What to Consider When It’s Time to Get Your Own Health Insurance

December 05, 2024

Brooke Royer

Capital Partners

Picking a healthcare plan may not be an exciting task, but it is important. Senior Relationship Associates Brooke Royer and Elise Johnston explain how to navigate open enrollment and make sense of the choices available to you.

Turning 26 years old might not seem like a big milestone, but for young adults who have been covered under a parent's health insurance plan, it means significant changes to your healthcare status.

The Affordable Care Act (ACA), which was enacted in 2010, increased accessibility to health insurance coverage for many who were previously uninsured due to pre-existing health conditions or limited finances. The ACA also requires that plans and issuers offer dependent coverage to children until the age of 26 under their parents' family healthcare plan.

So, when open enrollment – the annual period for employer-provided healthcare plans where you can sign up for or switch plans – rolls around at age 26, you may have some questions.

How does open enrollment work?

Open enrollment differs for every company, but it typically starts one to two months prior to coverage.

Many employers are on a calendar year plan, so benefits coverage starts January 1. A standard schedule for calendar year open enrollment may be as follows (please note, these dates may differ depending on your employer and/or state of residence):

November 1: Open enrollment begins. This is the first day you can enroll in, renew, or change health plans through the marketplace for the following year (coverage can start as soon as January 1).
December 15: This is the last day to enroll in/change your plan for any coverage starting on January 1.
January 1: Coverage starts for those enrolled by December 15, and the first premium payment is due.
January 15: Open enrollment ends. This is the last day you can enroll in or change your health plan for this year. After this date, you may only enroll/change your plan if you have a qualifying life event (QLE). More on those later.
February 1: Coverage starts for those who enrolled between December 16 and January 15, and the first premium payment is due.

The exact open enrollment timeline depends on your employer, but they should have clear firmwide communications leading up to and throughout the period.

What do I do if I need to enroll in or change my coverage outside of open enrollment?

There are many QLEs that can allow you to change your benefit election mid-year. The most common types are:

Loss of healthcare coverage: You turn 26 and can no longer be covered by your parents' plan.
Change of jobs: When you switch jobs, you will also be able to enroll in your new employer's health plan once you start working. Your employer’s human resources (HR) department should present their plans to you within the first few weeks of starting your new job – if not, be proactive and explore your options.
Marriage: If you get married, you can merge health insurance plans with your spouse. You may be added to their plan as an additional dependent, or they may join yours.
Birth/adoption of a child: If you have a child or adopt, you can add them to your health insurance plan mid-year.

You typically have 30 to 60 days from the time of a QLE to make changes to your plan. If you are aware of an upcoming QLE (such as your 26th birthday approaching, getting married, or having a child), start exploring your options on your employer's HR benefits portal and be aware of the deadline following the event. You can elect the changes on your HR benefits portal or by reaching out to the HR benefits team directly.

Keep in mind that there’s certain documents that must be submitted if changing coverage outside of open enrollment due to a QLE. Check with your employer's HR team on the exact documentation that they require depending on the life event. If you are losing coverage at age 26, you’ll be sent a notice from your current plan. The notice should be addressed to you and outlines the type of plan you have and the date you will lose coverage. Additionally, a past employer or your parent's employer can provide a formal letter (with letterhead) outlining the coverage type and loss of coverage date.

What options should I consider?

If you are employed and your employer offers health benefits, enrolling in their health insurance plan is often a smart choice. Employers will partner with insurance carriers to provide group health insurance for both employees and dependents, which is generally more affordable than individual plans.

If your employer offers multiple plan options, it is important to carefully evaluate each one to determine which best meets your needs. Let's explore the most common types of employer-provided health insurance plans to help you make an informed decision when choosing your coverage:

Health maintenance organization (HMO): A budget friendly option that covers in-network providers.
- HMO plans are an affordable option, with lower premiums, prescription costs, and out-of-pocket costs. Having relationships with specific doctors, clinics, and hospitals allows employers to negotiate lower costs to cover the healthcare needs of their employees. However, HMOs limit coverage to in-network facilities, and participants are required to get referrals from a primary care doctor to see specialists. Unless there is an emergency, with an HMO you may not be covered for out-of-network care.
Preferred provider organization (PPO): PPOs provide in-network and out-of-network care, usually at a higher cost.
- A PPO plan offers flexibility to choose both in-network and out-of-network providers, along with the ability to see specialists without a referral from your primary care doctor. However, you will pay higher monthly premiums, out-of-pocket costs, and coinsurance rates if you opt for out-of-network care. PPOs are particularly beneficial for frequent travelers because you can receive care outside your network when away from home.
Exclusive provider organization (EPO): Another budget-friendly plan that covers a limited selection of in-network providers with direct access to specialists.
- An EPO plan is another budget-friendly option that offers access a local network of doctors, hospitals, and clinics. While the network is smaller than that of a PPO, it still provides a range of healthcare options. Like a PPO, you can see specialists without needing a referral from your primary care doctor. However, similar to an HMO, EPOs only cover out-of-network care in emergency situations or if the care you need is not provided in-network.
Point-of-service plan (POS): A hybrid of HMO and PPO plans.
- A POS plan has similar requirements to an HMO – you will need a primary care provider that can coordinate your care and refer you to see a specialist. Similar to a PPO plan, while you have the option to see out-of-network providers, the costs are likely to be higher. POS plans aren't as commonly offered in the ACA marketplace or by employers, but they could work for you if you don't want to be limited in which provider you see.

Another key to picking a plan is understanding the terminology described in each one. Below is a list of some of the most common terms you will see used to describe different plans.

