Itâ€™s not uncommon for recent college graduates to take some time off before entering the working world.Â Your child may decide to take a year or more to start with a â€œno brainerâ€ job and travel the world before settling down. While this type of freedom can be exciting,Â it can still leave parents sick with worry over one important issue: health insurance. How does a parent cover their child without breaking the bank?
It's imperative that your child has some kind of health insurance â€” even if theyâ€™re perfectly healthy now. The young often feel invincible, as if nothing (too) bad can happen to them, but the cost of health care, particularly for major illnesses or serious accidents, is just too high for anyone at any age, to risk going uninsured. In 2003, in fact, medical bills were the No. 1 cause of personal bankruptcy in America, according to Harvard University.
As Iâ€™m sure you know, the lack of health insurance is a serious issue for many Americans, but young adults are especially vulnerable. According to the U.S. Census Bureau (in a 2005 report on the topic), almost a third of those ages 18â€“24 did not have health insurance. And the consequences are real. The Commonwealth Fund did a study back in 2001 that found half of the uninsured ages 19â€“29 did not get the health care they needed because the cost was prohibitive.
But it doesnâ€™t have to be that way; here are some options for your child and other young adults.
PUT THEM ON YOUR PLAN
If you have a reasonably good health insurance plan through work, chances are it covers your child while they are in college. Most employer-sponsored plans cover dependent children as long as they are full-time students, typically up to age 23. Some plans will continue to cover them even after they graduate at least as long as you are their primary means of support. Your first step is to check out the details of your plan with your human resources or benefits department.
If theyâ€™re not eligible â€” say your plan won't cover them after graduation, or theyâ€™re too old, or theyâ€™re supporting themselves â€” then you may be able to cover them under the auspices of the COBRA legislation. COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, a 1985 law that gave employees the right to extend health insurance after leaving their employer. One of the law's provisions is that if a dependent child no longer qualifies as an eligible dependent, you can purchase coverage for that child under the employer's existing group plan for up to three years.
Realize, though, that this option is not likely to be cheap. You'll have to pay the full cost of their portion of the premium; your employer won't be subsidizing the insurance benefit at all (in some instances, you'll pay 102 percent of the premium for them). But it could easily be worth the money, especially if you know it's for a finite period (i.e., until they land a job with insurance benefits).
EXPLORE THE ALTERNATIVES
Even if extending coverage through COBRA is possible, you should do some research by shopping around for new coverage. You actually have quite a few options:
*SHORT-TERM HEALTH PLANS: Many insurance companies provide short-term major medical plans specifically intended for situations like this (along with people waiting on eligibility for their employer's group plan and people between jobs). Typically, these policies are in force for a finite period, perhaps as long as 18 months, but are not renewable. They can often be purchased quickly, without an extensive medical history, though they generally will not cover pre-existing conditions or preventive care.
The cost will vary, but should not be more than $100 per month.
*HIGH-DEDUCTIBLE HEALTH CARE PLANS: Another cost-effective option is to buy a catastrophic insurance plan designed to cover your child in the case of major injuries or illnesses. These plans generally have a high deductible and won't cover routine office visits or minor problems, but that is what keeps the premiums low. But if something serious (and seriously expensive) happens, they'll be covered. Â
*TRADITIONAL HEALTH INSURANCE PLANs: You should also investigate what a more typical insurance policy would cost, one that provides coverage similar to what you have through work. If your child is healthy, it may not be as expensive as you assume. And a large number of organizations, like AAA or professional organizations, offer group plans that might be affordable.
Whatever you choose, take comfort in a couple of facts. First, buying health insurance is absolutely the right thing to do for your child. And second, it's only for a year or so until they get their first job and can obtain coverage through their employer.
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