Health insurance for college graduates
- Young people who are uninsured in 2018 still face the individual mandate penalty – unless they have an exemption.
- The ACA has made it possible for millions of young people to stay on their parents’ health plans until their 26th birthday.
- A short-term plan may help span a coverage gap after college.
- A loss of coverage that occurs due to graduation may make it possible for college grads to buy ACA-compliant coverage during a special enrollment period.
- Depending on their income, some college grads may be eligible for Medicaid coverage.
- Health benefits through a new employer is often a route to substantial benefits and lower premiums.
As college graduation arrives, many college seniors are busy planning their next moves – to a new home, a new job, perhaps a new city. And while those transitions all involve careful consideration, college graduation very often brings another critical transition: to new health insurance coverage.
Since the passage of the Affordable Care Act, choosing new coverage – or holding on to existing coverage – has been much easier for college grads. Young adults are much more likely to be insured than they were before the ACA was enacted, and are the age group that has seen the largest reduction in uninsured rates.
But young adults are still known as the “young invincibles” – less concerned about catastrophic health costs and, as a result, not always convinced that purchasing health insurance is a good value.
Coverage for recent graduates? Priceless.
While young adults may consider health insurance premiums an unnecessary expense, many don’t realize that “going bare” can be costly – no matter how healthy the person is. For starters, there’s still a penalty (assessed on tax returns) for people who go without health insurance and don’t have an exemption from the penalty. And although the Tax Cuts and Jobs Act eliminated the penalty, that doesn’t take effect until 2019 – so people who are uninsured in 2018 are still subject to a penalty, equal to $659 or 2.5 percent of income, whichever is greater.
And then there’s the cost of having to pay for medical care without health insurance. At Vox, health reporter Sarah Kliff is collecting emergency room bills from across the country, and the reports are an eye-opening look at just how much it costs when people end up needing emergency treatment – which can happen to anyone, regardless of how healthy they are. A five- or six-figure medical bill would be crippling for most young people, especially on top of the student loan debt many graduates are struggling to pay off after college.
More coverage choices than ever for grads
The good news for grads is that there are more coverage options than ever – some offering low premiums, others offering more medical benefits, others offering a combination of the two.
Here’s a quick primer on the most logical and obvious coverage options that will help ensure recent graduates can avoid a coverage gap. (We’re listing these numerically, and not “best to worst” or vice versa. It’s up to each graduate to weigh factors that include employment, availability of a parent’s plan, etc.)
1. Remain on your parent’s insurance
Before the ACA was enacted, it was common for health insurance plans to drop dependents as soon as they graduated from college. But the ACA changed that, requiring almost all health plans (with the exception of retiree-only plans) that offer dependent coverage to allow young adults to remain on a parent’s plan until they turn 26. So for young adults with coverage under a parent’s plan, graduating from college no longer requires a mad scramble to find new health insurance.
Under the new rules, there are no strings attached. The young adult doesn’t have to be a student, doesn’t have to be on the parent’s tax return, and can even be married and living on the other side of the country – although in that situation, it might be wise for them to purchase their own health insurance, since the provider network of the parent’s plan might not cover them if they live far away.
There are several points to consider before deciding whether remaining on a parent’s plan is the best course of action, and we cover them in more detail here.
2. Purchase a short-term plan
Short-term health insurance is a potential alternative for college grads who need temporary coverage to tide them over until another policy kicks in. Even for grads who have a job lined up right away, employers often have a waiting period before health insurance coverage is available to new hires. Short-term health insurance is designed for exactly that sort of scenario, and it’s easy on the wallet.
Under current rules, short-term plans are only available for up to three months at a time, although there are options available in some states that allow applicants to purchase up to four short-term plans bundled together, with back-to-back coverage and just a single application.
But proposed federal regulations would allow short-term plans to have durations of up to 364 days, making short-term coverage an option for people who need temporary coverage for more than three months. If the new rules are finalized, states will still be able to limit the availability and scope of short-term plans, so coverage options will vary from one place to another.
Applicants should be aware that short-term plans do not cover pre-existing conditions, and do not have to cover the essential health benefits. Short-term plans generally don’t cover maternity care, prescription drugs, or mental health care, for example. But for a healthy person who just needs a few months of coverage before a new plan takes effect, a short-term plan could be just the right solution, at the right price (short-term plans tend to be inexpensive, since they don’t have to comply with the ACA’s rules).
And unlike ACA-compliant plans, short-term plans can be purchased at any time of the year, with immediate effective dates available.
3. Buy an ACA-compliant individual plan
For new grads who need longer-term coverage, or who have pre-existing conditions, or who want a more robust, ACA-compliant plan that does cover the essential health benefits, a plan purchased through the state health insurance exchange is likely to be an ideal solution.
ACA-compliant plans for individuals are available in every state, (some states run their own exchange, but most use HealthCare.gov). And premium subsidies and cost-sharing reductions are available through the exchange to make coverage and care more affordable.
Subsidies are available in 2018 for a single person earning up to $48,240, so they’re especially useful for people in entry-level jobs that don’t offer health benefits. (Caveats: People with income below the federal poverty level generally aren’t eligible for subsidies; some applicants aren’t eligible for subsidies even with income below $48,240; and if a young adult is still claimed on a parent’s tax return, the parent’s income would also be taken into consideration for subsidy-eligibility determination.)
ACA-compliant plans (sold on or off-exchange) are only available during the annual open enrollment period (November 1 to December 15, in most states), and during special enrollment periods triggered by certain qualifying events. Some examples of qualifying events include:
- A new grad who moves to a new area (assuming they were already insured before the move) would be eligible to purchase an ACA-compliant plan based on the move.
- A new grad who loses access to the school’s student health plan would be eligible to purchase an ACA-compliant plan based on the loss of coverage (assuming the student health plan provided minimum essential coverage, which most do).
But unlike short-term plans, ACA-compliant plans cannot be purchased outside of open enrollment if the applicant does not have a qualifying event.
4. Check Medicaid eligibility
Medicaid enrollment is available year-round, and Medicaid does cover pre-existing conditions. In most cases, there are no premiums. For a new grad living in a state where Medicaid has been expanded, this could be a perfect solution during the weeks or months that it might take to find a job after graduation.
In New York and Minnesota, there’s also an option for very low-cost coverage for people who earn too much for Medicaid, but are still fairly low-income. Both of those states have Basic Health Programs (BHPs), available to individuals earning up to just over $24,000. In New York, the BHP is called The Essential Plan, and it only costs $20/month. In Minnesota, the BHP is called MinnesotaCare, and most enrollees pay between $16 and $80 per month.
5.Get coverage through a new employer
Getting health coverage through an employer is probably the path that most college grads envision, and it’s an excellent option if it becomes available. Employer-sponsored health insurance generally offers substantial benefits, and employers typically pay a large portion of the premiums.
But while obtaining employer-sponsored health insurance may be the goal for many new grads, it won’t necessarily happen right away, or even in the near future. Thanks to the ACA, it’s easier than ever for young adults to have health insurance coverage, even if the benefits they assumed they’d receive from employers take longer than expected to materialize.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.