The college graduation ceremony is a rite of passage. Unfortunately, a lot of college grads go through another rite of passage shortly afterwards when they lose their health insurance coverage. Welcome to adulthood – now you’re uninsured!
When Congress wrote the health reform law popularly known as “Obamacare” they did not make college graduation a “qualifying life event” allowing you to enroll in a health insurance plan of your choice. In fact, unless you experience a qualifying life event, you may have to wait months until the next open enrollment period to sign up for major medical coverage.
That doesn’t mean you don’t have options, however. In order to help you better understand your health insurance choices after college graduation, we’ve put together the following tips. By following them and enrolling in the best plan for your needs, you could save hundreds of dollars per year in tax penalties and medical bills:
Here are 10 Health Insurance Tips for College Grads
- Know a qualifying life event when you experience one. A qualifying life event allows you to purchase an Obamacare-compliant health insurance plan outside of open enrollment and apply for subsidies to help you pay for your monthly premiums. Qualifying life events include things like marriage and divorce and the birth or adoption of a child. College graduation is not a qualifying event. However, losing Obamacare-compliant coverage that you received through school, a job, or your parents may be a qualifying life event. Moving to a new city or state may also be a qualifying life event. Work with a licensed agent like eHealth to learn if you’re eligible to enroll in an Obamacare-compliant plan when you graduate this year.
- Review ALL your coverage options. College graduation is a good time to take stock of your life. Are you ready to start your career? Are you living in the city you want to live in? Is your current health insurance plan really the best choice for you? It’s time to re-examine your options, all of them. When it comes to health insurance, these may include purchasing coverage on your own, sticking with Mom and Dad’s plan, or enrolling in coverage through an employer, among others. If you don’t have coverage from a parent, employer, school, or other source, you should consider buying coverage on your own. Keep an open mind and review the coverage options available to you through a variety of sources.
- Buying coverage on the cheap may cost you more than you think – or can afford. Don’t pick your next health insurance plan based only on which one has the lowest monthly premium. Instead, look at the “maximum out-of-pocket” amount for any plan you’re considering. This is what you could potentially need to pay, in addition to your premiums, for covered medical care in a worst-case scenario (like a serious illness or an injury requiring hospitalization). A monthly premium of $150 (for example) might sound great until you realize that your maximum out-of-pocket cost would be $6,000! If the lowest-premium plan is all you can afford, consider buying an accident or critical illness plan on the side to help cover your out-of-pocket costs in worst-case scenarios.
- Think twice before sticking with Mom and Dad’s health plan. The Affordable Care Act allows your parents to keep you on the family health insurance plan until you turn 26. That’s a pretty good deal. However, Mom and Dad aren’t required to keep you on their plan and it may cost them to do so. What’s more, if you live away from home, in another city or state, your access to network doctors and hospitals through your parents’ plan may be limited or non-existent. So, don’t automatically stick with your parent’s plan. Find out if there are other, better options available to you first.
- Look beyond government exchanges. If you experience a qualifying life event and find yourself shopping for health insurance, don’t limit yourself to government-run health insurance exchanges. There are other plans available outside of government exchanges that can also meet your coverage requirements under the Affordable Care Act. To find the plan that best meets your needs and budget, compare the options available through your government exchange with other options available through private online marketplaces like eHealth. Some private marketplaces can also help you apply for government subsidies if you qualify.
- Consider short-term coverage for the in-between times. If you don’t expect employer-based health insurance to kick in for a while and you’re not eligible for (or can’t afford) coverage through another source, consider a short-term health insurance plan. Just make sure you understand what you’re buying. A short-term plan is a form of temporary coverage (from 30 days up to 12 months). It will not meet your coverage requirements under the Affordable Care Act, meaning that you may still be subject to a tax penalty. Short-term plans also may not provide coverage for preventive care, pre-existing medical conditions, or prescription drugs. However, short-term plans are relatively inexpensive and can limit your financial risk for medical care you receive for unexpected illnesses or covered injuries.
- Keep an eye open for the next open enrollment period. The next nationwide open enrollment period for self-purchased health insurance is coming up on November 1, 2015. If you’re not otherwise eligible to sign up for traditional major medical health insurance after graduation, this will be your chance to do so. Don’t let it pass you by. Even if you find major medical coverage after graduation, you should use the upcoming nationwide open enrollment period to make sure you’ll have the best plan for your needs into 2016.
- Check your subsidy eligibility. If you experience a qualifying life event allowing you to enroll in coverage outside of open enrollment, find out if you qualify for a government subsidy to help you afford health insurance. In order to qualify, your projected income for 2015 can be no more than 400% of the federal poverty level, which is about $47,000 for a single person. Be aware, however, that unexpectedly earning more this year could mean that you end up having to pay back some or all of your subsidy dollars. To learn about your eligibility for a health insurance subsidy, work with a licensed agent or your state’s government exchange.
- Consider a “catastrophic” health insurance plan.These are major medical plans intended primarily for people under age 30. They provide less coverage overall than typical health insurance plans but may be more affordable on a month-to-month basis. They’ll meet your coverage requirements under the health care reform law but you can’t use government subsidies to help pay for them. Catastrophic plans might be a good choice if you can’t afford more robust coverage but want something to back you up in case of an emergency. Just be sure that you could pay your deductible in a real emergency.
- Understand your tax obligations if you go uninsured for 2015. Being uninsured the day after graduation doesn’t mean that you’ll automatically have to pay a tax penalty. Under the Affordable Care Act, tax penalties are triggered when you go uninsured for three consecutive months or more in the same calendar year. There are also exemptions for people with very low incomes or certain other circumstances. If you’re tempted to go uninsured after graduation, make sure you understand what your tax penalty may look like. For 2015, the tax penalty for going uninsured is the greater of $325 or 2% of your taxable income. Depending on how much you earn in 2015, your tax penalty for going uninsured could be hundreds of dollars or more.
With the above student health insurance guide, you can now explore your options for health insurance plans by entering your zip code where indicated on the right side of this page. Or, you can sign up for our newsletter in the lower right side of this page, too.