Public Insurance: Aging Out?

In the United States, young adults can remain on their parents' health insurance plan until they turn 26, thanks to the Affordable Care Act. This applies regardless of their living situation, tax dependency, or student status. However, once they reach this age, they must find their own health insurance coverage, which can be a daunting task. The transition process depends on how their parents receive their insurance and varies between public and private coverage. For instance, if a parent has an Obamacare Marketplace plan, their child will have until December 31 of the year they turn 26 to sign up for their own insurance. On the other hand, if the parent has a private employer-sponsored plan, coverage will end on the last day of the month of their 26th birthday.

The Affordable Care Act (ACA)

• Make affordable health insurance available to more people: The law provides consumers with subsidies (the "premium tax credit") that lower costs for households with incomes between 100% and 400% of the federal poverty level. If your income is above 400% FPL, you may still qualify for the premium tax credit. If your income is at or below 150% FPL, you may qualify to enroll in or change Marketplace coverage through a Special Enrollment Period.
• Expand Medicaid to cover all adults with income below 138% of the FPL: Not all states have expanded their Medicaid programs, but this expansion helps to provide free or low-cost health coverage to some low-income people, families, children, pregnant women, the elderly, and people with disabilities.
• Support innovative medical care delivery methods designed to lower the costs of health care: The ACA has implemented multiple delivery system reforms, such as Medicare payment changes, bundled payment initiatives, the Center for Medicare and Medicaid Innovation, the Independent Payment Advisory Board, and accountable care organizations. These reforms are intended to constrain healthcare costs and improve quality.

In addition to these primary goals, the ACA also allows young adults to stay on their parents' health care plan until the age of 26. This provision helps to address the problem of young adults having the highest rate of uninsured of any age group, with about 30% of young adults uninsured. The ACA ensures that young adults can remain on their parents' plan even if they are not living with their parents, are not financially dependent on their parents, or are eligible to enroll in their employer's plan.

The ACA has had a significant impact on health insurance coverage and health outcomes in the United States. By 2016, the uninsured share of the population had roughly halved, with estimates ranging from 20 to 24 million additional people covered. The law also led to a reduction in income inequality, as it placed relatively little burden on households in the top quintile (top 20%) outside of the top 1%. A 2017 study found that the ACA reduced socioeconomic disparities in health care access. Additionally, a study using data from 2010 to 2015 found that about 21 million more people had health coverage ten years after the enactment of the ACA.

Private vs. public coverage

In the United States, the Affordable Care Act (ACA or Obamacare) allows young adults to remain on their parents' health insurance plan until they turn 26. This legislation was introduced because many young adults were being removed from their parents' policies due to their age, leaving them uninsured.

Once a person ages out of their parents' health insurance plan, the next steps depend on the type of coverage their parents had. If their parents had a private employer-sponsored plan, their coverage will usually end on the last day of the month of their 26th birthday. If their parents had an Obamacare Marketplace plan, they will have until December 31 of the year they turn 26 to sign up for their own health insurance plan. However, they must enroll by December 15 to get coverage for the following year.

In some states, young adults can apply for a health insurance rider, which allows them to stay on their parent's plan beyond the age of 26. As of 2022, this is possible in Florida, Illinois, New York, Pennsylvania, South Dakota, and Wisconsin, and these states usually extend coverage to age 30 or 31.

Regardless of the type of coverage their parents had, aging out of a parent's plan makes individuals eligible for a Special Enrollment Period, allowing them to enroll in a health plan outside of the usual open enrollment period. This Special Enrollment Period typically lasts for 120 days, and it begins 60 days before the individual is dropped from their parent's plan and ends 60 days after they lose coverage.

When it comes to private vs. public coverage, the main difference lies in how the insurance is obtained and funded. Private insurance is typically obtained through an employer or purchased individually from a health insurance company, while public insurance is government-funded and often has more stringent eligibility criteria. For example, Medicare is a public insurance program available to individuals over the age of 65 or with specific disabilities. It is important to note that private and public insurance can also be supplemental to each other, as seen with Medicare, where individuals may have both public Medicare coverage and private supplemental insurance to cover additional costs.

Special Enrollment Period

In the United States, the Special Enrollment Period (SEP) is a time outside the yearly Open Enrollment Period when individuals can sign up for health insurance. This period is typically triggered by specific life events or changes in circumstances, such as losing health coverage, moving, getting married, having a baby, adopting a child, or if your household income falls below a certain threshold.

