When I enrolled in law school, I was prepared for the idea that I was going to have to come up with the funds to pay my own tuition and well as books, room and board. One thing I wasn’t prepared for: the astronomical cost of health insurance.
As a college student, I had been covered under my parents’ health insurance plan but when I graduated at age 20, the rules changed. I had aged out of the system. Getting coverage through an employer was out of the question: at the time, there were strict ABA rules which limited employment during the first year of law school. Without a full time job or coverage from my parents’ plan, my health care solution became a patchwork of clinics and paying cash for services (there’s nothing like being subjected to a credit check while you await an X-ray on a broken bone).
Fortunately, that’s not the case for most graduate students and young adults these days.As part of the Affordable Care Act (sometimes called Obamacare), young adults are generally allowed to stay on a parent’s health care plan until age 26 so long as the plan offers coverage for dependents. Under the rules, a child under the age of 26 can remain on a parent’s health plan even if the child is married, attending school, not living with a parent, or not eligible to enroll in their employer’s plan. Coverage must also be extended to a child under the age of 26 even if the child is not claimed as a dependent on their parent’s tax return. This applies to both private health insurance and health insurance provided through the Marketplace.
Even better news? The value of any employer provided health care plan that a parent receives for the benefit of a child is excluded from the employee’s income (meaning that it’s tax free) through the end of the taxable year in which the child turns 26. This tax benefit for parents applies even if extended coverage isn’t required by law and is done voluntarily.
Of course, if your parents don’t wish to cover you, or if your parent’s employer doesn’t extend coverage to dependents, you’ll need to consider other options. You may wish to apply for coverage through the Marketplace or your state’s plan. You should also check to see if you would be covered under a government benefit (including Medicare, Medicaid, CHIP, TRICARE, or VA health coverage) or insurance provided by your employer.
Remember that you don’t want to simply do nothing. If you don’t have a plan that qualifies as “minimum essential coverage” under the law, you may find yourself subject to a penalty – the shared individual responsibility payment – equal to 2% of income above the filing threshold or $325 per adult, whichever is higher, for 2015. In 2016, the amount of the penalty increases to 2.5% of income or $695 per adult. Exemptions exist based on income or filing status, immigration status, religious affiliation and incarceration (the latter is a tough way to get out of a penalty). A number of hardship exemptions are also available
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