Why Health Savings Accounts Are a Great Strategy for Tax Savings
By First Name Last Name
Many clients wonder if a Health Savings Account (HSA), and the high-deductible health plan that comes with it, is right for them. It can be a great wealth-building tool, and for those who are generally healthy and don’t have many healthcare needs, it makes a lot of sense to utilize an HSA.
For those that aren’t familiar, an HSA is a tax-advantaged medical savings account that you can contribute to and withdraw from tax-free for qualified medical expenses. Funds in an HSA are split into a liquid cash account and an investment account. HSAs are not only a way to save for future healthcare expenses, but to also gain tax savings! In fact, when used well, HSAs are a triple threat for tax savings.
First, interest and investment earnings on HSA contributions can grow tax-free. This is why many people choose to not spend the money in their HSA and let the funds build instead. For those who are healthy and don’t utilize healthcare often, an excellent wealth-building strategy is to pay for their few and infrequent medical expenses out of pocket and leave their HSA untouched. Another reason to let your HSA grow, no matter your healthcare usage, is that HSAs can lower your taxable income.
The second tax-saving benefit of having an HSA is that HSA contributions can be invested and grow tax-free. If you have an HSA, you can grow your funds through interest, and in some cases, you can also invest your contributions. Best of all? Neither interest nor investment is subject to taxes. Just like many other investments, it’s wise to leave it untouched so it can grow as much as possible. Unlike some investments though, (such as a 401k or an IRA) there aren’t any requirements for minimum distribution options. An HSA also stays with you for as long as you’re alive. It doesn’t go away if you leave your employer or even if you change your health plan. If you do choose to invest the HSA funds for the long haul, it’s important to select a provider that has low costs and great investment options.
The third and final tax-saving benefit of an HSA is that you can withdraw money from your HSA at any time after you turn 65 for any reason. The only caveat is that you’ll have to pay income taxes on funds withdrawn for non-medical expenses. If you have an HSA, your financial advisor, can discuss strategies with you on how and when to use your HSA in retirement. The funds can still be used on just medical expenses, especially since healthcare costs are the second most expensive item in retirement. Another benefit to being able to withdraw funds from an HSA after 65 is that you can reimburse yourself for past medical expenses as long as the expense was incurred after you opened your HSA account.
For example, let’s say you opened your HSA account when you were 25. At the age of 60, you received knee replacement surgery and did not use your HSA funds to pay for the out-of-pocket costs. As long as you keep the medical bill and receipt, after you turn 65 you can reimburse yourself for that surgery by taking a distribution from your HSA. Doing so won’t affect your taxable income since this expense is a qualified medical expense and was not previously reimbursed or deducted.
In Conclusion
On top of the triple-tax savings of having an HSA, the funds in the account can also be used for healthcare costs in retirement such as long-term care insurance premiums, prescription medications, and many other common healthcare costs incurred in retirement. You can, of course, also use your HSA before your turn 65 but leave it mostly untouched so that you have a fund for large medical expenses, like surgery or childbirth. Your financial advisor can sit down with you to help you determine whether or not an HSA is the right choice for your financial goals and health needs. Just reach out and set up a meeting!
How to Pick a Health Plan: Preferences and Questions to Make Choosing Easier
By __Name___
With many different options available, choosing health coverage can be overwhelming. But understanding your healthcare needs and personal preferences can help narrow down the number of plans to consider. With the exception of special life events that trigger unique enrollment opportunities, insurance plans cannot be changed outside of the annual open enrollment period. Changes to current health status may not align with this timeframe, so you want to ensure you have a plan that covers you (and any dependents or a spouse) for any eventuality.
The following list of questions should help you identify and prioritize your personal preferences when looking at plans. Each question has an additional note to explain its relevance and how the answer might affect the plan you choose. As you go through the questions, think about the healthcare you’ve needed so far and what you might expect to want or need in the coming year. If you’d like additional assistance, don’t hesitate to reach out to your financial advisor to talk through the decision-making process with them!
Access to Care
1. Do you have any current doctors or physicians that you want to continue to see?
- Insurance companies offer doctors a chance to join their “network” and there are many mutual benefits that come with this agreement. These networks are then offered to you as an enticement to choose their health plan. Most plans have better rates for using in-network doctors so it is important to know if your doctors will be considered in-network for the plan you choose.
