Under 26? Should You Stay on Your Parent's Health Insurance?

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 healthcare benefits, or the employee's cost share is prohibitive for someone barely making minimum wage. Add to the equation that most twentysomethings 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 thousands of dollars in bills. In fact, over half of all personal bankruptcies result from unpaid medical bills. Plus, there's usually a tax penalty for going uninsured.

Fortunately, since the Affordable Care Act (ACA) rolled out, 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:

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 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.

Another good reason to enroll in a healthcare plan is the so-called individual mandate, an 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.

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. For more information, go to www.healthcare.gov/exemptions.

If your parent's plan offers dependent coverage, they can add you 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. If they're already covering other dependents, there may be little or no cost to add you to their plan. Plus, they can generally pay the premium using pretax dollars if it's an employer-provided plan.

Other coverage options include:

• Those under 30 can buy a catastrophic health plan designed to financially protect against worst-case scenarios like a serious accident or illness. For information, search "catastrophic" at www.healthcare.gov.
• 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.
• 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, search "income levels" at www.healthcare.gov.