In their quest to land a job, any job, many young adults will sacrifice what used to be called "fringe benefits" to gain a foot in the door. But many entry-level jobs either offer no health care benefits, or the employee's cost share is prohibitive for someone barely making minimum wage. Add to the equation that most twenty-somethings are in good health and rarely visit the doctor and it's easy to see why many will forego health insurance in favor of paying other bills.
But that's a dangerous choice. One serious accident or illness can rack up tens of thousands of dollars in bills. In fact, more than half of all personal bankruptcies result from unpaid medical bills. Plus, there's a tax penalty for going uninsured.
Fortunately, since the rollout of the Affordable Care Act (ACA), young adults now have more health insurance options than before. In addition to buying coverage through their employer (if offered), people under age 26 may also choose to enroll in their parent's plan, even if they're married or no longer a dependent, or to buy an individual plan through the health insurance marketplace.
If you're currently without coverage or want to explore better options, this is the perfect time to start researching what's available. Here's why:
Open enrollment. For most employer-sponsored benefit plans, the open enrollment period to sign up for 2015 benefits happens in the next few months. Watch for communications from your own employer (if they offer coverage), and ask your parents to do likewise if their company provides dependent health coverage. ACA's 2015 open enrollment period is November 15, 2014, to February 15, 2015.
With both employer plans and ACA, if you miss open enrollment you'll have to wait until the following year to apply unless: you're applying for Medicaid; you qualify for a special enrollment period because of a family status change (e.g., marriage, divorce, birth of child); or you lose your current coverage.
Individual mandate. Another good reason to enroll in a healthcare plan is the so-called individual mandate, which is the ACA regulation that says most people must maintain health insurance with minimum essential coverage for themselves and their dependents or be subject to a penalty for non-compliance.
For 2015, the penalty is the greater of $325 per uninsured person or 2 percent of household income over the tax-return filing threshold for your filing status (e.g., single, married filing jointly, etc.). This threshold is the minimum you must earn to be required to file a tax return. For example, the 2014 threshold for single taxpayers was $10,150. (The IRS hasn't yet announced 2015 thresholds.)
Certain people, like those whose income falls below the federal poverty line, are exempt from the penalty. But keep in mind that even if you opt to forego insurance and pay the penalty, you'll still be responsible for all your healthcare expenses. The maximum penalty is the national average premium for a bronze plan available through the health insurance marketplace. For more information on penalty exemptions, CLICK HERE.
Parent's plan. If your parent's plan offers dependent coverage, you can be added or kept on it until you turn 26, even if you are: married; not living with your parents; attending school; eligible for worse coverage through your own employer; or not financially dependent on your parent. Some plans even allow dependents to stay enrolled until the end of the year in which you turn 26, or longer.
Other considerations:- The value of dependent coverage is not added to parents' taxable income, as it was prior to the ACA.
- Most plans let parents pay dependent coverage using pretax dollars, further reducing the cost.
- If your parents are already covering other dependents, there may be little or no cost to add you to their plan.
- If you're considering staying on your parent's plan but live in a different state, first find out whether you would be reimbursed at lower, out-of-network rates.
- Parents' plans don't cover their children's spouses or grandchildren.
- Parents who buy insurance through the marketplace rather than from an employer also may add dependents to their coverage.
Catastrophic health plan. If you're under 30, you can buy a catastrophic health plan designed to financially protect you from worst-case scenarios like a serious accident or illness. They have lower monthly premiums and higher deductibles than comprehensive plans, which means you pay for most of your care yourself, up to a certain amount. After that, the insurance company pays its share for covered services.
Catastrophic plans also cover three primary care visits per year, regardless of whether you meet your deductible, and many preventive care benefits, including vaccines and screenings, are free. To learn more, CLICK HERE.
Low-income subsidies. If you can't afford your employer's insurance and your income falls below certain levels, you may qualify for a tax credit that reduces the cost of ACA plan coverage. For example, in 2014 a single person earning between $11,490 and $45,960 would likely qualify for lower premiums. (2015 income ranges haven't yet been announced.)
In addition, many states expanded eligibility for their Medicaid programs under the ACA, meaning you could earn more and now qualify for Medicaid. To learn more about subsidies and Medicaid eligibility, CLICK HERE.
Bottom line: Just because your job doesn't provide adequate medical insurance doesn't mean you must go without. Learn which options are available to you -- open enrollment season is almost here.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
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