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By Jonathan Sadlier

With the fall college semester in full swing, many young adults may be joining the workforce soon, or they already have.

Federal law permits parents to keep adult children on their health insurance until age 26, so it’s natural to wonder when parents should take their adult children off their insurance.

Stay or go

Young adults might want their own health insurance if they can get cheaper rates on their own. Due to their age and potentially healthier bodies, young adults could get lower premiums through their employer or on the marketplace through the Affordable Care Act. This is especially true if they can choose a high-deductible plan and build savings through a health savings account.

As open enrollment begins this fall, parents may want to take a closer look at their own employer-sponsored health insurance. Does it cost more to keep adult children on the plan? Are there penalties for insuring adult children?

Adult children aged 21-25 will be charged the adult insurance rate, even when on their parents’ family plan, according to healthinsurance.org. Parents should consider how that impacts their out-of-pocket expenses.

Geographic location is also important. If the young adult lives far away, they will need insurance that works with a local health system. Going outside the network for care can rack up debt fast, which could create a tough financial situation for those involved.

If the young adult has children of their own, they likely will need to get their own insurance for that child. The law does not extend to coverage of grandchildren.

How to transition

Health insurance can be expensive. It often comes as a shock to those new to the workforce how much a paycheck dwindles when insurance and taxes are deducted.

Begin educating your child on the cost of health insurance long before they transition to their own plan. Involve them in the process of choosing health benefits from a menu and give them an idea of what it will cost.

Some parents may choose to help with copays or premiums to ease the adult child into financial independence.

At age 25, if an adult child is still on a parent’s health insurance plan, the parents should start researching when the child will need to transition. Insurers have different timelines of when the child must leave the parent’s plan.

For example, some carriers will allow a child to remain on a plan their entire birth month after turning 26, while others will allow them to stay through the whole plan year. Some might require that the adult child transition to their own insurance the day they turn 26.

Employers can help educate their employees on the nuances of their coverage, as well as how federal law may impact their decisions.

The experienced team at Oswald can help employers design a plan that is right for their organization and their employees. Our benefits team will even provide one-on-one or group educational sessions to employees to make sure all are well informed about their insurance.

This article also appeared on bizjournals.com.

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