in student health insurance through Virginia Polytechnic Institute and State University (Virginia Tech), where she earned her master’s in business administration.

If you are a freelancer, there might be a local freelancers union offering an affordable plan. If you’re a temporary employee, check to see whether your temp agency offers coverage.

Shop around.

If none of the above apply, visit Healthcare.gov or your state’s online marketplace to evaluate your options.

Depending on your income and family size, you might qualify for free or low-cost coverage through Medicaid. Some states, including Illinois and Connecticut, are expanding Medicaid to cover more people. Search “Medicaid” on the Healthcare.gov site to see if you qualify.

If you don’t qualify for Medicaid, but your income still falls below a certain threshold ($45,960 for a single-person household), you may qualify for subsidized premiums and/or out-of-pocket costs for private insurance, according to Healthcare.gov. (If you’re eligible for insurance through your employer, you can still switch to a marketplace plan, but you typically won’t qualify for subsidies based on your income, the site says.)

If you earn more, you can still purchase health insurance through the marketplace at the regular price, according to the site.

Know how the marketplace works.

The online marketplace groups plans into five categories: bronze, silver, gold, platinum and catastrophic. The grouping doesn’t reflect the quality or amount of care provided, the site says.

Bronze and silver plans typically have lower premiums and higher out-of-pocket costs, and are a good fit for people who don’t require a lot of regular medical care. Gold and platinum plans typically have higher premiums, but lower out-of-pocket costs, making them a good option for those requiring a lot of doctor visits or regular prescriptions.

Catastrophic plans are geared toward people under 30 and people of limited income, and are meant to provide protection for worst-case scenarios, according to the site. They tend to have low premiums and high deductibles—or the amount you owe for services before your plan kicks in. Such plans typically cover three primary-care visits a year and free preventative services—such as immunization vaccines, sexually transmitted infection screenings and diet counseling—both at no cost, the site says. And catastrophic plans are only available at standard—not subsidized—rates.

Seek professional assistance.

If you’re not sure where to turn, there is help available. The site localhelp.healthcare.gov can direct you to impartial in-person assisters, such as navigators, near you.

Help is also available over the phone at 1-800-318-2596 or via webchat at HealthCare.gov.

Write to Lindsay Gellman at lindsay.gellman@wsj.com



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