Should You Turn Down Health Insurance to Stay On Your Parent's Health Insurance Plan?
Today’s millennials have options when it comes to choosing health care coverage. While 77 percent were covered with private or public health insurance in 2013, that number has risen to 81 percent of millennials in 2018.1 That means millennials are finding more affordable, viable coverage options to keep them protected than in previous years - whether it’s through their employer, the Marketplace or by sticking to their parents’ plans. And thanks to 2010’s Affordable Care Act, almost anyone under the age of 26 may be covered under their parent’s health insurance plan.2 While sticking to your parent’s insurance for as long as you can may sound like an obvious choice, there are some careful considerations to make as you graduate college, find a job and look to leave the nest.
Understanding Your Health Insurance Options
You may be wondering what makes you eligible or ineligible for keeping coverage under your parents’ health insurance. The truth is, you don’t have to be living under the same roof as your parents or put off plans for marriage to remain covered. Those 26 and under will remain eligible for coverage under their parents’ plan even if they:
-
Decide to get married
-
Have or adopt a child
-
Start or leave school
-
Move out of their parents’ home
-
Are not claimed as a dependent on their parents’ taxes
-
Are offered coverage from an employer and turn it down3
3 Reasons To Stay On Your Parents’ Plan
If you’re already on a parent’s health insurance plan, remaining on it until you’re 26 could be a financially viable option for both you and your parents.
Reason 1: You’re Not The Only Dependent
If you are not the only dependent (think about siblings or the plan sponsor’s spouse), it is possible that you’re not costing your family any additional premiums to keep you covered under their plan. In some cases, the amount of dependents doesn’t affect the cost of the plan. If this is the case, it may make more financial sense to stay under your parents’ plan than to pay a separate health insurance premium of your own.
Reason 2: Finding In-Network Care
If you still live with your parents, or at least close by, you’ll likely face little challenge in finding a primary care physician or hospital that’s in your network. This can make things a bit more convenient in finding medical professions nearby, making it an important consideration for staying under your parents’ plan.
Reason 3: Reducing Your Personal Cost
As you graduate college and head into the workforce, the chances are high that you haven’t hit your prime earning years yet. Instead, you’re likely working an entry-level or lesser paying job now than you will be 5, 10, 15+ years down the line. But when it comes to health care premiums, the less you make, the higher the percentage of your salary goes to your premium. According to the ADP, if you have an annual income between $15,000 and $20,000, approximately 9.5 percent of your income will go toward healthcare premiums. But the more you make, the lower that percentage drops. Meaning if you’re making between $35,000 and $40,000, you can expect to put about 6.4 percent towards premiums.4 As you’re just starting to accumulate wealth, pay off debt and start saving for the future, it may make more sense to stick to your parent’s plan than to forfeit a sizeable percentage of your paycheck every month.
3 Reasons To Leave Your Parent’s Plan
While remaining under your parents’ plan may have worked well in the past, you could be in the position now to find a more suitable option for the following reasons.
Reason 1: You’re About To Turn 26
While you know you must leave your parents’ plan at the age of 26, you may want to consider leaving earlier if the option arises. For example, if you’re 25 ½ and just started working at a new job that offers health insurance, it may make more sense to opt in now. Otherwise, you’ll be stuck going through the selection process soon enough anyway.
Reason 2: Moving Away From Your Parents
Staying on your parent’s plan can offer better prices for in-network medical facilities, but moving out of the state or region may limit your access to these in-network offices. Paying out-of-network because you are nowhere near your parents could possibly negate the benefits of staying on your parents’ plan in the first place. Instead, it may make more sense in your specific circumstance to opt for your own insurance and network.
Reason 3: You’re Growing Your Family
Your parent’s plan will likely cover you until you’re 26, even if you have a child or get married. But if that spouse or baby needs coverage, they will not fall under your parent’s plan. If you need to begin covering your new family, you’ll have to get an insurance plan of your own.
If you’re under 26 and steadily growing your independence, it’s important to consider whether or not staying on your parents’ health insurance plan is the best option for you. Everyone’s circumstances are unique, but we’ve provided some worthwhile pros and cons you can discuss with your parents or partner as you decide.
At Sorensen Wealth Management we have access to a network of professionals that can help evaluate your health insurance options.
I need help deciding what health plan is best for me
1 https://www.statista.com/statistics/703397/health-insurance-status-millennials-in-us/
2 https://www.hhs.gov/sites/default/files/ppacacon.pdf
3 https://www.healthcare.gov/young-adults/children-under-26/
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
