Insurance and Finance

Edge of 26: Making Your Way Off Your Parents’ Insurance

By Joshua Baethge 12.1.17

Certain birthdays bring with them exciting milestones. Turning 16 means learning to drive. Reaching 18 earns you the right to vote. Turning 26, on the other hand, can be less exciting, when you’re faced with the prospect of having to pay for your own health insurance. 

Under current federal law, if a parent’s health insurance policy covers children, those children can stay on their plan until they turn 26. This is true even if the child gets married, doesn’t live at home, attends school, or is financially independent. It applies even if the child is eligible to get their own plan through an employer. But when they turn 26, they are on their own.

This may seem daunting to someone who has never navigated the world of deductibles and co-pays or considered the merits of HMOs (health maintenance organizations) versus PPOs (preferred provider organizations). Fortunately, there are resources available to help you through the process. Here are the basics to getting through this transition. 

Getting Your Own Insurance

Some young adults opt to not have health insurance at all. While this is their right, it will cost them. Federal law states that adults who don’t carry health insurance are obligated to pay a penalty of either $695 or 2.5 percent of their household income (whichever is higher) in their income taxes. But it’s not just the cost concerns that should sway their decision.

Even the healthiest people face unexpected health issues. Nancy Sparks, a Texas Farm Bureau Insurance Agent in Rotan, says it is imperative for people in their 20s to get health insurance.

“You need it in case of a catastrophic event. You have to have health insurance,” she says. “You don’t want to deplete your bank account or your parents’ bank account.”

Giving Yourself Time

Sparks advises those in the market for health insurance to begin looking at options approximately three months before their 26th birthday. This will give them time to fully understand the products available and find one that is a good fit.

There are several ways for first-time insurance customers to go about obtaining coverage. Under the terms of the Affordable Care Act, those who turn 26 qualify for a special enrollment period, meaning they do not have to wait for the annual enrollment window to apply. If a 26-year-old is on their parent’s plan, they can remain covered on that policy through Dec. 31 of that year. 

Getting to Know the Health Insurance Marketplace

The Health Insurance Marketplace is where many first-timers go to find coverage.

“A person who’s 26 might not be at the highest end of the earning scale,” says Marcia Allen, a Texas Farm Bureau Insurance Agent from Grapevine. “They might qualify for discounts at the marketplace, so they should go through the questionnaire on the website and see what it tells them.”

For example, there are marketplace plans that can provide significant cost relief. A person who was not listed as their parent’s dependent could be eligible for these discounts if their employer does not offer health insurance. However, if their employer offers health insurance, that may be a more attractive option.

“If you can get insurance through your employer, it is almost guaranteed to be better than an individual policy,” Allen says.

Understanding Your Employer’s Policy

The majority of Americans get health insurance through their jobs. Employers purchase plans on a large scale and then offer workers and their dependents coverage; since the cost of the employee’s policy is partially covered by the employer, in many cases the individual’s costs are reduced.

According to Sparks, when people are comparing policies through their jobs, there are a few things to pay particularly close attention to.

“You should know how much of the cost the employer is paying and understand what your deductibles will be,” she says. “You should also know what type of plans they have. Is it a PPO or an HMO?”

Keeping Your Own Doctor

Sparks adds that it is also important for people to choose a plan that can be used with their preferred doctor and the hospitals they will likely go to if an emergency arises. This is particularly critical in small towns like Rotan — a West Texas locale with fewer healthcare options than big cities may have. 

The choice is a little different in places like Grapevine, which is located in the heart of the Dallas-Fort Worth area. According to Allen, many people pick a plan first, and then choose from the available pool of doctors.

Covering Your Medication

Allen adds that it’s important for insurance seekers to review their plan’s prescription coverage to make sure it meets their needs. Above all, there is one other tip she has for everyone.

“The biggest mistake I see is the person who decided not to get health insurance. If something happens to them, like a car accident, it can be devastating.”

Talk to your Texas Farm Bureau Insurance Agent today about competitive healthcare plans through Blue Cross Blue Shield of Texas. Call your local Agent today for more information. 

Coverage and discounts are subject to qualifications and policy terms and may vary by situation. 

© 2017 Texas Farm Bureau Insurance