26 and uninsured? 6 steps to your first health insurance plan

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26 and uninsured? 6 steps to your first health insurance plan

There are major milestones we experience when we reach certain ages in life.

At 16 or 17, you can get your driver’s license.

At 18, you can register to vote.

At 21, you can buy alcohol.

And at 26, you’re required to have … health insurance?

Many millennials still covered under their parents’ health insurance may be in for a rude awakening to realize that they’ll officially be kicked off once they reach 26 years old.

Parents were previously allowed to keep their children on the family health insurance plan until age 19 before the Affordable Care Act was introduced in 2009, raising it to 26. If your 26th birthday is approaching, it might seem a bit weird that you’re effectively being aged out of something so young, but moreover, you’re now placed in the unenviable position of shopping for your own health insurance.

Navigating the landscape of plans, policies and premiums on your own may seem daunting -- even intimidating, considering that it’s unlawful to go without health insurance. But going without coverage doesn’t have to be the outcome. Knowing what your options are -- and how to narrow them down -- can help direct you to the right plan that covers your needs without breaking the bank.

Why you absolutely need health insurance

Studies show that young adults between the ages of 18 to 34 are uninsured at almost double the rate of adults; other estimates reveal that this general age group comprises 13 million Americans living without health insurance.

Regardless of age, going without insurance to save some money may seem like a possibility. We’re here to tell you that before shopping around, you should never go without some sort of health insurance coverage.

We asked two millennial money experts -- Tonya Rapley of My Fab Finance and Chelsea Fagan of The Financial Diet -- about the importance of having a health insurance policy. Both bloggers ensured that they secured health coverage when they aged out at 26:

The cost of having no insurance

The Affordable Care Act mandates that you must have health insurance coverage or pay a fee to the government if you can afford it, but decide to go without it.

Coined a "shared responsibility payment," it’s a tax penalty that’s gone up steadily since 2014. According to Healthcare.gov, the fee is levied as the greater of a 2.5% percent of one’s household income, at a maximum cap equivalent to the total yearly national average premium price of a Marketplace Bronze plan; or a $695 per person surcharge, maximum $2,085.

The fee is owed for every month you go without health insurance.

You’ll still get hit with partial fees even if you have insurance coverage for part of the year. For every month you go without health insurance, you’ll pay a penalty of one-twelfth of your annual insurance premium; but if you go insurance-less for just a month or two, you won’t owe anything to Uncle Sam. Each fee is paid up during income tax filing time.

Exploring healthcare options at 26

Facing these costs and fees can be disconcerting. At 26, you may have already have mountains of student loan debt to pay off, or, early in your career, may not have the option to receive job-sponsored health benefits.

And it needs to be said: Just because you’re under 30 doesn’t mean you’re invincible, immune to getting sick. You’ll need some kind of minimal catastrophic health coverage in the event something terrible happens to you.
These are some of your options:

Remember open enrollment

Open enrollment under the Obamacare Health Insurance Marketplace is from Nov. 1 until Dec. 15, 2017. To ensure you start coverage on a new plan by the New Year, you’ll need to enroll by Dec. 15. Open enrollment rules vary from state to state, so make sure you take advantage of the various options available to you.

Take advantage of your special enrollment period

If you miss the deadline for Obamacare, you can still sign up for coverage under a special enrollment period around the time of your 26th birthday. It buys you some more time, allowing you to take advantage of open enrollment both 60 days before and after your 26th birthday. Take advantage of this opportunity and keep away penalty fees that can add up the more time you go uninsured.

Consider Medicaid

Another alternative for finding healthcare coverage after turning 26 is to apply for Medicaid, a welfare-based program for those who fall 138% below the federal poverty level. Keep in mind that Medicaid is difficult to obtain in 19 states due to rigid guidelines, so you may not qualify depending on where you live.

While many Medicaid policies are absent of premiums or extra costs, we’d still encourage you to keep shopping around for more comprehensive coverage. Medicaid is essentially considered a subsidy, of which there are several available to you to help pay for health insurance coverage:

  • Medicaid
  • Premium tax credits to help lower your premium
  • Cost-sharing reductions to lower expenses like copays, deductibles, coinsurance costs and out-of-pocket limits

You may qualify for any of these subsidies if you fall below 400% of the federal poverty level.

Sign up for student health insurance

Turning 26 may exclude you from remaining on your parents’ health coverage, but not from other plans that don’t take age into account. If you’re still in school or have returned to college to earn a degree, investigate signing up for a college-sponsored plan while you’re enrolled in classes. Already graduated? Many colleges and universities offer health insurance plans through their respective alumni associations.

Professional options and other choices

Freelancers and the self employed need health insurance, too. Get to know your industry and the resources offered to you. Is there a freelancers union or trade organization you can join that offers health coverage to its members? You may be able to obtain insurance from temp agencies, chambers of commerce, or small business owner groups. You can even opt for an off-exchange plan through the federal marketplace.

Don’t settle for the first plan you find

Doing so could cost you money and give you unacceptable coverage. Whether browsing the Obamacare marketplace, selecting a private insurance policy, or going an alternative route, keep in mind some of these tips:

  • What type of plan are you looking for? An HMO, a PPO, or some variation thereof? What type of deductible do you want? Do you prefer a large in-network selection of doctors? Examine, compare and contrast plans carefully to see which ones contain features and benefits you’re looking for.
  • Consider how often you’ll use your plan. Even if you’re healthy at 26 and rarely go to the doctor’s, think about the cost and price tradeoff. If you intend on using your plan frequently, it might benefit you to pay an overall higher insurance premium in exchange for a lower deductible limit you can reach more quickly. But if you’re a rare sight at the doctor’s office, a high deductible/lower premium plan could be the way to go. Also, be sure to use a tool like Amino to scope out the cost of different health procedures in your area.
  • Build your budget. Determine how much you’d ideally like to limit your spending on monthly or annual premium costs or copay expenses. When looking at plans, note the in-network and out-of-network costs, and weigh your deductibles against your premiums to make sure that you won’t end up paying more for your insurance than you’ll be using it. And look into opening a dedicated health/flexible savings account, or some equivalent, to offset medical expenses not covered by your insurance policy.

Searching for insurance isn’t something you should do overnight, nor does the process of your new policy becoming effective happen immediately, either. Unfortunately, turning 26 does happen overnight, and suddenly, the comfort of being under family coverage is gone.

Taking the time to anticipate this change well in advance can prevent you from missing a beat and being uninsured in the event a medical emergency arises. With the right coverage, you’ll save money, stay protected, and become more informed for making better insurance policy choices into your 30s, 40s and beyond.

Image: Emiliano Horcada