Graduating college soon and not sure about your next steps into the so-called “real world”? As a young adult, you’ve got lots of decisions to make. From where to live to what to do. And one of those decisions is what to do about health insurance now that you’re heading out on your own.
If you’re covered under a family health plan, then you’re in luck. Thanks to the Affordable Care Act, you can stay on your parents’ plan until you turn 26 (more on that below).
But if you don’t have that option, then you may be wondering how to get covered.
Rest assured you still have options. Here’s what to do about health insurance once you graduate college.
Option #1: Your Family’s Plan
As we mentioned in the intro, you can stay on a family health plan until you turn 26. So if your parent or parents have a family plan and agree to keep you on it, this is probably your best option until you can get your own comprehensive coverage.
Worried you’ll lose coverage if you move out? No need. You can generally stay on a family plan until you’re 26 even if you:
- Get married
- Have or adopt a child
- Don’t live with your parents (the policyholders)
- Aren’t claimed as a tax dependent
- Have access to a job-based plan but turn it down
- Start or leave school
You may not get kicked off the plan abruptly at age 26, either. That depends on your state’s own rules and whether your parents have a marketplace plan or something else. Marketplace plans allow kids to stay on a family plan until December 31st of the year they turn 26.
If you’re graduating and have access to a family plan, consider staying on it for as long as you can.
Option #2: Marketplace Coverage
When we say “marketplace coverage,” we mean health insurance that meets the standards of the Affordable Care Act (ACA or “Obamacare”). These plans are robust and comprehensive. They cover pre-existing conditions and can’t deny coverage or charge higher rates to people with health problems. Marketplace plans also cover 10 essential health benefits, like preventive care, prescription drugs and mental health care, among others.
If you graduate college and lose your student health plan, you may be able to enroll in a marketplace health plan during what’s called a Special Enrollment Period.
Special Enrollment Period
Normally, you can only sign up for ACA marketplace plans during the open enrollment period, which runs in the fall each year. But a Special Enrollment Period allows people to sign up when they experience a qualifying life change. That can mean:
- Getting married or divorced
- Having or adopting a baby
- Moving
- Experiencing certain hardships
- Losing certain health insurance plans
There are actually dozens of events and circumstances that can trigger a Special Enrollment Period, and these periods usually only last for 60 days starting from when the triggering event happened. So if you move on June 1st, for example, then you may only have until July 30th to apply for coverage. (It’s better to do it as soon as possible, though.)
Leaving school could also count as a qualifying life event, particularly if you’re also losing access to a student-based health plan. If that’s the case, see if you can apply for a marketplace plan.
A note about the cost
One big advantage to marketplace plans is that most people qualify for a tax credit, aka subsidy, to lower the monthly premium cost. You need to earn an income above 100% of the poverty level, but there’s no cap on income like there used to be. How much you get in subsidies depends on how much you make, with lower incomes getting more help.
As an example, a 23-year-old living in Orlando, FL, and earning $25,000 a year could find a silver level marketplace plan from Molina Healthcare for about $40 a month thanks to subsidies. Without subsidies, that same plan would cost just under $395 a month.
Marketplace plans come in four different metal tier levels: bronze, silver, gold and platinum. Each metal tier covers a different percentage of medical costs overall. It’s not exact for every specific service, but in general, it’s: 60% for bronze, 70% for silver, 80% for gold and 90% for platinum.
The lower the premium, the higher the cost sharing (deductibles and copays) will be, so look for a plan that strikes a balance between affordability and coverage. Silver plans tend to be a good value on this front.
Enrolling in a marketplace plan
Most states defer to the federal government site at HealthCare.gov for enrollment, but these states (plus D.C.) offer their own exchanges to enroll in ACA health insurance:
- California
- Colorado
- Connecticut
- Idaho
- Kentucky
- Maine
- Maryland
- Massachusetts
- Minnesota
- Nevada
- New Jersey
- New Mexico
- New York
- Pennsylvania
- Rhode Island
- Vermont
- Washington
Important note: you don’t have to use a government marketplace to enroll in marketplace coverage. You can also use sites like ours (here) to compare options, apply for subsidies and enroll.
