Insured Dependent Child Turning Age 26 • Peters & Milam Insurance Services • Santa Barbara, California
Since the passage of the Affordable Care Act (ObamaCare) children covered under a parent's health plan can remain on that plan up to age 26. The question is, what happens when they turn 26? There could be some rare exceptions, but in general they have 4 options.
Option #1: Elect COBRA on the parent's plan. This is generally a somewhat expensive option, especially for large employers (100+ employee groups) that use composite or average rates. For employers of under 100 employees, the child will be charged the age 26 rate plus a 2% or 10% load. This strategy could make sense if the child is sick and/or they have expensive healthcare needs. COBRA may be especially sensible for a sick child through the initial deductible period, or plan year, usually December 31st. As of January 1st, they may want to consider Option #2. Option #2 may also be best if their health is good.
Option #2: Sign up for an individual health insurance plan - either directly with a carrier, or through Covered California (if subsidy eligible). Single people earning under $46,500/year could be eligible for a subsidy and must sign up through Covered California. If the child is not earning income, or has income under about $16,500, they are eligible for MediCal in California (MedicAid in other states).
Option #3: If they are working full-time and their employer offers health insurance, loss of parental coverage is considered a qualifying event, which will open a window so that they can come on their employer's plan.
Option #4: Proceed with no health insurance coverage. This strategy will incur a penalty in 2018, but that penalty is set to go away in 2019. States may create a penalty of their own, so keep an eye on this issue. The much larger drawback to this strategy would be an unplanned illness or accident that puts them in huge debt. This is statistically a low risk age, but things happen. We are not fans of this strategy!
As always, if you or a child are nearing this age, please reach out to our office for specific advice tailored to your situation! Call us at (805) 687 - 3225, or send us an email at firstname.lastname@example.org. We can't wait to hear from you!
- Dave Peters