What Your Millennial Child Should Know About Health Insurance

Last year, after my Millennial daughter started college in another state, I spent inordinate amounts of time talking to my health insurance provider to designate an out-of-state, in-network, primary care provider at the student health clinic. I also educated my daughter about the importance of using in-network providers to avoid exorbitant bills. She only visited her student clinic twice, but admitted that not understanding health insurance was the most stressful aspect of her first year.

She’s not alone. According to Transamerica Center for Health Studies’ (TCHS) executive director Hector De La Torre, many Millennials don’t understand how health insurance works, where to apply for it or what their options are. A recent TCHS survey found that feeling uninformed about options is the biggest barrier to health insurance for uninsured Millennials, contributing to 11 percent going without.

Nov. 1 was the start of the Affordable Care Act (ACA; aka Obamacare) open enrollment period for 2017, and I thought it would be a good time to explore what Millennials need to know before the enrollment period ends.

Many colleges have made health insurance an enrollment requirement and provide student plans if parent plans aren’t adequate. But after graduation, the choices feel less obvious.

“We found many uninsured Millennials thought employment would be their path to coverage. They weren’t researching on their own,” De La Torre says. But young adulthood is bumpy, and employment with health benefits isn’t guaranteed.

The second barrier is cost. Yet only 37 percent of Millennials in the survey comparison-shopped, according to Transamerica. Many of the young uninsured don’t understand that they may qualify for an Obamacare subsidy to offset premiums. They mistakenly assume they can’t afford insurance, De La Torre explains. They also don’t realize emergency room visits are expensive. “Many Millennials don’t understand the potential cost of an accident or illness and that they could be paying a medical bill for decades,” says Laura Adams, senior insurance analyst for insuranceQuotes.

Moreover, skipping health insurance means paying a fine, $695 per adult per year for the 2016 tax year and $347.50 per child under 18, or 2.5 percent of your income, whichever is higher. The flat-fee penalty figures will be adjusted for inflation for 2017.

To educate Millennials, TCHS created a guide explaining health insurance options. Young Invincibles, a national organization engaging Millennials on health insurance and other topics, also publishes resources for young adults.

But, as I learned, some kids need parental help understanding the basics. Sixty-four percent do turn to moms and stepmoms for help, De La Torre says. And 36 percent ask dads and stepdads.

Even so, Siyuan Dai, 28, was surprised how little his graduate-level colleagues understood about health insurance. “I was the only one in my circle who understood how policies worked. One friend thought a deductible was something the insurance company would pay him,” he says. (It is, of course, your out-of-pocket cost before the insurer starts paying benefits.)

Health insurance premiums for 2017 are going to be tough, although federal subsidies should mitigate sticker shock. Some insurers are pulling out of marketplaces or scaling back, while others are hiking midlevel ("Silver") plan premiums by an average of 25 percent, according to The New York Times. My individual plan is increasing its premium by 24 percent and will no longer cover my daughter out of state. So it’s back to the drawing board for us.

Here are your Millennials’ choices:

Student health plan. If a parent’s employer-based or individual plan doesn’t extend out of state and your child is in college, the student health plan may be his or her only choice, because many colleges require proof of insurance. It can be used instead of, or in combination with, a parent plan (check the student plan’s coverage).

Also, ensure that the plan counts as Affordable Care Act qualifying coverage. Most do. If you have a senior heading to college next fall, I recommend evaluating your plan while the enrollment window is open.

Parent’s plan. Millennials can often stay on their parent’s plan until age 26 even if they turn down job-based coverage or get married. Do consider whether the parent plan provides the best coverage. Plans vary from ZIP code to ZIP code even within a state, Adams says. Don’t forget to have your child sign up for his or her own insurance if he or she will be turning 26 this year.

Marketplace or individual private plan. Millennials can purchase their own plan, either at the federal or state-run marketplace — also called the Exchange — or through the traditional private insurance market. Individuals earning up to about $47,000 will qualify for an income-based, sliding-scale subsidy with an Exchange plan (try this calculator). Millennials claimed on parents' tax returns must declare their parents' income, but 86 percent of families qualify for a subsidy, De La Torre says. (A family of four can earn up to $97,000 and qualify for one.)

Private insurance plans differ from Obamacare marketplace plans, so check both arenas and consider multi-state plans for mobile youngsters. Losing job coverage or moving shouldn’t strand them, however, because certain life events qualify them to apply outside of the open enrollment period.

Medicaid. Independent, very low-income Millennials may qualify for free or low-cost Medicaid if their state offers it. They must earn less than $16,500 in most states that have expanded Medicaid or $11,880 in non-expansion states. If your family qualifies, a dependent Millennial qualifies. Apply any time of year.

Employment-based insurance. Employer-based insurance for your child may offer better coverage than a parent plan. If a job offers benefits, Millennials can’t sign up for an Exchange plan for a subsidy.

Catastrophic insurance for those under 30. People under 30 can purchase a catastrophic health plan with a high deductible ($6,850 in 2016). These plans cover many preventive services in full and provide protection for worst-case scenarios.

Finding affordable health insurance is confusing, but help is available. The ACA marketplace and state Exchanges offer localized patient “navigators” to sift through marketplace plans with you. In some states, insurance brokers also function as navigators. “That’s ideal,” De La Torre says, “because they can tell you about Exchange and private market plans.” Start with healthcare.gov.

Alternatively, you and your child could consult an insurance broker for no fee to learn about traditional insurance plans. Brokers might not explain Medicaid or Exchange plans, so do that homework as well. You can also contact insurance companies directly to learn what they offer.

Try quick comparison shopping online at places like eHealthInsurance or insuranceQuotes for Marketplace and traditional insurance plans in all ZIP codes.

Persuading Millennials they need health insurance isn’t easy when they’re healthy and don’t understand the potential for devastating consequences, Adams says. But it’s important to teach them all about the risks of going without and how to shop, because they’re not as invincible as they think.