2. Are there any pharmacies near your home or place of work that you prefer to use for prescription medications? Likewise, are there any hospitals in your area that you want to ensure are covered?
- Similar to how doctors can join the insurance network, hospitals, clinics, and pharmacies can also join and be “in-network” with your insurance company.
3. Are you ok if the plan requires you to get a referral from your primary care doctor in order to see a specialist?
- Some plans, notably HMO plans, require you to get a referral from your primary care doctor before you can go to a specialist. Specialists are doctors that have completed advanced education and training in a specific field, such as dermatologists, neurologists, cardiologists, etc. If you anticipate needing these services often, a plan that requires you to go through the ‘gatekeeper’ of a referring primary care doctor may not be the best for you.
- It should also be noted that a referral by your primary care physician does not guarantee coverage under your plan, and you should always check with your insurance before you attend an appointment.
4. Do you travel within the United States frequently? If you do, would you need coverage that has access to a nationwide network of doctors? Or would a more restricted regional network be sufficient for your needs?
- Insurance networks can be regional or nationwide. Regional networks are limited to a geographic area and therefore can be more affordable in price. Nationwide networks allow you the flexibility to see in-network doctors in any of the U.S. states and territories. Regional networks are often statewide but a few of them might be specific to several local counties.
- In an emergency, ambulances and medical treatment at the ER will be covered even if you go outside the network. However, frequent travelers might wish to see an in-network doctor for a cold or to refill a prescription and that would only be accessible with a nationwide network.
Financials
1. Do you currently have a Health Savings Account (HSA), or would you like a plan that is compatible with them?
- HSAs are a great way to set aside money on a pre-tax basis to pay for qualified medical expenses. HSA accounts are compatible with high-deductible health plans. Any unused funds can roll over year after year, and be invested to grow for use in the future.
2. Is the out-of-pocket maximum associated with the plan a potential cost you could afford or budget for?
- The out-of-pocket maximum is the most you will pay out of your pocket for covered health services in a year. The deductible, any copayments, and coinsurance that you pay for medical care will all count towards the out-of-pocket maximum amount that year. Plans that offer out-of-network benefits will have a different out-of-pocket maximum amount for in-network and out-of-network services. This is very helpful for determining the ‘worst-case scenario’ for any given year. It will help you estimate the potential impact on your personal finances in a year with a high number of medical services, or a service with a high cost.
3. When considering your upfront costs for healthcare, would you prefer to pay a higher monthly premium but a lower cost for individual medical services received? Or, would you prefer to pay less each month in premiums, but have a higher cost responsibility when you receive medical care?
- This question has a lot to do with your risk tolerance and financial situation. If you have the savings to cover the out-of-pocket maximum for your plan, choosing a lower monthly premium can potentially save you money in the months that you do not have many medical services. Alternatively, a plan with higher monthly premiums and lower costs at the time of service can be easy to manage and budget for.
4. Would you prefer to pay a flat rate copayment for each doctor visit, or would you be comfortable with a percentage-based cost?
- If the plans you are comparing have similar out-of-pocket costs, this question is more about your personal preference for an organization. Plans with flat-rate co-payments often have higher monthly premiums or fixed costs. These types of ‘pay in advance’ plans can be very easy to manage because the flat rate copayment is the same every time you go to the doctor. These plans are great if you have lots of regular repeat services with an in-network doctor, such as mental health services.
- Alternatively, if you do not mind navigating a percentage-based coinsurance on your doctors' bills, you may find plans with coinsurance have a lower monthly cost.
Insurance Carrier Option
1. Do you have any insurance companies you prefer to work with? Or any that you refuse to work with?
- Each insurance carrier has its own perks and benefits. You might consider the size of their doctor network, the quality of their customer service, or even the design of their websites and support tools. You may want to weigh your personal preferences against each carrier. For example, if it’s important to have an app on your phone to check your claims and find your doctors, you might prioritize that over costs.
