Health Insurance at Age 26: Leaving Your Parent's Plan
Health Insurance at Age 26: Leaving Your Parent's Plan
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Most young adults age off of their parent's health insurance plans soon after they turn 26. Depending on the type of insurance plan, 26-year-olds could lose coverage at the end of their birthday month or at the end of the calendar year. This cutoff is because of the Affordable Care Act (ACA), which only requires health insurance providers to cover a dependent on a parent’s plan until the age of 26.
The age 26 health insurance rule
In most states, turning 26 means you're no longer eligible for health insurance coverage through a parent's plan.
This health insurance rule was established by the Affordable Care Act (ACA). Before this, insurers routinely dropped young adults from their parent's insurance policies after they reached a certain age or stopped attending school full time after the age of 19, which meant they no longer qualified as dependents under the rules of the Internal Revenue Service. As a result, many young adults lost their insurance earlier.
Before the ACA, more than 30% of young Americans were uninsured, making them the highest uninsured group of any group in the country. The ACA provision has bridged this coverage gap, making it possible for millions of young Americans to retain health care coverage through their parents.
With this rule, young adults age 26 and under can stay on their parent's health insurance plan even if they:
- Have started or finished school
- Are no longer claimed as a tax dependent
- Are married
- Adopt or have a child
- Turn down employer-sponsored health insurance coverage
How long can you stay on your parent's insurance after you turn 26?
The timelines for when coverage ends depends on the type of provided coverage.
- If you are covered under your parent's employer policy, you have until the end of the month when you turn 26 to choose a new health insurance plan.
- If you receive coverage under your parent’s ACA market-based plan, you have until the end of the calendar year, Dec. 31, before your coverage ends — even if you turn 26 mid-year.
States that allow extended coverage after age 26
Eight states — Florida, Illinois, Nebraska, New Jersey, New York, Pennsylvania, South Dakota and Wisconsin — have enacted measures allowing beneficiaries to stay on their parent's health insurance plans well past the age of 26. This provides a grace period allowing for the continuation of health insurance coverage.
The requirements for staying on a parent’s health insurance policy vary depending on the state. In Pennsylvania, for example, you can stay on your parent’s health insurance policy until 29 if you meet certain conditions. The first requirement is the insurance plan must be group coverage through a parent's Pennsylvania-based employer. You cannot be married and cannot have any dependents. You also have to be either a resident or enrolled as a full-time student in college.
State | Age limit | Eligibility requirements |
|---|---|---|
| Florida | 30 |
|
| Illinois | 30 |
|
| Nebraska | 30 |
|
| New Jersey | 31 |
|
| New York | 29 |
|
| Pennsylvania | 29 |
|
| South Dakota | 29 |
|
| Wisconsin | 27 |
|
Losing health insurance triggers a special enrollment period
When you age off your parent's health insurance plan, you automatically qualify for a special enrollment period (SEP) under the ACA, allowing you to enroll in a marketplace plan outside of the regular enrollment periods.
The SEP for signing up for health insurance starts 60 days before your coverage ends and lasts 60 days after coverage ends, totaling 120 days.
If you are slated to lose coverage, you should know the exact date coverage ends while finding alternative sources of coverage that will take effect on the day that coverage terminates so there are no gaps or lapses in coverage.
In other words, if you enroll in a health care plan on Jan. 3, coverage does not usually take effect on Jan. 4, making it important to plan ahead and make sure you enroll in a plan so that coverage starts when you need it to.
Best health insurance options when you turn 26
There are seven ways to obtain insurance if you are aging off of your parent's insurance plan. But before choosing an insurance plan as a young adult, you need to evaluate your own situation, determining, for example, what you need in a health plan and how much you can afford.
If you are healthy, you may not need a comprehensive and more expensive health plan that is designed for someone with chronic illnesses. By the same token, if you are a young adult with a chronic illness, you may need a more comprehensive plan.
There are other considerations. A young adult who is planning to start a family will have different coverage needs than a young, single adult starting their first job and living alone.
Employer plans: Best for those who can get coverage through a job
Employer-based coverage should be one of the first places to look for coverage if you are employed and aging off your parent's insurance plan. This is how most people in the country get their health insurance.
Employer plans are usually relatively inexpensive because the employer contributes to the cost of insurance. But employer plans can come with drawbacks, limiting employee choice, for example, by only offering one plan or by offering only one plan with a restrictive network.
COBRA: Expensive but good for a coverage gap
Beneficiaries who are aging off of their parent's insurance can stay on the same plan through the Consolidated Omnibus Budget Reconciliation Act (COBRA).
Insurance through COBRA is usually very expensive because the parent's employer is no longer paying for the young adult's coverage. That's why COBRA should only be used as a temporary measure, bridging short coverage gaps until beneficiaries transition on to more permanent health care plans.
For example, if you've already met the plan's yearly deductible, you may want to use COBRA to stay on the same plan until the end of the policy year.
Short-term plans: Cheap and offers some coverage during a gap
Similarly, beneficiaries can turn to short-term policies to bridge coverage gaps. This can be useful in situations when you're waiting for another insurance policy to begin.
It is important to note, however, that short-term plans do not have to cover preexisting conditions and they can deny coverage altogether based on medical conditions. Short-term plans are typically used for protection against catastrophic events until longer-term insurance takes effect or can be found.
