Health Insurance For College Students and Recent Grads: A Look at Your Options
Health insurance isn't something most college students think about. But once you graduate, it’s a different story. Unless you’re lucky enough to have a job with benefits waiting for you when you graduate, you'll probably spend some time scrambling for insurance.
Recent graduates without health insurance are often stereotyped as “Young Invincibles” who’d rather buy an expensive stereo system than opt for health insurance, but for many the choice isn’t between luxuries and coverage. Many of these young people need to make a choice between expensive health insurance and, say, buying a car—which they need to commute to work—or living on their own, which for some is non-negotiable. In addition, many recent grads have huge college loan debt, and can’t manage the large monthly payments for both debt and insurance.
Still, you do have some options for health insurance, both as a college student and as a recent graduate waiting for that first job.
When You're In College
Most college students are covered under their parents' insurance plans until graduation. In general, these plans are free for students because they come out of the parents' paychecks. You’ll get the same benefits you've had all your life as a child or teenager. These benefits allow most students to go through all four years of college without thinking about health insurance.
However, some parents’ plans are not ideal for their students. A PPO or HMO might restrict everyone under the plan to use in-network doctors and health facilities; if there are none near your school, you’re out of luck.
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In addition, no insurer will allow you to stay on your parents’ plan forever. The rules vary depending on the insurer, but most insurers will force your parents to drop you from the plan by the age of 19 if you’re not a full-time student. If you are, the age is extended—but usually not past 22 or 23. If you’re still a full-time student or if your parents still claim you as a dependent, it won’t necessarily matter.
If you don’t have health insurance through your parents, your college still gives you a safety net. Most colleges offer free or low-cost health care at the on-campus clinic. Some require payment only for prescription drugs, while others charge a nominal fee. Many of these clinics aren’t set up to deal with serious injuries or illnesses, so you’ll still need hospital coverage and possibly prescription drug coverage.
However, some colleges may require you to have health insurance to enroll—this is law in New Jersey, Idaho, Illinois, Montana, and California. If you can’t use your parents’ plan, your college may offer individual health insurance for students. Some colleges develop partnerships with insurance companies to offer competitive rates to students. Others offer a health insurance plan through the school’s health center.
There are benefits and drawbacks to college health care plans, and every college offers a different deal. Traditionally, college plans have been low-cost, but that’s changing—some college plans can cost thousands of dollars per year. In addition, some plans only cover medical care within the college’s geographical area, and may cease coverage during summer break. If you do sign up for a college health plan, make sure you know when and where you’re covered.
When You Graduate: Before Your First Job
The true insurance nightmare often doesn’t begin for students until after they graduate. If you land a job with benefits immediately after graduation, you’re lucky. In 2007, only 51% of graduates landed jobs directly after graduation, and not all of those came with health insurance. It’s not unusual for students to go months or even a year or two without coverage before landing that first job—and once they do, there’s no guarantee that health insurance will be included.
Health insurance is expensive, but it’s not completely out of reach for many graduates. If you’re between graduation and that first job with benefits, here are a few options for coverage.
COBRA
Federal law requires that health insurance providers allow continuing coverage for up to 36 months for those who ordinarily would be dropped from their plans. This includes terminated employees, spouses and former spouses, retirees, and adult children. Under COBRA, the health insurance carrier continues to offer the same price to the individual that it offered to the employer. The problem with it is that despite the discount, COBRA is expensive—usually because the employer paid part of the fee.
COBRA can be expensive for adult children, as well—often several hundred dollars per month. This is because even though your parent may still be employed, the health insurance carrier requires them to pay the full price of your premium—the employer does not contribute. However, COBRA carriers often don’t restrict your coverage based on pre-existing conditions, and you will usually continue to get the same benefits you had under your parents’ plan.
Short-term coverage
Short-term coverage will cover you for about 12 months. These plans are usually available through private insurers, and sometimes through your college’s alumni association as well. The plans are designed to be flexible, allowing you to pay by month if you aren’t sure when you’ll need to stop coverage. Some plans allow you to pick your coverage by day, so you don’t have to pay for a month’s worth of coverage if you only need it for a few weeks. This type of coverage generally doesn’t cover pre-existing conditions, and most short-term coverage plans can’t be renewed.
Your college’s plan
Some distance education colleges allow students who are already signed up for the university health plan to remain enrolled for a short amount of time after graduation, and this time can sometimes be extended with a “bridge policy” that covers a short gap between the time the student’s health insurance plan expires and the time an employer’s policy kicks in.
High-deductible health insurance
Buying an individual health insurance plan is out of financial reach for many unemployed recent college grads. But not if you choose a plan with a high deductible. In some states, high deductible health insurance plans can cost as little as $50 or $100 per month. Typically they don’t cover preventive care or prescription drugs, and you could be stuck with a bill of a few thousand dollars if you do need to go to the hospital—but at least the trip won’t ruin you. These plans don’t have a time limit, unlike COBRA and short-term coverage.
Health savings accounts
If your health insurance plan has a deductible over $1,100 for individual coverage, you’re eligible to open a health savings account. Health savings accounts allow you to save money tax-free to cover medical bills that may occur before your insurance kicks in. As a recent grad, you may not think you have a lot of extra money to save in an HSA—but it might be worth it to save your money this way, rather than paying it to a less affordable health insurance plan.
Your quest for health insurance may be easier in some states than others. The state of New Jersey requires insurers to allow adult children to stay on their parents’ coverage until the age of 30, as long as the children have no dependents and both parent and child are New Jersey residents. A few other states, including Texas, New Mexico, South Dakota, Illinois, and Colorado, have similar laws on the books, although none extend the coverage that long—most allow coverage to stop at 25.
For those who are not covered by a parent’s or an employer’s plan, there are no perfect options. But there are a few options that allow students to choose a balance between affordability and broad coverage that works for them. Even a high-deductible plan is better than no plan at all.
YouTube.com: Health Insurance in the USA Sucks
Sources
Sources:
Tallahassee.com: Graduated? Get Yourself Some Health Insurance
U.S. Dept. of Labor: FAQ’s About Cobra
MarketWatch: The Right Health Insurance for Those in Their 20’s
Pew Research: States Let Adult Kids Stay on Parents’ Insurance
Pittsburg Post-Gazette: More States Mandating Health Coverage for Adult Children
Insurance Journal: Short Term Health Insurance; Low Cost, Sold Online, Gaining in Popularity
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