2. If you choose to change insurance carriers, do you feel it’s worth the effort required to make the switch?
- Will you need to find new providers? Or be required to move your medications over to a new pharmacy? Does the new insurance carrier use the same bank or a different bank for an HSA plan, if you have one? If you need to wait for your new ID cards to arrive in the mail, will this timing be ok for your family? You may have to restart your deductible and out-of-pocket maximum if you are making the change mid-year; will this be something you can afford?
3. Do any of the insurance plans come with additional perks or benefits you would like to use?
- Many insurance companies offer discounts for healthy lifestyles, such as Silver Sneakers, or discounts to Weight Watchers. If you utilize these benefits or would like to, consider the priority of those services against your preference for the company.
Types of Services Covered
If you are considering coverage through an employer, your spouse's company, or retiree benefits, different plans may cover different types of services. So you will want to consider what services are covered under the plan.
1. Do you want coverage for alternative therapies?
- In addition to covering doctors, pharmacies, and hospitals, some plans offer coverage for alternative therapies such as naturopathy, acupuncture, chiropractic care, massage therapy, etc. If you feel you would want to utilize these services, you may want to choose a plan that covers them.
2. Would you prefer the convenience of Telemedicine?
- Even before COVID-19, some people preferred to use telemedicine instead of going to their doctor’s office. This was especially true in regard to visits that didn’t require a physical exam, such as mental health visits or to discuss test results. If you feel you could benefit from this option, you may want to choose a plan that covers telemedicine.
3. Are there annual or lifetime maximums on any of the covered services you would like to use?
- Insurance plans can often have benefit limitations in the form of a maximum number of visits annually or a maximum dollar amount. Here is a list of services that are commonly limited:
- Dental and Orthodontics
- Hearing Aids
- Vision
- Physical Therapy
- Speech Therapy
- Occupational Therapy
- Fertility Treatments
- Durable Medical Equipment
You may want to confirm with your insurance if you currently use or are planning to use any of these.
4. Are you expecting any large medical events in the next year? Such as a planned surgery or pregnancy?
- This is perhaps the most important question of all. If you know you are expecting large medical costs, preparing your plan selection around that event might be one of your top priorities. Consider the doctors you will need, the out-of-pocket maximum on your plan options, and the timing of your event within the year. Prioritize your preferences and choose a plan that is going to suit your needs for this year. You can always make a new selection during the next open enrollment period.
Final Thoughts
When choosing a health plan, it’s important to consider budget, personal preferences, and health needs before making a decision. Although this blog is not an exhaustive list of all the features and preferences you can go over to consider a plan, it does cover most of them and will help you to make the best decision possible for your needs. If you want to take it a step further, ask your financial advisor about completing a HealthPlanning Analysis! Simply reach out to get support for this complex decision by getting health plan options tailored to your needs.
Medicare Enrollment 101: A Guide to Help You Sign Up for Medicare
By __Name__
If you’re turning 65 soon, congratulations! You’ve reached an important milestone: you can finally enroll in Medicare. You might be even more excited than most if you’ve been postponing retirement until 65 in order to avoid paying for expensive health insurance. But even those who’ve already retired are likely looking forward to Medicare enrollment as well.
But before you can check Medicare enrollment off your “Turning 65 Checklist”, it's important that you know how the process works. Unfortunately, Medicare enrollment is not straightforward, and making mistakes during the Initial Enrollment Period can result in financial implications like costly penalties, gaps in coverage, and/or insufficient coverage.
Together, we’ll review the basic parts of Medicare, enrollment deadlines, how to enroll, and some common costs you can expect. With this guide in hand, and the help of your financial advisor, you’ll be able to go through the Medicare enrollment process from start to finish with confidence.
What Am I Enrolling In?
Before diving into the timeframe specifics of Medicare enrollment, it’s important to first understand what you're actually enrolling in. Many pre-retirees mistakenly think that all Medicare is the same, but in reality, you have many decisions to make about the Parts of Medicare you’ll enroll in. The main components of Medicare include:
- Part A (Hospital Insurance): Medicare Part A covers services like hospital inpatient care, hospice care, home health care, and some types of skilled, inpatient nursing home care (excluding long-term care).
- Part B (Medical Insurance): Medicare Part B covers preventive and medically necessary services that diagnose or treat medical conditions. Examples of these services include doctor's visits, some outpatient services, some mental health services, and prescribed durable medical equipment.
