Young Adults Can Stay on Parents’ Health Plans. But Should They?

After President Obama signed the Patient Protection and Affordable Care Act in 2010, one of the first groups to benefit was young adults – persons up to age 26 who had been among the chronically uninsured. Under the new law, this group could now stay on their parents’ health insurance.

And stay on they did. A study by the Centers for Disease Control published in September 2012 found that the share of uninsured between the ages of 19 and 25 dropped from 33.9 percent to 27.9 percent from 2010 to 2011 – the largest drop seen in this group since the agency began keeping records. Given the difficulty young adults have had finding jobs, such a drop could only be attributed to the new law, analysts agreed.

Young adults stay on their parents’ plans for reasons of cost, convenience, or both: With the law firmly in place, it’s part of open enrollment for Mom or Dad. But is staying on a parent’s plan always the best option?

Sometimes, the answer is no. It’s important that both the young adult and his or her parents read the fine print each year to get the best deal – no matter who is paying.

If a law’s success can be measured by its popularity, the young adult provision has worked wonders. A survey taken in April 2012 by the Kaiser Family Foundation, before the U.S. Supreme Court’s ruling to uphold most of the law, found that 71 percent of Americans supported this part of health reform, despite mixed views of Obamacare overall.

Estimates vary on how many young adults have benefited from the provision. One government calculation put the number of 19-to-25-year-olds becoming insured at 2.5 million, while the Commonwealth Fund projected that 6.6 million had either left the ranks of the uninsured or switched onto their parents’ plans from inferior or more expensive coverage.

But there are circumstances – a faraway job, expensive cost-sharing, an opportunity to add a new spouse to an employer-based plan – in which staying with Mom or Dad’s plan no longer makes sense.

According to Kelly Brooke, Marketing Product Director for Cigna, the details matter. “Every situation is unique, and everyone needs to review his or her own specific situation,” she said.

Both Brooke and Thomas Vincz, Manager of Public Relations for Horizon Blue Cross Blue Shield of New Jersey, pointed out the example of an adult child who moves far away from a parent whose health plan features strict in-network limitations. “While emergency services may be covered, other benefits would be considered ‘out-of-network,’ which could result in significant out-of-pocket costs for the dependent,” Vincz said.

In these cases, adult children might be better off seeking coverage through an employer or by purchasing low-cost policies where they are living. Vincz said Horizon BCBSNJ has developed a “Guest Program” product available with its Small Employer HMO plans, which lets dependents receive care from a Blues HMO network where they are living, as declared for

Brooke cautions parents and adult children to examine premium costs and benefit limitations, and to look how dependent rates are structured. If the adult child is the baby of the family, is paying the premium for a family plan worth the cost? Both Brooke and Vincz recommend comparing this sum to the total cost of a husband-and-wife plan, plus the cost of a more modest “essentials” or bare-bones plan for the adult child. Of course, if the young adult takes an expensive medication or regularly sees a specialist, the richer coverage of a family plan might make sense.

As the young adult approaches age 26, it’s important to start early looking at coverage options for the day when Mom or Dad’s coverage runs out, Brooke said. “Depending on unexpected health circumstances, what is the provision of the parent’s plan for covering services past the 26th birthday?” she declared for “This may require a close look at a more detail benefit certificate or summary plan description, to see whether there is an extension of benefit provision.”

That’s especially true if the adult child is considering marriage. The adult child’s spouse cannot join his or her in-law’s plan.

The good news? Young adults are no longer a forgotten class of health insurance consumers. The provision of health reform designed to capture them showed that this age group wanted coverage if it was affordable. Coverage options have already expanded, Brooke notes, and they will continue to grow as state and federal exchanges come online. For more about consumer options under the new law, see also our insurance guide.