Under the Affordable Care Act, young adults seem to have more health insurance options than anyone. They may remain on a parent’s plan through age 26. Depending on access and eligibility, they may also obtain health insurance benefits from their employer, their state or federal exchange, the private marketplace, or Medicaid.With so many possibilities, what is best? Should twenty-somethings go it alone or stay on their parent’s plan through age 26? It all comes down to individual circumstances.
Here are the major health insurance options young adults have under the Affordable Care Act, what factors may make them favorable, and things consumers should generally keep in mind when deciding:
A parent’s health insurance plan
Beginning with plan dates effective Sept. 23, 2010, and later, the Affordable Care Act requires plans that include dependent coverage to extend benefits to adult children through age 26. These health insurance benefits are available to young adults regardless of their access to employer-sponsored coverage, marital status, or whether or not they are claimed as a dependent. It can be an affordable way for young people just starting out to remain insured until they have more financial stability.
“I think you have to look at it on a case by case basis. If your child is part of your family composition and you keep them on your contract, you have to consider the family deductible,” says Claudia Swink, Director of Individual Business for the Detroit-based Health Alliance Plan. “The more people you have on a contract, the more attractive that plan becomes because you will reach the deductible faster. There’s a value proposition there.”
A parent of a college senior, Swink adds peace of mind to the list of reasons this option may be best for many families. “There’s so much on their minds,” Swink says, providing focus on the job market, grades and completing their education as examples. “Knowing they have coverage through their parents can offer peace of mind for them. I wouldn’t want that on his to-do list. I’d be on him every day about it. They tend to prioritize differently.”
When a child is on a parent’s health insurance plan, as he or she approaches 26, parents should be aware of when coverage will end. Depending on the carrier, it could be at the end of the month when they turn 26. For others, it may be the end of they year.
Job-based health insurance
Young adults with access to employer-sponsored health insurance might consider this option if the plan offers reasonable out-of-pocket and monthly premium costs, says Swink.
Again, adult children may remain on their parents’ health insurance plans, regardless of employment. Just because an adult child has access to health insurance through his or her job does not mean he or she has to take it.
A spouse’s health insurance
As with employment, young adults who are married can still remain on a parent’s health insurance plan. Factors such as plan costs and benefits, as well as timing, may influence them to wait a little longer before obtaining their own coverage.
“Staying on my parents’ healthcare was an easy decision to make since my dad has great benefits from the college he works at,” says Jonathan Gilde, account manager at BrightHaus. “Right now, I’m engaged, and one of the biggest reasons we decided to do March [for the wedding] rather than any later is because my 26th birthday is in April. I’ll be able to be covered on my wife’s plan the second I say ‘I do,’ which is really reassuring since we’re doing a destination wedding.”
In states where Medicaid was expanded to individuals making up to 138 percent of the federal poverty level, adults 18 and older may be eligible for low-cost or no-cost health insurance. Based on the 2014 federal poverty guidelines, an individual whose annual income is up to $16,105 may qualify. Find your state’s Medicaid program to determine eligibility and apply.
If your adult child makes more than that or lives in a state that did not expand Medicaid, he or she may still find more affordable coverage away from your plan as a result of income-based financial assistance available to those who buy health insurance through state-based and federally facilitated health insurance exchanges.
Individual health insurance
As with others who buy their own health insurance, young adults may shop for individual plans on and away from state-based or federally facilitated health insurance exchanges. They can select coverage from the four metal levels or a catastrophic plan, which is available to those under 30.
Adult children who are not claimed as dependents on their parents’ taxes and buy health insurance from a state-based or federally facilitated exchange may qualify for income-based premium tax credits and cost-sharing subsidies. For some, this may be a more economic option.
For example, in 2015, a 24-year-old non-smoker in Denver, Colorado, who make $18,000 a year before taxes can pay as little as $28.25 per month for an exchange-based bronze plan—that’s with a subsidy.
Again, financial assistance only applies to plans purchased from the state-based and federally facilitated exchanges. Estimate your child’s subsidy amount using the HealthCare.com calculator. If he or she qualifies, check your state’s exchange to shop 2015 plans and enroll. Note that exchange-based financial assistance does not apply to catastrophic plans.
Young adults who do not qualify for financial assistance may explore their individual health insurance options in the private marketplace as well. As with the exchange-based plans, families should consider monthly premium rates, deductibles and out-of-pocket expenses when comparing and selecting coverage.
Ultimately, families need to look at the options available, their financial circumstances, and the young adult’s healthcare needs and expenses. Whether adult children are considering the best coverage option until they reach age 26 or aging out of a parent’s plan and looking for coverage on their own, parents and health insurance professionals can be important guides in the decision-making process.
 United States Department of Labor. “Young Adults and the Affordable Care Act: Protecting Young Adults and Eliminating Burdens on Businesses and Families.” http://www.dol.gov/ebsa/faqs/faq-dependentcoverage.html.
 HealthCare.com quote based on 2015 rates.