The Special Enrollment Period is particularly relevant for young adults who have been covered by their parents' health insurance and are approaching their 26th birthday. Under the Affordable Care Act, young adults are allowed to remain on their parents' health care plans until they turn 26. Once they reach this age, they will need to transition to their own health insurance plan. The SEP provides an opportunity for these individuals to enrol in a new plan without having to wait for the standard Open Enrollment Period.

The timing of the Special Enrollment Period can vary depending on the specific circumstances. In some cases, individuals may have up to 60 days before or after the qualifying event to enrol in a new plan. For example, if someone loses their health coverage, they have 60 days before or after this event to enrol in a new plan. Similarly, for events like getting married or having a baby, individuals must pick a plan by the last day of the month, and their coverage can begin on the first day of the following month.

It is important to note that the Special Enrollment Period is not available if an individual voluntarily withdraws from their current insurance plan or if their previous coverage was discontinued due to non-payment of premiums. Additionally, certain types of moves, such as moving solely for medical treatment or vacation, do not qualify for the Special Enrollment Period.

Insurance riders

In the context of people ageing out of their parents' public insurance, insurance riders refer to add-ons to an existing insurance policy that allow individuals to remain on their parents' plan beyond the age of 26. This option is currently available in seven US states: Florida, Illinois, New Jersey, New York, Pennsylvania, South Dakota, and Wisconsin.

Now, let's delve into the broader concept of insurance riders and how they work:

The process of purchasing an insurance rider typically begins with determining the type of rider that aligns with your needs. For example, if you're planning to start a family, you might consider adding a pregnancy rider to your health insurance plan to help cover prenatal care, labour, and delivery expenses. Riders generally require minimal underwriting, which keeps the cost relatively low. They also offer flexibility, allowing you to purchase specific coverage now and adjust it later as your needs change.

Types of Common Insurance Riders:

• Term Conversion Riders: Allow conversion of term life insurance to permanent coverage without a medical exam, helping lock in lower costs and protecting your family in the future.
• Long-Term Care Riders: Help cover long-term care costs by drawing on your life insurance policy's death benefit, reducing out-of-pocket expenses for you and your loved ones.
• Accidental Death Riders: Provide your beneficiaries with additional funds if your death is the result of an accident, typically doubling the benefit amount.
• Guaranteed Insurability Riders: Allow you to purchase additional coverage or increase your policy's death benefit in the future without undergoing medical examinations or answering health questions.
• Critical Illness Riders: Enable you to access your policy's death benefit upon diagnosis of a qualifying health condition, providing funds for medical treatments, transportation, and other expenses.

Benefits of Insurance Riders:

• Lower Deductibles: Riders often come with lower or no deductibles, resulting in potentially higher insurance payouts.
• Extra Savings: Adding a rider is generally more cost-effective than purchasing a separate insurance policy, reducing monthly premium costs.
• Customised Coverage: Riders allow you to tailor your insurance plan to your specific needs and circumstances, ensuring you have the right coverage for you and your family.

In conclusion, insurance riders provide individuals with the flexibility to customise their insurance coverage. They are a useful tool to address specific needs and circumstances that may not be adequately covered by a standard insurance policy. However, it's important to carefully consider your goals and priorities before adding a rider, as there may be instances where a separate insurance policy is a more suitable option.

Employer-sponsored coverage

In the United States, employer-sponsored coverage is the most common way Americans obtain health insurance. It refers to health insurance obtained through an employer and can include insurance for current employees, their families, and retired employees. Federal law also gives former employees the right to stay on their employer's health insurance, at their own expense, for a period after leaving their job.

The Affordable Care Act, also known as Obamacare, requires employers with at least 50 full-time employees or "full-time equivalents" to provide health coverage to their workers. In this context, full-time equivalents refer to part-time employees whose total work hours add up to a full-time workload (30 hours/week). Applicable large employers that fail to comply with this requirement may be subject to penalties.

Companies that sponsor health coverage are typically mandated to report the cost of that coverage on W-2 forms, the annual wage statements that employees use to file their taxes. Health benefits are not taxed, but the Internal Revenue Service (IRS) requires that this information be included on the W-2 to help workers better understand the value of their coverage. Employees with employer-sponsored coverage usually receive annual statements detailing their coverage on Form 1095-B or Form 1095-C.

Health insurance benefits are more commonly provided by larger companies. According to congressional testimony, an estimated 99% of companies with 200 or more workers offer health benefits. However, these plans face rapidly escalating premiums, with workers' share of premiums and out-of-pocket expenses increasing over time.

Frequently asked questions