Benefit: A service, drug, or other item that your health insurance covers. Benefits may include office visits, lab tests, and procedures.
Deductible: The amount you must pay for covered services each year before your insurance plan starts covering costs.
Coinsurance: Your share of the costs of covered healthcare services, calculated as a percentage after you've met your deductible amount. For example, if you have 80/20 coinsurance requirements, this means that the insurer pays 80% and you pay 20%.
Network: The facilities, providers, and suppliers your insurer or plan has contracted with to provide healthcare services.
Premium: The amount that must be paid for your health insurance plan, either monthly, quarterly, or annually.
Out-of-pocket costs: The portion of your medical expenses that are not covered by insurance. Examples of out-of-pocket costs include deductibles and coinsurance.

All managed care plans vary in the benefits that are provided and the out-of-pocket expenses that are required, so it is important to understand the nuances between the plans that are offered to seek coverage that fits within your circumstances and priorities.

In sickness and in health, right? Getting married not only marks the beginning of a new chapter, but it also opens up new opportunities for healthcare coverage. Saying "I do" means that you are now eligible to either add your spouse to your employer-provided health plan or join your spouse's plan as a qualifying dependent. Marriage is considered a QLE, and thus, newlyweds have 60 days from their wedding date to update their health insurance coverage.

If you are not employed, or do not anticipate being at your job much longer, joining your spouse's healthcare plan is a cost-effective way to ensure you are covered. This is because employer-provided plans commonly offer discounted prices for coverage of more than one individual. If you have already surpassed the 60-day window for a QLE, ensure that you make adjustments to your healthcare plan during the open enrollment period, which usually happens between November 1 and January 15 for ACA plans.

If you've lost your job, had your hours reduced, or experienced other QLEs, a popular option to maintaining health coverage is via the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA allows workers to temporarily maintain employer-provided health insurance during unemployment.

COBRA is a solid option for individuals who need coverage between losing job-based coverage and beginning new healthcare coverage. For example, if you take time between your job and graduate school or quit your job a few months before getting married and joining your spouse's plan, COBRA might be a strong choice for you in the interim.

You have 60 days to enroll in COBRA once your employer-sponsored benefits end. If you were previously covered by your employer, you should expect to receive a notification from your employer with information about deadlines for COBRA enrollment. While COBRA coverage is designed to be temporary, you can stay on COBRA for 18 to 36 months – providing flexibility to find a plan that suits your needs. However, you may be required to pay the full premium, including the employer contribution, and a 2% administrative fee.

If you are no longer eligible for your parents’ plan and are not currently employed, you can still participate in plans through the ACA Marketplace, but at a higher cost. During the open enrollment period, you can explore plans that suit your needs. Marketplace plans are generally categorized into four metal tiers—bronze, silver, gold, and platinum—based on how costs are shared between you and the insurer.

Bronze plans offer lower monthly premiums and higher deductibles, making them a good option for healthy individuals who want to protect against major costs. Silver plans offer moderate premiums and deductibles, while gold plans offer higher premiums and lower deductibles. Platinum plans have the highest premiums but the lowest deductibles, making them ideal for those who anticipate needing more extensive medical care.

To choose the right plan, evaluate your healthcare needs and determine how much you’re willing to pay for coverage and care to find a suitable balance between monthly costs and out-of-pocket expenses.

If you are unemployed and aging out of your parent’s health care coverage, you can also purchase a health insurance plan directly from a private insurance company outside of the Marketplace. These plans offer a range of coverage options and are available to anyone. The caveat is that private plans can be expensive, especially if you do not qualify for subsidies (government provided financial assistance that helps lower-income individuals afford health insurance).

Like the Marketplace options, you can choose a private plan based on your healthcare needs. However, there are some key differences. For instance, private plans may offer a more limited network of doctors and hospitals, especially with lower-cost options. Additionally, not all private plans cover the full range of ACA’s essential health benefits, such as mental health services and maternity care.

How do you choose a plan?

Consider your priorities. Would you prefer a more cost-effective plan or one that offers greater flexibility and broader coverage?
Are there any specific healthcare needs that you should be taking into consideration? For example, do you have a chronic condition? Are you planning to have any procedures soon?
How extensive are your medical needs? How often do you anticipate you will need to see specialists?
Do you have any major life events coming up soon (i.e., marriage, surgery, children, a move)?

Are there late enrollment options if I miss the timeline for enrollment in my employer’s healthcare plan? The IRS typically does not allow exceptions outside of the allotted open enrollment timeframe unless you have a QLE. Make sure to review your current coverage each fall and determine if any changes need to be made once open enrollment begins.
Do I need to get my own health insurance right when I turn 26 or by the end of the calendar year that I turn 26? Everyone’s plans operate differently. If your goal is to be insured, it is important to check with your current provider to see if dependent status is based off your birthday, the end of the month, or the end of the year.
How can an individual who is currently on their parents’ health insurance but turning 26 be proactive when thinking about health insurance alternatives? First, you should ask your employer when their upcoming open enrollment period is. Some companies provide open enrollment information sessions, which can be a helpful resource to learn about the different available options. Then, be prepared to make your selections when the time comes. There is a wealth of resources out there, and don't be afraid to ask questions.
If you taking time off between leaving a job and going to grad school, how do you ensure that you are covered in the interim? When leaving your job, you should be offered COBRA coverage for a certain amount of time after termination. The premiums and fees are typically higher than when you were enrolled in a group plan as an active employee, so just keep that in mind.

Navigating your health insurance can be complex, but understanding the nuances of your options and how your plan works is essential for making informed decisions and maximizing your benefits.

If you have more questions about navigating transition periods of early adulthood, reach out to your BBH relationship team.

Contact Us

Brooke Royer

Relationship Associate

Multi-Family Office
Endowment & Foundation Management

Capital Partners

New York City, NY | USA

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