- Part C (Medicare Advantage): Medicare Advantage plans offer an alternative way of getting the same coverage found under Parts A and B (Original Medicare) plus additional coverage, including coverage for the 20% that Parts A and B don’t cover. Medicare Advantage Plans, which are often bundled with Part D, are provided by Medicare-approved private insurance companies. Individuals typically have dozens of Medicare Advantage Plans to choose from depending on the state they live in.
- Medicare Supplement (“Medigap”): Medigap supplements Parts A & B (whereas a Medicare Advantage plan offers an alternative way to get Parts A & B) by paying for some of the costs for covered healthcare services and supplies, including copayments, coinsurance, and deductibles. Some Medigap policies also offer additional coverage on services not covered by Parts A & B.
- Part D (Prescription Drug Coverage): Medicare Part D aids in covering the cost of prescription medications. This coverage is optional (penalties will apply if you delay coverage) but is available to anyone with Original Medicare (Parts A & B). Most Medicare Advantage Plans bundle in prescription drug coverage.
When Can I Enroll?
There are lots of key dates to consider for Medicare enrollment depending on your unique circumstances. Reach out to your financial advisor for help with these steps or to talk through decision-making related to Medicare!
Parts A and B Enrollment
Most individuals will be able to sign up for Parts A and B during their Initial Enrollment Period, which lasts for seven months. The Initial Enrollment Period begins three months before you turn 65 and ends three months after. So if you have an August birthday then your IEP is from May to November. When coverage begins depends on which month individuals enroll, but the earliest it can be is your birthday month and it will always start on the first of the month.
Signing up for Medicare during the Initial Enrollment Period is not optional for most people. If you miss the Initial Enrollment Period, you might have to wait to sign up until the next General Enrollment Period, which may result in a delay in coverage and a lifetime late enrollment penalty. The longer you wait to sign up, the higher the penalty.
Once individuals have enrolled, they can make changes to their Medicare coverage during the Open Enrollment Period, from October 15 to December 7 each year, or the General Enrollment Period, which happens annually between January 1st and March 31st, depending on their circumstances.
In limited special circumstances, some individuals can make changes to their coverage or enroll in Medicare for the first time outside of the Initial and General Enrollment Periods, but only if they’re eligible for what’s known as a Special Enrollment Period. These special circumstances may include changing addresses outside your plan’s service area, losing certain existing coverages, or being offered coverage changes by your employer.
Medigap, Medicare Advantage (Part C), and Part D Enrollment
Individuals will need to have enrolled in Parts A and B prior to signing up for a Medigap, Medicare Advantage, or a Part D plan.
In most cases, you only have 60 days to enroll in these plans after you’ve enrolled in Parts A and B. Once you’ve selected either Medigap or Medicare Advantage, you have your entire first year as a Trial Right Period to possibly switch to the other if you’re not satisfied. After this time, you can only switch during limited times of the year and you may be subject to medical underwriting.
How Do I Start the Enrollment Process?
Now that we’ve covered what Parts of Medicare you can enroll in and when you can enroll, let’s review how to sign up for Medicare. Thankfully, the process for signing up for Original Medicare is relatively simple. If you are already receiving Social Security benefits, you may already be enrolled in Original Medicare.
Listed below are the various options available for individuals who are not currently receiving Social Security benefits:
- Apply Online: The easiest (and often fastest) way to sign up for Medicare is to sign up online on the Social Security website. You’ll need to create a secure Social Security account to get started. Note: If you’re already collecting Social Security, you’ll automatically be enrolled in Parts A and B.
- Call Social Security: You can also call Social Security at 1-800-772-1213 or 1-800-325-0778 if you’re using a teletypewriter. Individuals can also contact a local Social Security office in their area and reach out for assistance.
- Railroad Retirement Board: It’s worth noting that if you or your spouse worked for a railroad, you have the option of reaching out to the Railroad Retirement Board. The Railroad Retirement Board can be reached at 1-877-772-5772.
Enrolling in a Medigap, Medicare Advantage Plan, or a standalone Part D plan requires more effort. Because you likely have many plans available as options, this is a good opportunity to review your medical needs, research various plan options, and review potential costs.
