How long can you stay on your parents’ health insurance?
“To sum it up…”
- The Affordable Care Act allows children to stay on their parent’s health plans until age 26
- Children can stay on private or employer-sponsored policies until age 26
- Parents can add a minor to a Marketplace policy during Open Enrollment or a Special Enrollment Period
- Once past age 26, young adults can get Marketplace coverage, Medicaid, and CHIP benefits
One of the important reforms in the Affordable Care Act affected young adults in particular. The provision allowed young adults to stay on a parent’s health insurance policy until their 26th birthday. The law does not require further status such as financial dependence or residing in the same household.
Once at age 26, a covered dependent must get new coverage. The Affordable Care Act provides for an open enrollment or special enrollment for those that lose coverage at age 26.
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The Individual Mandate
The Affordable Care Act requires every eligible person to get and keep qualified health insurance coverage. Young adults must get covered if they must file a tax return. Everyone with income above the tax filing threshold. They may qualify for exemptions based on hardship status as a student or other accepted basis. The exemptions only solve the problem of the penalty payment; it does not provide the vital protections of qualified health insurance.
The Age 26 Rule
Obamacare introduced the requirement that qualified health plans and employer plans must cover dependent children through their 26th birthday. This rule applies without regard to marital status.
Married dependents under age 26 get the same protections as single dependents. Young adults can get coverage in the state exchanges or federal marketplace before they pass the age 26.
The rules permit an early sign-up to prevent a gap in coverage that might otherwise occur when losing dependent’s coverage.
Parents can include their children on their Marketplace policies. The Affordable Care Act provides that the dependents can keep this coverage through their 26th birthday. Children can stay on a parent’s policy until age 26 even when one or more of the below-listed facts exist.
- The child is married
- The child does not reside with the parents
- The insured child attends a school, a college , or university
- The child is not financially dependent on their parents
- The child could enroll in their employer’s plan
The best time to add a child under age 26 to a health insurance policy is during the Open Enrollment Period. When purchasing or renewing coverage, the parent needs only list the child as a dependent on the policy. After the open enrollment, one must have a qualifying event for a special enrollment period.
Special Enrollment Period
If one wishes to add a child to a marketplace policy after the close of the annual open enrollment period, then one must have a qualifying event and get a special enrollment period.
The special enrollment period is a 60-day period in which one person can get qualified health coverage and Marketplace assistance.
Getting Covered After Age 26
As stated above the individual mandate requires that every eligible person gets and keeps health insurance. After age 26, one is likely not to continue coverage under a parent’s policy and will have to get coverage. One should note, there are no rules against continuing coverage beyond age 26 on an employer policy.
Given the terms of a particular employer’s plan, one may be able to continue for so long as one qualifies. Most young people will find affordable insurance on the federal Marketplace or state exchange.
Self-employed individuals can take advantage of a strong deduction provision. Self-employed persons can deduct the costs of premiums and expenses for themselves and their dependents. The deductions apply to dental and vision care and include a partner or spouse.
Small Business and Start-Ups
One can get covered as owner of a small business or start-up company. This coverage comes with assistance and potentially with a tax credit to cover costs and to encourage the voluntary employer coverage.
These programs come through the Marketplace SHOP programs. In order to qualify, the owner must have one or more employees. If so, then one can insure the self and one or more employees in a small business employer-sponsored plan.
Tax Benefits of Child Coverage
Parent’s get a tax benefit during the last year of the dependent’s coverage. In the age 26 year, the parents get to deduct the value of the dependent’s coverage.
The law excludes the value of employer-sponsored coverage from the employee’s income through the end of the calendar year in which the child reaches age 26.
This feature helps the parent not pay for coverage that the dependent can no longer get. The parents get to pay the child’s share of the costs of coverage on a pre-tax basis which also reduces their taxable income base for that calendar year.
Benefits of Child Coverage
The costs of health insurance can be a particular burden for young adults. Many young adults go to college and do not begin to work regularly until well past age 21. While the benefits of coverage are clear, the costs may be a barrier for those just starting in jobs, careers, or business.
During this type of personal growth period, many young adults would have difficulty in meeting the requirement for mandatory health insurance. The typical young adult would have to arrange for the costs of insurance while also financing their education or a career development program.
Medicaid and CHIP
Young adults past their 26th birthday can also qualify for free or low costs coverage through Medicaid and, if they have young children, through the CHIP. These programs may be perfect for young adults that are just getting started with jobs and careers.
Low-income will not bar participation. CHIP covers young adults through age 19. Dependents with children can use these benefits to get family coverage.
Can grandchildren get covered too?
Grandchildren may also qualify for coverage under a parent’s plan. The essential qualification is that the natural parents may not also share the residence with the parents and covered grandchild.
Once offered coverage by an employer-sponsored plan, one cannot use the federal Marketplace or state exchanges for tax credits or other financial benefits. A dependent of an employee can get an offer of coverage.
If over age 25, then one may not be eligible for the coverage and it will have no effect on the ability to use the Marketplace or state exchange to get covered.
How Long Can One Stay on a Parent’s Policy?
Children can stay on a parent’s policy until age 26; they get a sixty-day period to get new coverage. They may continue to get coverage as a dependent if they receive an offer of coverage from an employer-sponsored plan.
The law does not bar further coverage of a dependent. The age 26 rule was a major policy change brought about by Obamacare to help young adults.
Comparison shopping is an agile tool for selecting health insurance. Young adults have a lot to consider when selecting a health plan. They must decide costs and coverage to make sure the policy is both affordable and sufficient for their likely needs.
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