Marketplace plans: Best long-term option for those without an employer plan
If you are self-employed, are a gig-worker or don't have coverage through a job, choosing a plan from the ACA marketplace can make good sense, especially if you qualify for tax credits to help defray the cost of a plan.
ACA market-based plans are broken into metal tiers.
- Silver plans are often referred to as middle-of-the-road policies, carrying premiums and deductibles that are cheaper than the Gold and Platinum plans, but more expensive than Catastrophic or Bronze tiers. The American Rescue Plan, which was enacted in March, reduced the percentage of income that enrollees have to pay for Silver plans, enabling beneficiaries to save a lot of money on deductibles, copayments and coinsurance. This makes Silver plans a great option for relatively healthy individuals and their dependents who primarily rely on the health care system for routine care such as regular physician visits, x-rays and lab work.
- Gold and Platinum plans are the most expensive, carrying the lowest deductibles and thus allowing you to access coinsurance benefits faster. These insurance plans are a good option for individuals with chronic illnesses who need monthly prescriptions to manage their illnesses. However, the plans are usually not cost effective for healthy individuals in their mid or late 20s who do not need extensive health care services.
- Catastrophic and Bronze health plans are the cheapest insurance plans on the marketplace. They could be a good choice for healthy beneficiaries who do not typically have high-cost health needs. But plans have the highest deductibles and out-of-pocket maximums, making them less than ideal for beneficiaries with chronic illness who need ongoing care.
ACA Subsidies
To reduce the cost of health insurance, most people signing up for health insurance on the marketplace are eligible for ACA subsidies if their household incomes lie between 100% and 400% of the federal poverty level. The size of the discount is based on a sliding scale — the lower the income, the greater the health insurance tax credit.
Please note that a beneficiary will not qualify for tax credits for health exchange plans if they turn down an employer-based plan or if they are listed as a dependent on another person’s income taxes.
Student health plans: Private insurance plans that are good for students
Student health plans represent another way for college students to access health insurance. Some insurance companies offer these plans for students between the ages of 17 and 29, allowing students to pay premiums annually, or semiannually in some instances. Unlike a school-based plan, these plans travel with you wherever you study in the United States.
If you start at one university and then transfer to another university, the coverage transfers with you.
College and university plans: Good for on-campus health care
Full-time students attending a college or university may be able to obtain insurance through their school’s health insurance plan if a plan is offered. This could be a good health insurance option for older students who can’t continue their parent's coverage. It’s also useful for any student who is attending school out of state.
Let’s say, for example, that a student from Texas, who is covered under a parent’s health maintenance organization (HMO) in Texas, is attending college in Ohio and cannot access the list of designated medical providers that are located in Texas. It would make sense for the student to have their own health insurance plan in Ohio provided through a college or university.
One of the advantages of selecting a school policy is the monthly premium can be grouped with your tuition and room and board expenses, making it possible to use student loans to pay for your health insurance costs.
School-sponsored health care may not cover services received outside of the university. If you need to access services away from the school, for example, the policy may not cover the expenses.
Moreover, some university or college health plans do not adhere to ACA standards, meaning they may not cover preexisting conditions or they may impose caps on how much they will pay. It is thus important to read the terms of health plans provided by your college or university to determine if the plans cover needed benefits and services.
Medicaid coverage: Best for those who have a low income
Medicaid provides free or cheap health insurance for those who are low-income, if you meet the eligibility criteria.
For young adults, Medicaid is a good option if they are unemployed or if their job does not provide health insurance benefits. One of the benefits of applying for an ACA marketplace plan is that the system automatically assesses whether you qualify for Medicaid.
Income eligibility varies by state, and it's higher in 38 states that expanded Medicaid eligibility. In these states, residents qualify for Medicaid if their household incomes fall below 138% of the federal poverty level. Twelve states — Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin and Wyoming — have not expanded their Medicaid programs, and as a result, Medicaid eligibility is tighter in these states.
Frequently asked questions
Can you stay on your parent's insurance after age 26?
In most states, coverage either ends at the end of the month when you turn 26 or at the end of the calendar year in which you turn 26, depending on whether the coverage is provided through an employer or through an ACA market-based plan. You can usually choose to continue coverage through COBRA, but that option is very expensive. Most people will get the best deal obtaining insurance through their jobs or through the ACA marketplace.
How much does health insurance cost for a 26-year-old?
A Silver health insurance plan through the marketplace costs an average of $383 a month for a 26-year-old. Most beneficiaries qualify for ACA subsidies if their household incomes lie between 100% and 400% of the federal poverty level, reducing the costs of the plans.
When does health insurance end for 26-year-olds?
If you are covered under a parent’s marketplace plan, you can stay on your parent’s plan until the end of the calendar year, Dec. 31, even if you turn 26 mid-year. If you are covered under your parent's employer plan, you usually have until the end of the month when you turn 26 before coverage ends. Eight states — Florida, Illinois, Nebraska, New Jersey, New York, Pennsylvania, South Dakota and Wisconsin — have enacted measures allowing beneficiaries to stay on their parent's health insurance plans past the age of 26.
How does a 26-year-old get health insurance?
A 26-year-old has several options for obtaining health care, including an employer-based plan, if available, or a plan that can be purchased from a health insurance exchange under the Affordable Care Act. A low-income 26-year-old may qualify for Medicaid. A 26-year-old student who attends college or university may also have the option of obtaining coverage through a college or university plan.
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