Once this process is complete, you can enroll in a plan online, contact the plan holder directly, or call 1-800-633-4227 (1-877-486-2048 for teletypewriter users) for assistance.
What Costs Should I Anticipate?
When it comes to Part A coverage, most people don’t pay a premium, hence why it’s often known as premium-free Part A. Most people are eligible for premium-free Part A at age 65. Those who have paid Medicare taxes for a certain amount of time while working or anyone who is already receiving or will receive Social Security benefits or Railroad Retirement Board benefits qualifies for premium-free Part A.
If you do have to pay for Part A coverage, you may be looking at a premium between $278 and $506 each month in 2023. The number will depend on how long you (or your spouse) worked and paid into Medicare taxes. Additionally, you’ll be subject to a deductible of $1,600 as well as a potential range of coinsurance payments.
For Part B coverage, the standard premium for most individuals is $164.90 for 2023. However, you may pay a higher premium depending on your income. Additionally, you may also pay 20% of the Medicare-Approved Amount for most outpatient therapy, durable medical equipment, and doctor services (including ones rendered as a hospital inpatient), unless you have a Medigap or Medicare Advantage plan, which will provide a cap on total medical costs. With a Medigap Plan G, for example, you’ll be subject to only a $226 deductible.
Monthly premiums vary by plan for Medigap, Medicare Advantage, and Part D. You can compare plan costs here.
Get More Support With Medicare
This is a very big transition for many of our clients, and Medicare comes with key differences from employer-sponsored or Marketplace insurance. Although there are Medicare insurance agents who can help you, the commission-based nature of their services means that you might not always receive unbiased advice. If you’re turning 65 soon, ask your financial advisor about completing a HealthPlanning Analysis to ensure the enrollment process goes smoothly and you find the plan options that best fit your needs, preferences, and budget.
How to Avoid High Healthcare Costs While Traveling
By __Name__
It’s summertime, which means we’re seeing “out of office” messages galore and an influx of requests from family and friends to “water the plants” or “feed the cat” while they’re vacationing. Whether you’re taking a well-deserved vacation or visiting family, there are some important pieces of advice we’d like to share. Although it’s not a thrilling topic and certainly not at the top of things anyone thinks about when vacationing, it is important to know the answers to questions like:
- “How does my healthcare coverage work if I’m out of state? Or out of the country?”
- “I’m not familiar with the area, how do I find a pediatrician for my toddler’s earache?”
- “I forgot to pack my prescription medication, how do I get a refill if I’m not anywhere near my pharmacy? Or if I’m not technically due for a refill?”
If you’re not prepared for the healthcare issues that could arise during your vacation, you may find yourself paying an expensive medical bill and dealing with a lot more stress than needed. So, bookmark this blog for when you might need it, and let’s dive in.
Proactive steps to take before your vacation to avoid unnecessary medical costs.
It’s always better to be proactive than reactive. You can’t prepare for every single possible medical situation that may or may not arise before traveling, but there are a few simple and common things you can do before your trip to avoid unnecessary medical costs.
Medications
This is a big one! In the midst of packing, it can be easy to forget medications. Try creating a list of all the medications and/or medical equipment you need to pack so you’re less likely to forget. If you do forget to bring an over-the-counter medication, that’s a pretty easy fix. Just go to the nearest store that sells the medication you need. Forgetting a prescription medication isn’t quite as simple. A proactive step you can take is to request a vacation override or travel supply for your prescription. It’s best to request a vacation override on a prescription at least two weeks before your trip. This is a form you can fill out at your pharmacy that allows you to have a prescription filled early or for more than a 30 or 90-day supply. Exact rules and coverage vary depending on your insurer, pharmacy, and state.
Research
Another way to avoid unnecessary medical costs if you need healthcare while traveling is to research if your pharmacy has locations in the area you’re traveling to. It can also be helpful to do a quick search on your health insurer’s website or member platform to see in-network providers, pharmacies, and clinics that exist in your travel destination. You can also check what your health insurer’s policies are on covering healthcare expenses incurred outside of your home state.
