Entering adulthood is expensive, and whether it's paying rent or student loans, you're probably noticing that your paycheck isn't going quite as far as you thought it might. Fortunately, one expense that might stay affordable for a bit is health insurance since you can stay on your parent's plan until you turn 26.
While these extra years of coverage are helpful when establishing your career and getting your finances in order, eventually, you’ll need to find your own healthcare coverage. Obtaining healthcare coverage is a significant financial milestone that requires dedicated financial planning. Here’s what you need to know about the transition of aging out of your parent's healthcare plan.
How long can you stay on your parent's insurance?
In 2010, the Affordable Care Act (ACA) made it possible to stay on your parent's health insurance until age 26, and even longer in some states. Typically, you can stay on your parent's insurance even if you’re married, have children, or don’t live with your parents. Likewise, even if you qualify for insurance through your employer, you can remain on your parent's insurance.
While 26 is the maximum age at which you can stay on your parent's insurance, some states allow you to stay on your parent's insurance until age 30, while other states have no age limit at all. Often, these higher age limits have qualifying criteria, such as having a disability or being a student.
For example, in Pennsylvania, you can stay on your parent's insurance until you turn 30, but you can't be married or have dependents. You also either need to be a resident of the state or enrolled as a student.
Here’s a breakdown of the age limits for each state that go beyond age 26 (note that conditions may apply in order to be eligible for coverage). You can look up details about your state on the ACA Marketplace.
Age Limit |
States |
|
27: |
Wisconsin |
|
29: |
South Dakota |
|
30: |
Florida, Illinois, New York, Pennsylvania |
|
31: |
New Jersey |
|
No Age Limit: |
Georgia, Indiana, Massachusetts, Minnesota, Missouri, Nevada, Ohio, Oregon, Rhode Island, South Carolina |
Options after aging out
If you’re aging out of your parent's insurance coverage, you have plenty of options for healthcare. It’s important to note that some options are more suitable than others depending on factors like your employment status and your household income, but the list below is a good starting point.
- Employer-sponsored health insurance
If you have a job, you may be eligible for employer-sponsored health insurance. Sometimes referred to as group health insurance, this is a benefit often included as part of your overall benefits package. Group health insurance is often less expensive than buying your own policy because your employer may subsidize some of the costs.
Choosing employer-sponsored health insurance does have some downsides, the biggest one being that you’ll have fewer plan options (or sometimes only one) to choose from.
- Affordable Care Act marketplace
The Affordable Care Act (ACA) marketplace is an online platform that allows you to purchase an individual or family healthcare plan. There are 31 states enrolled in the ACA marketplace, while the remaining 19 states and the District of Columbia have state-run insurance marketplaces that function similarly.
The average monthly premium for an ACA policy in 2023 was $604.78, and for those receiving advance payments of the premium tax credit, the average monthly premium was $127. Ultimately, how much you’ll pay depends on your income, the plan you choose, and whether you qualify for any tax credits or subsidies related to your healthcare plan.
- Private health insurance
You can purchase your own private health insurance. These plans are similar to those you’ll find on the ACA marketplace, but they aren’t subject to the regulations and mandates (for example, mandating coverage of preexisting conditions) of the ACA marketplace. For this reason, private health insurance may be less expensive.
- COBRA health insurance
If your parent previously had employer-sponsored health insurance but was fired or laid off, you can continue this insurance coverage thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA gives you the right to choose to continue your group benefits for a period of time while you search for alternative healthcare plans. To qualify for COBRA, the employer must have 20 or more employees on their group health plan.
Keep in mind that with COBRA health insurance, you’ll be paying both your and your employer’s portion of the cost of the plan, which can make it quite expensive.
- Medicaid
You may also qualify for Medicaid, a state-provided healthcare plan for people with lower income, disabilities, or who are over 65, as well as children and those who are pregnant. Medicaid is a comprehensive plan that offers coverage for not only health concerns but also dental care, prescription drugs, mental health services, and long-term services and supports.
Use the ACA marketplace to determine if you qualify for Medicaid, or you can contact your state’s office directly. The level of coverage you are eligible for will depend on your income and your age.
Budgeting for health insurance
There are a wide variety of options available for health insurance once you age out of your parent's plan, and most of them will involve paying monthly fees (known as premiums) and lump sum payments (called deductibles). Regardless of whether you choose an affordable plan or one with more coverage, you should ensure you have room in your budget for the cost. Here are some of the costs you should prepare for.
- Premiums
Your healthcare plan premium is the monthly fee you pay to keep your healthcare plan in good standing. You’ll need to pay your monthly premium regardless of whether you use your healthcare plan, even when you don’t have any doctor appointments or other medical expenses. You should include your monthly premium in your regular budget, just as you would a cell phone bill or rent payment. If you have employer-sponsored health insurance, this cost is often deducted directly from your paycheck.
- Deductibles
Beyond your monthly premium, you’ll also need to pay a fee (known as a co-pay) each time you use your healthcare plan for services like doctor visits. Your co-pay amounts will be applied toward your overall deductible, which is a predetermined amount that you must pay before your health insurance starts sharing the cost. It’s smart to set aside the amount of your deductible in an emergency fund, since it can be several thousand dollars. The last thing you want to worry about while dealing with a medical emergency is paying your deductible!
- HSA contributions
Depending on your healthcare plan, you may have access to a health savings account (HSA). These accounts allow you to make contributions that can then be used for healthcare expenses, such as co-pays or prescription drugs. In some cases, your employer may also contribute to your HSA.
Final thoughts
First, do your research and prepare your finances before you turn 26. If applicable to your situation, speak with your employer’s human resources or finance department to understand eligibility requirement for health insurance. Then, shop around for the best options, either through the ACA marketplace or other avenues. Finally, choose the healthcare plan that best fits your needs and budget, being mindful that some healthcare plans have specific times of year when you’ll need to enroll.
If your parent's insurance is an ACA marketplace plan, your insurance will last until December 31st of the year you turn 26, and you can buy your plan after that. If your parent has a job-based plan, your insurance may last until the end of your birth month, and you can buy an ACA marketplace plan during a special enrollment period that runs for 60 days after you lose coverage.
Aging out of your parent's healthcare plan is a milestone of adulthood - and if a potentially expensive one at that. If you aren’t sure where to start, a Fulton financial advisor can help you build your benefits and financial foundation now to support your future goals.
