For many new college graduates, a reward for four years of hard work is being kicked off their parents' health insurance the day they put on their cap and gown. Unless they buy a policy or have lined up a job with insurance, they face paying their medical bills out of pocket.
Thanks to a new law in Maryland, though, this rite of passage will end for many families here beginning next year. Maryland is joining a dozen other states in allowing some parents to keep dependent, unmarried children under age 25 on their health insurance.
The usual rule now is that children can stay on a parent's health plan only until age 19 or 23 if they're full-time students.
"It sure will make life easier," says Stacey Kuzma, a mother of seven in Kensington. Her oldest daughter graduated from college last year, and Kuzma spent nearly $400 a month for health insurance for her until she landed a job about six months later. The family is going through the exercise again now that a second daughter recently graduated.
As Kuzma points out, new grads get a grace period before having to start repaying student loans so they can get on their financial feet. Families can use a similar breather when it comes to health insurance, she says.
Maryland's law and others like it won't solve the problem of uninsured young adults, says Sara Collins, an assistance vice president at the Commonwealth Fund, but it will chip away at it. In Maryland, 214,000 residents ages 19 to 29 were without health insurance last year, reports the Maryland Health Care Commission. Nationally, that figure was 13.3 million, according to the Commonwealth Fund, a private foundation.
"It's one of the fastest-growing uninsured age groups," Collins says.
The Maryland law won't apply to every plan. Basically, it will affect large group plans and individual policies written in the state and regulated by it.
The mandate also will apply to state employees in the HMO health plan beginning in July 2008, says Robin Sabatini, chief of staff for the Department of Budget and Management. No decision has been made on whether other health plans for state workers will adopt this policy, too. But in the past, Maryland has offered similar benefits under its different plans, Sabatini says.
Other exempt groups: Federal workers in the federal benefits program and employers that self-insure, meaning the employer pays the claims.
And for now, the law doesn't apply to small group plans at employers with 50 or fewer workers, says Rex Cowdry, executive director of the state's health commission.
That could change if the commission decides later this year to require small plans to expand dependent coverage, Cowdry says.
Again, this expanded coverage won't kick in until next year. Those losing coverage now will have to fill the insurance gap.
The temptation often is to go without insurance. Young adults figure they're healthy and can take their chances. But no matter how hardy you are, you're not immune from accidents.
And if you ever do need medical services, you'll pay more, says Etti Baranoff, an associate professor of insurance and finance at Virginia Commonwealth University. That's because insurers negotiate lower prices from health care providers, and you don't get the those discounts without insurance, she says.
So, here are insurance options for new grads:
Stay put. The same federal and Maryland laws that allow workers to continue coverage under a former employer's plan also permits new grads to keep insurance under a parent's plan for up to three years as long as they pay. But the price is steep. You'll pay the full cost of insurance -- even the share your parent's employer kicked in -- plus an administrative fee.
If you have a medical condition that would make it difficult to buy a policy on your own, this may be the best option, says Maura Carley, a health care consultant in Connecticut.
Also, if you do have a pre-existing condition, you don't want to go without coverage for more than 63 days, Carley adds. That's because even if you land a job with insurance later you could be excluded for a period of time because you had this gap in coverage, she says.
Individual policies. You can go out and buy a health policy. And if you know you won't need coverage for very long because you're starting a job in the fall, you can buy a policy that will last a few months.
"Oftentimes with young, healthy folks, it's cheaper to buy an individual policy," says Kimberly Robinson, with the Maryland Insurance Administration.
The state agency posts a list of insurers selling policies in Maryland online at www.mdinsurance.state.md.us. It also offers consumer tips on buying a policy. An alternative is to shop through an online broker, such as eHealthInsurance.com.
The price will depend on many factors such as health and the deductible, or how much you pay before insurance picks up the bills.
For example, the cost of a six-month policy for a 22-year-old female non-smoker in Baltimore ranges from $25 a month with a $2,500 deductible to $214 a month for a $250 deductible, according to eHealthInsurance.
Health savings account. This combines insurance with a tax-free investment account to pay for medical expenses. Essentially, you must buy an insurance policy with a deductible of at least $1,100.
Then each year you can put tax-free money into the account that can be used to pay the deductible and other medical bills. You'll never pay taxes on withdrawals if the cash is used for health care.
This year you can contribute up to $2,850 in a health savings account. Any money you don't spend each year can continue to grow in the account.
Coverage under a high-deductible policy will depend on how much you pay for the insurance.
"You get what you pay for. If it's very cheap, it probably doesn't provide much coverage," says Kathleen Stoll of Families USA, a health care advocacy group.
Bel Air financial planner Kirk Kinder likes these accounts for healthy young adults. Their premiums will be low, plus they have many years for their money to grow in the account.
Health savings accounts aren't suited for those with chronic illnesses who will deplete their accounts each year, he says.
Insurance of last resort. What if you've exhausted all avenues and can't get insurance or you've been denied it because of a medical condition?
Many states have an insurance pool for those who can't get coverage elsewhere. Maryland's is called the Maryland Health Insurance Plan. Information is available from the state's insurance administration.
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