Don’t quit your parent’s health insurance just because you have a job

The conventional advice for parents is to end the financial relationship with their young adult children as soon as possible.

We are told to push them out to fend for themselves financially or risk raising irresponsible adults who live lazily in their nursery or basement, unable to manage their money.

But that advice is outdated given the reality of an economy still grappling with the fallout from the pandemic. Helping grown-up children doesn’t have to stand in the way of their path to independence.

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Our children are now faced with monthly rent payments that can amount to more than 50 percent of their net salary. Inflation causes food prices to rise. Energy costs are increasing. If your offspring has to buy a new or used car, you have to reckon with horrendous prices.

I’ve long advocated that parents encourage young adults to live at home for as long as possible, especially when they have massive student loan debt to pay off. Even if they don’t have debt, a few years of rent-free living can help them tremendously when they finally start. All three of my 20 year old kids are happily living at home after exploring rental costs in the DC area.

It is already common and acceptable for young adults to use family cell phone plans. Here’s another way to help your young adult children that can make a lasting impact: Keep them on your health insurance. If you can afford to keep your child on your policy even after they get their first full-time job, they’ll have several years of savings that can be used to pay down debt or increase pension contributions.

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With the passage of the Affordable Care Act, also known as Obamacare, young adults can stay on a parent’s plan until they turn 26. But what you may not know is that they can stay on the plan even if they work for a company that offers health insurance.

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The ACA requires plans that offer dependent child insurance to have coverage available until a child is 26 years old. Insurance is mandatory even if they are married or have children. In general, they can stay on the plan even if they don’t live at home. You also do not need to be claimed as a taxpayer to maintain coverage.

Sit down with your child and review the cost of having their own insurance covered by their employer, as the financial situation of continuing to carry them until they are 26 is compelling if you can afford it.

Even when employees are insured, the combined cost of premiums, deductibles, and other expenses can be significant.

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According to the Kaiser Family Foundation’s 2021 Employer Health Benefits Survey, annual premiums for employer-sponsored family health insurance last year were $22,221 for families and $7,739 for individual plans.

Most insured workers contribute to the cost of their insurance. On average, employees contribute 17 percent of the premium for individual insurance and 28 percent for family insurance. The average annual contribution of insured workers was $1,299 for individual insurance and $5,969 for family insurance.

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The financial burden of deductibles is steadily increasing. Last year, 85 percent of insured workers had a deductible in their plan, up from 74 percent a decade earlier, the KFF report said.

The smaller the company, the higher the deductible. Workers at companies with fewer than 200 employees face deductibles that are, on average, 70 percent higher than those at companies with at least 200 employees ($2,379 versus $1,397), KFF said.

“While many employers pay a significant portion of health insurance premiums, some workers have to pay relatively high premiums to enroll in coverage,” according to a separate Health System Tracker report from the Peterson Center on Healthcare and KFF. “People with employer insurance often face a deductible, which can leave the registrant having to spend thousands of dollars before the plan covers most services.”

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Workers in low-income families with employer coverage spend a larger portion of their income on health care costs than workers on higher incomes, the report found.

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The keyword in my argument is affordability. It may not be cheaper to stay on a parent’s plan. For us the cost would not have changed as as a couple we still need a family plan.

This may not be feasible if you were looking forward to getting rid of dependent care coverage because you need to save money. It may also be that your child has moved to an area where it doesn’t make sense for them to keep your plan if they need to see healthcare professionals outside of your insurance network.

If you’re struggling, your child could share the expenses and help out with deductibles or co-payments. It doesn’t have to be an all-or-nothing agreement.

Soon enough they will age and be on their own. But gap years between bearing and paying for all healthcare costs can make all the difference when accumulating a significant amount of money in an emergency fund and retirement account.

At the beginning of an adult child’s full-time employment, being able to stay in your health insurance plan gives them room to catch up financially.

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