Travel medical insurance
If you’re someone who travels outside of the U.S. for extended periods of time or frequently throughout the year, it might make sense to look into travel medical insurance. This is because many health insurers, like Medicare, do not cover medical expenses that you incur outside of the U.S. Make sure to discuss this with your insurer, financial advisor, and travel agent though; if you don’t travel often or for long periods of time, paying for this additional insurance may be a waste of money. It will depend on your unique situation.
Where to go depending on your medical situation.
Let’s say you’re at a beach with your family and one of your kids goes sideways under the water. They get a painful earache and you can’t seem to fix it on your own. They need medical attention, and since you’re not at home, you might feel tempted to rush them to the nearest hospital. Or, maybe you and your spouse are on a hiking trip and you fall. Your ankle hurts pretty bad, but you’re not sure if it’s a sprain or something more serious. Again, you might be tempted to go to the nearest hospital. However, a surefire way to get an expensive medical bill is to go to the E.R. Even if you’re medical situation isn’t an emergency and you only receive minor medical care, the hospital may charge you a high amount for simply being in the E.R.
Generally, taking yourself or someone else to the E.R. is necessary if one or more of the following is present:
- Uncontrolled bleeding
- Chest pain
- Acute respiratory distress
- Medication overdose
- Large, open wounds
- Severe head injury
- Loss of normal function (e.g. inability to move an arm, unable to speak)
This is not an exhaustive list of E.R. scenarios, but it gives you an idea of what is an emergency and what isn’t. And of course, if someone’s life is in danger, call 911.
The two examples we gave earlier, an earache and a potentially sprained ankle, are situations where it would be more appropriate to receive care at an urgent care clinic or a walk-in clinic. These facilities are generally much more affordable than E.R.s and large hospital systems. The following are medical situations that urgent care clinics can take care of:
- Common illnesses (e.g. colds, the flu, earaches, sore throats, migraines, and low-grade fevers)
- Rashes
- Minor injuries (e.g., sprains, back pain)
- Minor cuts and burns
- Minor broken bones
- Minor eye injuries
Knowing where to go for different types of medical care can mean the difference between a $75 co-pay and a $3,000 medical bill.
A quick recap before you jet off to your next destination!
Before you take some much-needed R&R this summer, bookmark this blog so you can access it quickly in case you need it for yourself or someone you’re traveling with. The hope, of course, is that you’ll be perfectly safe and healthy while vacationing and won’t need these tips, but having this information on hand can give you some peace of mind during a potentially stressful event and save you money in the long run.
Happy travels!
College, Turning 26, and Other Dependent Changes That Impact Healthcare Costs and Coverage
By First Name Last Name
You’re likely already aware that turning 26 is a life event that impacts healthcare coverage, but did you know that going to college and getting a job are also life events that can impact your and your dependent’s healthcare costs and financial plans?
College
While some students have access to coverage through a guardian’s plan, there will likely also be an option to enroll in a student health insurance plan offered through the institution. It can be confusing to decide which insurance option makes the most sense.
Student health insurance is commonly offered and may be packaged into tuition costs. Institutions typically also offer separate plans for coverage. All student insurance coverage must be compliant with the Affordable Care Act (ACA). Thus, to waive coverage, the coverage under another plan instead of plans offered by the institution must also be ACA-compliant.
To determine the best option, it’s important to understand how the college’s or university’s health insurance is structured and evaluate all the options against your dependent’s healthcare needs.
When evaluating a student health plan, compare the annual fixed costs (total monthly premiums) of their current coverage against the plan offered by the institution. Then, factor in the possible out-of-pocket costs into the comparison to find out the most your student might pay in a given year.
If you decide to keep your current coverage for your dependent, you’re entitled to waive the student plan by submitting the required documents to the institution. Waiver deadlines are often dependent on the academic calendar but the waiver process typically occurs at the beginning of each semester or quarter. For dependents who are covered under a guardian’s plan, under the ACA they can stay on the plan until they turn 26.
Another option is to go through the Marketplace. Sometimes, these plans may be less expensive than student insurance. Students may also get coverage through Medicaid if they qualify as low-income and meet the state’s eligibility requirements.
A few things to keep in mind are also where the college is located, the plan type, continued eligibility, and summer coverage.
