College Graduates May Be In Danger of Losing Their Health Insurance

NEW YORK (MainStreet) — Recent college grads should review their health insurance coverage since many of them could be losing their current plan.

Changing your current plan to another one can be tricky unless you meet the standards for a "qualifying life event" under the Affordable Care Act such as getting married or divorced, moving from one coverage area or changes in your salary. College graduation is not a qualifying event.

Consumers who experience a qualifying event have a 60-day window to enroll in a new ACA compliant health plan, said Carrie McLean, director of customer care at eHealth.com, an online health insurance exchange based in Mountain View, Calif.

"Losing ACA-compliant coverage that you received through school or moving to a new state or city may be qualifying life events," she said.

College grads who were insured under a school-sponsored plan that meets the coverage requirements of the ACA but are losing their coverage are likely to have their situation considered as a "qualifying event," McLean said.

Sticking with your parents' health plan sounds like an easy and sensible idea since the ACA allows your parents to keep you on the family health insurance plan until you turn 26.

"However, Mom and Dad aren't required to keep you on their plan, and it may cost them to do so," she said. "What's more, if you live away from home in another city or state, your access to network doctors and hospitals through your parents' plan may be limited or non-existent."

Don't limit yourself to government-run health insurance exchanges. There are other plans available outside of government exchanges that can also meet your coverage requirements under the ACA. To find the plan that best meets your needs and budget, compare the options available through your government exchange with other options available through private online marketplaces.

Short-term coverage can be the best option if you don't expect employer-based health insurance to kick in for awhile and you are not eligible for or can not afford coverage through another source.

A short-term plan is a form of temporary coverage that last anywhere from 30 days up to 12 months, but will not meet your coverage requirements under the ACA. This means that you may still be subject to a tax penalty. Short-term plans also may not provide coverage for preventive care, pre-existing medical conditions or prescription drugs. However, these plans tend to be relatively affordable and can put a limit to your financial liability for any medical care you might receive for unexpected illnesses or injuries.

Recent grads should not overlook the subsidies which can help you afford health insurance. In order to qualify, your projected income for 2014 can be no more than 400% of the federal poverty level, which is about $46,000 for a single person.

"Be aware that unexpectedly earning more this year could mean that you end up having to pay back some or all of your subsidy dollars," McLean said.

All major medical health insurance plans cover the same basic suite of benefits, but they may be differentiated by "metal" levels. These metal levels describe how much cost-sharing you may face when you actually receive medical care. Bronze plans are designed to cover about 60% of a typical member's medical expenses. The coverage increases to 90% with platinum plans.

"The higher you go up the metal scale the better your overall coverage, but the more you should expect to pay in monthly premiums," she said. "If you're healthy and don't take prescription drugs, a bronze plan may suit you fine, but make sure you could pay out your full deductible in case of an emergency."

If you are under 30, you should also consider a "catastrophic coverage" plan. These plans provide less coverage than bronze plans, but they are probably more affordable on a monthly basis. While they meet the coverage requirements under the health care reform law, you can not use government subsidies to help pay for them. Catastrophic plans might be a good choice if you can't afford more robust coverage but want something to back you up in case of an emergency.

Being uninsured the day after graduation doesn't mean that you'll automatically have to pay a tax penalty. Under the ACA, tax penalties are triggered when you go uninsured for three consecutive months or more in the same calendar year.

If you're tempted to go uninsured after graduation because you simply cannot afford it or don't think you need it, make sure you understand what your tax penalty may look like. The penalty is not just $95. In fact, the tax penalty for going uninsured in 2014 is the greater of $95 or 1% of your annual household income above the tax filing threshold of $10,150 for an individual. Depending on how much you earn in 2014, your tax penalty for going uninsured could be hundreds of dollars.

If you already have insurance, but are unhappy with the plan because you think the co-payments or deductibles are too high, you can not just switch to another plan. If you feel like an error occurred placing you in the wrong health plan, your best recourse is to contact the federal or state exchange as soon as you are aware of this information, said John DiVito, president of Flexible Benefit, a web-based insurance provider based in Rosemont, Ill.

"The individual may be eligible for special enrollment rights if enrollment in the health plan was made in error," he said. "Special enrollment periods provide individuals with a 60-day time period to make a plan change. Although they may be eligible for a plan change, the change may not be retroactively processed unless an error was made during the enrollment process by the exchange or the insurance company."

--Written by Ellen Chang for MainStreet

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