Health Insurance And Your 26 Year Old Kid

Your kid is now turning 26 years old and you have more planning to do than just a birthday get together. The Affordable Care Act has made it possible to maintain coverage for your adult kid until they reach the age of 26. With the new law, they no longer have to be a full-time student. Your kid could be unemployed and sitting at home; or working, paying their student loans and making a name for themselves, you are able maintain health coverage for them. This could be a blessing and a curse. You need to know your options to help with transitioning your kid off your plan when they are kicked off the health coverage.

For years, your kid had to be a full-time student in order to cover them until the age of 24. Then they were on their own. With the current employment crisis, college graduates were left without jobs when they graduated from school. This also meant no insurance.

Just like their auto insurance, they could buy their own health insurance policy. Many parents were not aware of this until the Health Insurance Marketplace (Obamacare) push their marketing efforts out. There were many affordable options prior to the new healthcare law for the young adult dependent and pre-existing conditions was hardly an issue with a 24-year-old.

Now your kid is 26 and the big question is what to do about health coverage…

Here are your options:

Step one: Is there insurance through their current employer and are they eligible for the coverage? You may need to push them to get this information, but that is step one.

Step two: Depending on their income, they may qualify for a tax credit through the government website, aka “Obamacare”. Only do this if you think they may qualify for a tax credit after some preliminary questions. It is highly recommended to seek out a professional on the matter beforehand to minimize wasting your valuable time. There has been many times that young adults do not qualify for a tax credit, for multiple reasons. Just because they are young and healthy has nothing to do with the tax credit.

Step three: Purchase the plans outright through a professional insurance agent. The plans are the same in comparison as the “Obamacare” plans. The only difference is what tax credit you qualify for. If they do not qualify for a tax credit, there is no point of going onto the Marketplace. Again, it will help if you seek a professional in this area.

Note: Sometimes your kid will lose coverage on their birthday instead of being covered for the whole month. This is a concern. Most, or all, new coverage will start the 1st of the month, of the following month. What are your options so your kid does not lose coverage?

  1. Pay for the rest of the month through your employer, if possible. Many will allow this at the employee dependent rate. Some will not.
  2. Buy COBRA for a month. This is not ideal because COBRA is expensive and coverage will overlap.
  3. Purchase a short-term medical through an insurance agent. You can buy them for 30 days at a time and coverage will overlap. Good news is they are inexpensive. If you can pass 4-5 questions (health and eligibility questions), you can get coverage within 24 hours. The bad news is there is no coverage for pre-existing conditions. Typically this is not a problem for a 26-year-old, but could be. Why is this? Because it was designed as a “gap” plan, not a qualified health plan with the new healthcare law.
  4. Take the gamble until the new coverage starts the 1st of the following month.

Just like each one of your kids having different personalities, every situation is different. Fighting it yourself could drive you crazy. There are too many options and with the tax credits, it just makes it that much more complicated.

As a parent, you should know your options and be prepared. You should start the process about three moths out from their birthday month. That may be a little early, but better early than late.