Location
If your dependent is attending an out-of-state school, you will need to consider the provider networks in your health insurance options. For instance, if a plan requires referrals from a primary care provider, you might want to look for a different doctor closer to your dependent’s school. State licensing can also impact availability. For example, if your dependent is planning to go to an out-of-state school and access mental health services with their provider from home, you’ll want to check if the provider is licensed in the new state.
Plan Type
Related to the above is the plan type, meaning if it is a PPO, HMO, or EPO. Your dependent will need to check for provider network coverage under your plan, especially if their school is in a different state. If their doctors aren’t in-network with their plan’s coverage, they might want to switch to a plan that has access to their providers to assure coverage at an optimal cost. If they change their legal residency, this is considered a qualifying life event, which allows them to make plan changes outside of Open Enrollment or when the semester or quarterly coverage ends.
Continued Eligibility
Some student plans require enrollment in a certain number of units or credit hours to be eligible for coverage. This is something to keep in mind in case your dependent is thinking of going part-time or taking time off from school.
Summer Coverage
Some colleges offer summer coverage, even if the student isn’t enrolled in classes. Pay attention to the deadlines to enroll though, otherwise, you might miss the window for coverage. If your dependent loses coverage over the summer, they might qualify for a special enrollment period to enroll in an ACA-compliant plan on the Marketplace. However, voluntarily dropping a student plan is not considered a qualifying event.
Turning 26
Under the Affordable Care Act, health plans are only required to cover the policyholder’s dependents until they turn 26. Before the ACA, most health plans kicked dependents off their guardian’s health plans once they reached the age of 19 or stopped attending school full-time. If your dependent is covered under your employer policy, they have until the end of the month that they turn 26 to choose a new health insurance plan. So, if your dependent turns 26 on May 4th, they have until May 31st to find new coverage. However, it’s always best to act sooner rather than later to avoid any potential gaps in coverage. If they receive coverage under your ACA Marketplace plan, they have until the end of the calendar year, December 31st, before their coverage ends.
So, when your dependent ages off of your policy, what are their options?
Well, for starters, this is a life event that qualifies as a Special Enrollment Period. Meaning that your dependent is eligible to enroll in a Marketplace plan no matter what time of the year they turn 26. Enrolling in a Marketplace plan is a good option if your dependent is not eligible to receive employer-sponsored coverage through their job. You can schedule a meeting with your financial advisor to help you and your dependent identify if they qualify for a premium tax credit to make their Marketplace health insurance premium more affordable.
Aside from the Marketplace, other healthcare coverage options for people who have aged off their guardian’s policy are:
- Employer-sponsored healthcare coverage
- COBRA
- Student health plans
- Medicaid coverage
After getting your dependent’s healthcare coverage figured out, it’s time to assess your own coverage. Now that one less person is on your health plan, this could affect the cost of your health plan. Your current health plan might not be the optimal choice anymore either. Let’s say your dependent has a chronic condition that required frequent medical appointments, so you opted for a low-deductible health plan with higher monthly premiums. If you’re in relatively good health and want to pay less each month on your health plan, you might want to consider enrolling in a high-deductible health plan with lower monthly premiums. You and your financial advisor have access to healthcare planning software through our partner Caribou, so you can complete a HealthPlanning Analysis to identify the optimal health plan choices for you based on your health needs, preferences, and financial goals.
First Job
Let’s say your dependent gets their first full-time job before the age of 26 and is eligible for healthcare coverage through their employer. What should they do? Should your dependent enroll in their employer’s coverage, or should they stay on your plan until they turn 26? Well, it depends. This is a great opportunity to have a conversation with the whole family about your financial goals, healthcare needs, and preferences. Through a HealthPlanning Analysis, you can compare plan options to see which offers the best combination of optimal coverage, costs, provider network, etc.
Final Thoughts
These are all exciting milestones for you and your dependent, but in the excitement, don’t forget to consider how your dependent’s healthcare coverage (and by extension, your own) might change based on these life events. If you want to ensure you make the best decision possible for your and your dependent’s healthcare coverage, ask your financial advisor about completing a HealthPlanning Analysis. Simply reach out to get support for these decisions by getting health plan options tailored to your needs.
