When Do You Get Kicked Off Your Parents’ Insurance?

If you’re a young professional still trying to navigate this whole adulting thing, you might be wondering: Can I stay on my parents’ insurance until I’m 30? A few states may let you do so, depending on your situation. But for the most part, young adults can expect to lose their coverage soon after they turn 26.

So, your best option is to do some research and start planning before you hit the big 2-6. Here’s what you need to know.

After Turning 26, What Are My Health Insurance Options?

If you’re turning 26 soon and work a full-time job, your employer may offer health insurance benefits. You may be familiar with open enrollment, which is an employee’s yearly opportunity to sign up for the benefits their company may offer with full-time employment—including health insurance. However, turning 26 is considered a “qualifying life event,” which means you’re eligible for a special enrollment period outside of the standard open enrollment. Here’s the catch: you only have 60 days to enroll, so it’s best to know your plan before your birthday.

The most common plans on the health insurance menu include health maintenance organization, preferred provider organization, and high-deductible healthcare plan. Then, depending on the plan you choose, you can also elect to enroll in a health savings account or a flexible savings account.

How to Read the Insurance Alphabet Soup: HMO, PPO, HDHP

What Is an HMO?

A health maintenance organization, or HMO, has the most limits of the plans. This plan’s coverage only includes doctors who work with the HMO, and out-of-network care is not covered except in emergencies. If you need to see a specialist, you’ll need a referral from your primary care physician or else your insurance won’t cover the cost. If you expect your regular medical expenses to be relatively high, an HDHP might be right for you.

What Is a PPO?

A preferred provider organization, or PPO, contracts with a network of medical providers that you can use, such as doctors and dentists. With this plan, you have to pay a certain amount for your healthcare services before your insurance kicks in and pays the costs for you. This is known as a deductible, and these out-of-pocket costs vary depending on the plan your company offers. If you want to use a medical provider outside of the plan, you have to pay an additional cost.

What Is an HDHP?

As the name suggests, high-deductible healthcare plan, or HDHP, offers lower premiums, which is the amount you are billed every month to keep your coverage, but your deductible is higher. Plans with deductibles of at least $1,400 for individuals and $2,800 for families fall into the HDHP category, as defined by the IRS.

On the bright side, individuals can often use an HSA (or in some cases, an FSA) to pay for expenses not covered by their plans.

What Is the Difference Between an FSA and an HSA?

A flexible savings account, or FSA, functions like a medical expenses-specific bank account to pay for out-of-pocket costs with tax-free dollars. An FSA can be used with any health insurance plan if your employer offers it. However, FSAs come with a few restrictions. First, you need to figure out how much you want to contribute at the beginning of the year. As of 2021, contributions are limited to $2,750 a year. If your employer makes contributions, it won’t count toward your designated maximum. Second, unused dollars don’t roll over.

Read more about FSAs.

If you enroll in an HDHP, you qualify for a health savings account, or HSA, which both you and your employer can contribute to. You can contribute, invest, and withdraw dollars to cover qualifying medical expenses tax-free. Plus, the money rolls over every year. However, there are contribution limits. For 2022, the IRS announced the annual limit for individuals with self-only coverage is $3,650. For family coverage, the limit is $7,300.

Read more about HSAs.

After Turning 26, What Are My Health Insurance Options if I’m Not a Full-Time Employee?

If you work in the gig economy, work part time, or are unemployed, your health insurance options include:

• Medicaid: Individuals with lower income may qualify for this low-cost plan through the federal government.
• Health Insurance Marketplace: Individuals with unpredictable income streams can apply for a plan based on their estimations.
• Consolidated Omnibus Budget Reconciliation Act, or COBRA: Individuals who lose their jobs can continue their existing coverage for a limited amount of time through this program.

Why Do I Need Health Insurance?

After turning 26, health insurance is still necessary. Medical debt doesn’t pick and choose—it affects both the uninsured and insured. According to a study from the Kaiser Family Foundation, 41% of adults carry debt from medical or dental bills.

Make your plan before this big birthday sneaks up on you—life can take unexpected turns and come with unexpected costs, too. Take the time to evaluate your options so you can find a plan that fits your needs and situation.

Here are some additional sources to help guide you through the maze:

• https://www.healthcare.gov/young-adults/coverage/
• https://www.healthcare.gov/turning-26/
• https://www.healthcare.gov/glossary/

Have more questions about adulting? Let’s figure out these financial milestones and hurdles together.