Is it Time to Move Your Adult Child Off Your Health Insurance?
Yes, they can stay on your plan until 26. But it may make financial – and adulting – sense to have them get their own plan
The Affordable Care Act made it possible for adult children to stay on a parent’s health insurance plan until the age of 26.
Adult children can stay on a parent’s plan regardless of where they live, if they are married, or whether their own employer offers coverage.
The extension of family coverage until age 26 has been credited with a big drop in uninsured rates for young adults. In 2010 – before the ACA, also called Obamacare, kicked in – more than 35% of young adults between the ages of 19 and 25 didn’t have coverage. By 2015 it was down to around 15%.
Covering a young adult who is still in school might make sense, but if you are continuing to cover an adult child who is working, simply because it’s just something you’ve always done, that is worth a rethink. Especially as we head into the main open-enrollment season for when you can make changes to your workplace benefits.
What does it cost you? An extensive survey last year found that parents with adult children are spending a lot of money continuing to support their kids, at a high cost. Many of those parents have their eyes wide open that helping their child is hurting their ability to save for retirement. If that sounds familiar, you owe it to yourself to review all the various ways you’re helping your kids, including health insurance.
During open enrollment find out what the premium cost difference might be if you no longer provide adult-child coverage. If you’re a single parent with only one child you are covering, switching from family-plan coverage to single could be a big savings.
Or if your child is working and you feel strongly that you want to keep them on your plan, they should at a minimum cover any additional premium to carry them on your plan. You might also consider having an upfront discussion of how you will share co-pays and co-insurance. Asking an adult child to participate in that cost is not tough love. It’s nudging them into adulting, and potentially helping you focus more of your dollars on building more retirement security.
How good is the coverage for your child? If your kid lives nearby – or with you —this isn’t an issue. But if they are not nearby, you want to make sure that wherever your child lives they will have access to in-network doctors. If you work for a smaller firm that doesn’t offer national in-network options, you are setting yourself up for some very expensive out-of-network bills.
Does your kid want some privacy? If you are the policy-holder, technically, bills and those maddening “explanation of benefits” are going to be sent to you. Your child should be aware of that.
What’s the cost for your kid getting insurance? If your child has the ability to be covered through work, it’s a bit nuts to not even compare the cost and quality of that coverage. Don't want to pressure your kid to cover the cost? Okay, but you still may find it could be cheaper to subsidize a child using their own insurer’s plan than to stay on yours.
If your child doesn’t have the option of coverage through work, they can qualify for an individual plan through your state ACA program, or the federal exchange. (Start at healthcare.gov and you will be directed to the right program.) You might want to dive into those options with your kid to see if that might make sense. There are different types of ACA plans.
Moving your kid off your plan into just a catastrophic plan offered through the ACA is, obviously, not what you are after. Rather, price out the premium for a Bronze or Silver plan. Premium costs are typically low for younger adults, and if your kid has yet to hit peak earnings there’s a good chance he or she may qualify for a subsidy that can bring the cost way down.
At the same time, be careful to compare the maximum annual out of pocket cost for an ACA plan, with your exposure through your own plan. If it’s much higher, you might want to keep your kid on your plan. Finally, if your child has some pre-existing or chronic issues, check which doctors are in-network for a plan you are considering. If your child feels strongly about sticking with a doctor, that is going to be part of the decision.