Finding health insurance protection that is both cost-efficient and tailored for their individual situations can be tricky for young adults. Your age, employment status, personal emergency fund and medical history can all affect your choice of plan. Here’s how.
Should you piggyback on your parents’ health insurance?
If you’re under age 26, you’re eligible to stay on your parent’s health insurance coverage even if you’re married, eligible to enroll in a plan at work, attending school, not living with your parents or not financially supported by them. If you aren’t employed or have a part-time job without insurance eligibility, stay on your parents’ plan! The premium charged to your parents will likely be less than a federal exchange. However, if you have a full-time job with health insurance coverage, your cost for that plan will likely be less expensive than what your parents would pay on their plan.
Should you take the high road or the low road?
If you’re over the age of 26 and employed, you have multiple options when choosing health insurance coverage. Employers often give you the choice between a high out-of-pocket plan with low premiums or a low out-of-pocket plan with higher premiums. “Out-of-pocket” costs include deductibles, coinsurance and copays. Consider these three factors when deciding between these two options:
1) Do you anticipate starting a family soon?
If so, then choosing the lower out-of-pocket plan makes the most sense. Take it from a guy with two kids under the age of three; you’ll quickly meet your out-of-pocket maximum!
2) Do you have sufficient emergency funds to pay for high out-of-pocket costs?
If you’re living paycheck-to-paycheck, a family in-network out-of-pocket of $6,500 may not be feasible without taking on debt. Although the premiums may be higher with a low out-of-pocket plan, when weighed against the out-of-pocket costs incurred with a major medical event, the lower out-of-pocket plan may be the better option.
3) What’s your medical history?
If your medical history is relatively clean, you have some ready cash on the side and you don’t anticipate any major medical expenses, then a high out-of-pocket plan may be appropriate. Choosing a high-deductible plan will also make you eligible to contribute into a Health Savings Account (HSA).
What are the advantages of a Health Savings Account?
An HSA is a great way to use pre-tax dollars on qualified medical expenses such as deductibles, copays, coinsurance, medications, chiropractors, physical therapy and contact lenses. Here’s how it works. Pre-tax contributions from your paycheck are deposited directly into your HSA and you can withdraw them tax-free to pay for eligible medical expenses. If you overfund the account, the money can be used for medical expenses in future years or for Medicare costs down the road. If you underfund the account and are forced to use your personal savings to cover a major medical expense, you can make HSA contributions in future years and refund yourself for expenses from previous years. Don’t confuse HSAs with Flexible Spending Accounts (FSAs). Typically FSA funds don’t roll into future years. In short, if you don’t use it, you lose it!
Contact Evan if you have questions or would like additional information regarding this topic.
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