Option #3: Short Term Health Insurance
Another option for health insurance when you’re graduating college is short term health insurance. These plans, as the name suggests, are for short term situations. They’re ideal for times when you may not be able to get comprehensive insurance, like a marketplace plan or job-based coverage.
Short term health plans aren’t the same as marketplace plans, but they are considered a type of health insurance. You pay a monthly premium for coverage, and the insurer covers a portion of your medical costs based on the terms of the plan. The difference is in coverage and eligibility. We’ll talk about those differences below.
Benefits of short term health insurance
Let’s start with the positive. Short term health plans are meant for exactly the scenario we’re talking about in this article. Gap periods. Young adults who don’t have other options for health insurance and who just need something to act as a cost safety net during times of flux. Highlights of short term health insurance include:
- Lower premiums than major medical insurance
- Flexible plan terms, from 30 days to nearly a year in some states
- More customizable plan options
- No network restrictions (typically)
You also don’t need to worry about enrollment periods with short term coverage. If you need it today, just sign up and it’s done. Coverage can start as soon as the next day assuming you pay your premium. You can also drop it anytime if you find more comprehensive coverage later.
A few downsides to think about
A cheaper health plan that you can get whenever you want? Sounds too good to be true, right? Well, for some, it is. Short term plans don’t work for everyone. Typical downsides to these policies include:
- No coverage for pre-existing conditions
- More limited benefits than marketplace plans (e.g., no coverage for preventive care)
- No guaranteed right to renew or extend the coverage
There are sometimes exceptions to these drawbacks. For example, some short term plans do cover preventive services, to a point. And you might find plans that can be bundled together for a multi-year period depending on where you live. But for the most part, these are standard downsides to short term plans that you should consider before signing up.
If you have chronic health problems or an ongoing medical issue, short term policies probably aren’t a good option for you. These plans are designed for a younger, healthier pool of people.
They don’t have to adhere to Affordable Care Act rules about major medical plans, either, so they don’t count as qualifying coverage in states that still mandate health insurance.
But if you’re relatively healthy and you just need something to bridge a gap between major medical plans, short term coverage could work for you. Weigh the pros and cons when comparing your options.
Other Options
The three options above aren’t your only options, though they may be the best and most straightforward. You have some other choices, including skipping health insurance altogether – but that’s a bad idea.
Assuming you plan on getting some kind of coverage and just want to check out all the options, consider:
- Extending a student health plan. If you had a student health plan while you were in college, see if it can be extended for a grace period. Some schools may allow this, maybe through the summer or before the next term starts. This is probably not a likely scenario, but it’s worth a check.
- Using COBRA coverage. Another unlikely but possible option for you is to continue work-based coverage through COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act. This law allows people who lose work-based health insurance to stay on an employer plan for a limited time. So if you worked while you were in school but have to leave that job once you graduate, and you had health benefits through that job, you may be able to use COBRA benefits. The downside here is that COBRA coverage is expensive since employers don’t have to continue paying any portion of the premium. That means you might have to foot the whole bill yourself.
- Enrolling in a government plan, like Medicaid. Whether you can enroll in Medicaid or not depends on where you live. Medicaid is a state-based program with partial federal funding, so states can decide on eligibility. Many states expanded Medicaid eligibility under guidelines from the Affordable Care Act. Some still haven’t as of 2023. You can go to HealthCare.gov and enter some info to see if Medicaid is an option for you. But Medicaid isn’t the only government program. If you’re a veteran or veteran dependent, you might qualify for health insurance through a military entity like the VA or TRICARE. Depending on where you live or your situation, you might also be able to access other assistance programs to help you out with health insurance. It never hurts to check.
The best option is to get covered at all.
As a newly minted college grad, you might be tempted to forgo health insurance altogether. With a tight economy, medical insurance can feel like a luxury. It’s not. Health insurance is just one of those things that feels like a waste until you really need it. Then you find out the hard way how expensive medical care really is in the U.S.
With several good options for young adults, there’s no reason to go without coverage. You can stay on a parent’s plan until age 26, find your own marketplace coverage, get a short term health insurance plan or apply for government assistance depending on where you live. And if you find a job that offers benefits right away, even better. Just make sure you choose a plan that works for you.
