Sat, May 23, 2009
Earlier this month I offered a list of financial planning suggestions for recent college graduates. Since It's often the case that there's a delay period between graduation and the start of a new job, I’d like to expand on one of the items in the list: finding health insurance after graduation.
Usually college students are covered by their parents’ health insurance plan while they’re in school. Parents need to check the specific provisions of their health care coverage to determine how the plan covers a child who graduates from college. In some cases, the coverage will end on the date of graduation; in others, coverage may continue through the end of the year or there may be some other provision.
Several states require health insurers to cover dependent children after graduation. For example, in Connecticut, in some cases a child can be covered under a parent’s group policy until age 26; New Jersey law provides that a child may be eligible as a dependent under the parent’s coverage until age 31. In Massachusetts, even if a child isn’t a dependent but is under 25, he or she can be covered for two years.
To be sure of your situation, you must check with your state’s insurance division or look for the applicable state health insurance consumer guide on this site provided by Georgetown University’s Health Policy Institute.
Why Health Insurance Coverage is Critical
People who can’t afford health insurance or who choose not to get it may assume that they’ll just pay for medical care as they need it. But anyone can experience a serious injury or illness, and hospitals sometimes choose to pursue unpaid bills aggressively. Wrecking your credit record early in life is a lousy idea.
Alternatives to Coverage Under a Parent’s Insurance Policy
State-Subsidized Health Insurance
If you can’t get coverage under a parent’s group policy, there are several options. Check first to see what health insurance assistance your state government offers; Massachusetts has a portal site that provides access to health insurance resources. Some states, like Massachusetts, offer low- or no-cost insurance programs for low-income residents.
Consolidated Omnibus Budget Reconciliation Act (COBRA) Health Coverage
Under COBRA, a child covered under an eligible parent’s health policy can purchase coverage for up to 36 months after becoming ineligible as a dependent. COBRA coverage is often expensive, but it’s worth considering. Some states have similar “mini-COBRA” rules, so again it’s best to check out your state’s health insurance provisions.
Dealing with Pre-existing conditions
Sometimes a private insurance plan may decline to offer a health insurance policy to someone with a pre-existing health condition. Massachusetts and New York require guaranteed access to health insurance without regard to pre-existing conditions, but many states don’t.
Even if you can obtain coverage, a plan may exclude payment for care related to a pre-existing condition for a period of time. Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), group health plans are limited in what can be excluded. A preexisting condition exclusion is permitted only if “medical advice, diagnosis, care, or treatment was recommended or received” for the condition during the 6 months prior to enrollment, and treatment for the condition can only be excluded for 12 months. Thus, even if you have a pre-existing condition, if it hasn’t required recent medical care HIPAA may preclude its exclusion from coverage.
If a child has “creditable coverage” – previous health care coverage for the last 18 months – an insurer cannot impose an exclusion on any pre-existing conditions. Usually, as long as the condition was covered under the previous plan and there is no gap in health insurance coverage of 63 days or more, a subsequent plan should also cover the condition. It’s best to avoid any gaps in coverage, of course.
Planning for health insurance coverage after graduation should be done in advance, so that there’s time to understand the available options and pursue the best choice for your situation.