The Health Care Reform Act enacted in 2010 requires health insurers to allow adult children to remain on their parents' plan until age 26. It's estimated that due to that stipulation, over two million young adults have been added to insurers' plans since the law was enacted.
So what happens when you reach the age of 26 and you can no longer be insured on your parents' plan? You're on your own and unless you want to pay thousands of dollars in hospital and doctor bills when you do something that even requires mild medical treatment, such as breaking your leg, you'll have to get insurance yourself. Many recent college graduates are taking any job, simply for the benefits. Here's what to expect:
A Consumer-Directed Health Plan
With these plans you pay lower premiums in exchange for higher deductibles. This is perfect for someone young and healthy. In order for a plan to qualify as a high deductible plan the deductible must be at least $1,200 for single coverage and $2,400 for family coverage; that way it can have a Health Savings Account (HSA) attached to it, which is discussed below.
The deductible is the amount you have to pay out of pocket before insurance kicks in. So, let's say you go to the doctor and have to have a $5,000 procedure done (these days that could be simply fixing a nose bleed.) Let's say you have family coverage with a $3,000 deductible; that means you have to pay the first $3,000, and then co-insurance pays a portion of the remaining $2,000 with you paying the remaining portion of the remaining $2,000. A common co-insurance split is 80/20, with insurance paying the 80%.
Gone are the days of simply paying a $25 co-pay for seeing the doctor.
Health Savings Account (HSA)
Most high deductible plans will have an HSA attached. You cannot contribute to an HSA unless you are covered by a High Deductible Health Plan. Contributions are tax-free and balances can be carried forward indefinitly, unlike the HSA's cousin, the FSA, where you loose the contributed dollars at the end of the year if you don't use them.
The purpose behind the HSA is to pay the (high) deductible, and the HSA allows you to do that with before-tax dollars. However, you should always have available funds in a liquid account to pay for the deductible, whether they're in an HSA or not. "No one plans to be sick," as my late grandfather, a surgeon, used to say. Having the liquid funds to pay the deductible will keep you from having to go (further) into debt.
Wellness Programs
In order to keep employees healthy and out of debt due to medical expenses, employers offer incentives for employees to stay healthy, including reimbursement for gym memberships. Other incentives include depositing cash in HSA's for participating in wellness programs, suchs as completing a health questionaire or getting screened for high cholesterol. Conversely, some employers are charging a higher premium for tobacco use.
As part of a wellness program, the Health Care Reform law requires insurers to provide preventive care without charging a deductible or co-pay. Although the deductible is zero for preventive care it does not preclude the plan from being a high deductible plan.
Are you willing to take the risk and pay a lower premium for a high deductible?