The Impact of the Affordable Care Act on Coverage for Young Adults

The Affordable Care Act and the 26-Year-Old Age Limit

Before the Affordable Care Act, many adults lost their parents’ coverage at age 26. The ACA requires all plan issues and issuers that offer dependent coverage to make that coverage available until age 26.

This provision is popular with young adults, but it’s not the best option for everyone. Here’s why.

How Does It Affect Young Adults?

Before the Affordable Care Act (ACA) was implemented, health insurers routinely dropped young adults from their parents’ plans once they reached a set age. Under the ACA, children can remain on their parent’s plan until they turn 26, and young adults can also enroll in their own independent coverage in the marketplace or through an employer’s plan.

This popular stipulation of the ACA has helped more than 2 million young people gain access to insurance coverage that otherwise would not have been available to them. In addition, the ACA has required that all health insurance plans offer pediatric dental and vision coverage for young adults. The ACA also requires that insurers spend a certain percentage of premium revenue on medical services rather than administrative costs or profits. This has led to lower rates of uninsured young adults and has created more stability in the health insurance market overall. These benefits may help to ease the financial strain for many families as their children reach adulthood.

Can Young Adults Stay On Their Parents’ Plan?

Under current law, young adults can remain on their parents’ health insurance until they turn 26 years old. This is true for family coverage in the marketplace as well as employer-sponsored plans in most states.

Before the Affordable Care Act (ACA), many insurance companies dropped young adults from their plans as soon as they turned 26, or once they no longer met the IRS definition of a “dependent.” This left young adults without health insurance options.

The ACA required that all plans extend dependent coverage through age 26. This requirement was effective for plan/policy years beginning on or after September 23, 2010. In order to take advantage of this provision, young adults must inform their parent’s insurer that they wish to continue coverage.

When a young adult turns 26 and loses their parent’s insurance, they can use a special enrollment period to purchase their own coverage through the marketplace. This period begins 60 days before and ends 60 days after the month in which they would normally lose coverage.

Can Young Adults Get Their Own Coverage?

Despite allowing young adults to stay on their parents’ insurance plan until age 26, the ACA has not caused many young adults to abandon their parental plans entirely. According to HHS data, between 2010 and September 2015, the number of young adult enrollees in their parent’s plans increased by 5.5 million.

Several leading insurance companies agreed to continue coverage for young adults voluntarily well before the ACA’s mandated implementation date (for plan or policy years beginning on or after September 23, 2010). These plans are typically group policies administered by employers, and require that the young adult is not married, does not have children, and is not a full-time student in college.

In addition, the ACA requires that all insurers offer these same benefits and prices to young adults who would otherwise lose coverage due to aging off of their parent’s plan. This one-time special enrollment period begins 60 days before the plan’s current coverage ends, and lasts for 60 days afterward.

What Happens When Young Adults Turn 26?

If young adults are covered under their parents’ health insurance, they can usually stay on that coverage until they turn 26. This is the case for all individual marketplace plans and employer-based coverage that is sold on the ACA market.

However, if their parent’s plan is purchased through the ACA marketplace and they are removed as a dependent on the date they turn 26, they will lose that coverage immediately (if their birthday happens in December or at the end of their parents’ calendar year). They can enroll in an individual marketplace plan during a special enrollment period which lasts 60 days before and after they lose their current coverage.

For this reason, it is important that young adults have a good understanding of marketplace plan options and how to purchase their own coverage prior to the age of 26. This will ensure they don’t experience a gap in coverage and are able to get the health care they need without expensive out-of-pocket costs.

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