Health insurance is one of the biggest worries for recent college graduates: how to get it, how much it will cost, and so on. Here are some tips for those worried about their health care coverage post-college.
Get the facts
For students who are cut off from their parents’ insurance upon graduation, there are a number of options when it comes to health insurance. According to Steve Glick, President and Administrator for Chamber Insurance Trust, state insurance departments allow a variety of the suggested alternatives. “Some of the most common methods are continuing on your parents’ plan under COBRA, purchasing a temporary health plan up to six months and renewed a second six months, and purchasing an individual health plan,” says Glick. “You can also choose college health for those who continue to higher education or evaluate parents’ group plan that continues coverage if you are still dependent on their income.”
When it comes down to it, the best thing a graduate can do when it comes to health care is, as Mark Bellman, Media Chair for the Texas Association of Health Underwriters (TAHU), says, “get a J.O.B. quickly.”
Most graduates have spent their lives covered by their parents’ plan or student plan through their school. “This means that they probably have not had to pay for their insurance in the past and probably have little to no concept of the value or costs of such a product,” says Bellman. “Unfortunately this lack of awareness can have dire consequences if coverage is not found quickly either through employment or purchased through an individual plan.” When looking for a job, Bellman says graduates need to consider the benefits package in the compensation equation.
“Graduates often overlook this important element,” he says. “What are the benefits like— not just health, 401k, and disability. Is there a waiting period? How much does my prospective employer contribute? Family coverage costs? These are important questions that can have a meaningful and impactful affect on one’s compensation package.”
Graduates should also not be afraid to ask their parents for advice on this subject. “This is the hardest thing to do for know-it-all new grads,” says Bellman. “However, the fact of the matter is that their parents probably value and understand health insurance matters much more than they do. Furthermore, parents can help graduates understand what is considered a good benefit package versus a meager one. Graduates usually do not have this perspective unless they have experienced such matters first hand in the work world.”
Graduates don’t always immediately lose their coverage, says Carolyn Goodwin, President of TAHU. “In Texas, insured plans are required to continue dependent coverage to the age of 25—it’s 30 in New Jersey—regardless of student status or residence,” says Goodwin. “So long as they aren’t married, the kids can remain on mom and dad’s policy. If their plan is self-funded, the next option is to elect COBRA continuation under Federal law.” Goodwin adds that it costs the full premium, but it’s an easy transition. In addition, when picking from your employer’s plan, be sure to give the proper attention to the decision.
“The decision-making process should depend on individual circumstances and expectations,” she says. “Are you healthy? Do you think you will never go to the doctor, and take no prescribed medication? That’s a good time to consider a Health Savings Account and the underlying medical plan, if one is available.” In this case you tax defer money, and you have insurance in the event of a catastrophic event. “But, if you have some chronic condition, like asthma or diabetes that requires frequent physician visits and multiple prescriptions, then the new employee might want to consider a more traditional plan, what most people are used to today,” says Goodwin. “It will cost more, but is often worth the extra premium”
Pick a plan
There are a number of options when it comes to choosing a health care plan. Dr. Davis Liu, author of Stay Healthy, Live Longer, Spend Wisely (Stehto Publishing), offers the following suggestions:
Look into a Health Savings Account (HSA)—Introduced in 2004, HSAs are perfect for healthy young people who don’t need to see a doctor very often. An HSA has very low premiums, but a high deductible. It allows you to set aside money tax-free to pay for future health care costs. Funds go in tax-free, grow tax-free, and are spent tax-free. Your take-home pay is higher, your taxable income is lower, and it can save you up to 30% on out-of-pocket medical costs.
Find “short-term” health insurance—Recent college graduates or those in between jobs should consider short-term health insurance. If HSAs are unaffordable, simply get catastrophic coverage. While it won’t cover routine office visits, it can protect individuals from going bankrupt if a major medical bill occurs, like being involved in a car accident requiring hospitalization. You can research individual or short-term insurance plans at www.ehealthinsurance.com.
See part-time employment with benefits—Another option is to consider working part-time for an employer that provides benefits. Companies like Starbucks, UPS, Costco, and Whole Foods Market provide health insurance to part-time employees. With increasing health care costs, these firms are becoming the exception rather than the norm.
Do your research—Refer to the NCQA website at www.ncqa.org to research insurance plans. PPOs, HMOs, Medicare, and Medicaid programs are rated on access and customer service, the providers, programs provided by the plan to improve and/or maintain health, and services in place to help those members with chronic illnesses like diabetes and asthma. Fortune 500 companies, state, and federal governments use NCQA report cards to determine which health insurance plans to offer their employees.