Which Is Better: Enrolling in Your Employer's Health Plan or Continuing on Your Parents'?

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Which Is Better: Enrolling in Your Employer's Health Plan or Continuing on Your Parents'?

The decision isn't always clear-cut for young adults.

Which Is Better: Enrolling in Your Employer's Health Plan or Continuing on Your Parents'?

When starting their first full-time jobs, young employees may have to make a choice that was unheard of in previous years for Americans: whether to continue using their parents' health insurance or enroll in a plan provided by their company.


Young adults have the option to remain on their parents' health plan until they turn 26 thanks to the Affordable Care Act, a historic health reform that was passed in 2010. They can choose to do this even if they are married, don't live with their parents, or have employment that provide health insurance.


Making the choice to continue on your parents' health plan isn't always easy because health insurance can be complicated. According to Dan Weissmann, presenter of the podcast "An Arm and a Leg," which examines the high cost of healthcare, "evaluating insurance options is just extremely annoying, like everything else with health care."

According to Martha Sanchez, director of health care policy and advocacy at Young Invincibles, a young adult advocacy organization, people in their early career may frequently change jobs, so it might be easier for them to stick with a plan they are familiar with rather than transferring to one offered by a new employer.

She remarked, "It's just easier not to go through the hassle."

However, Ms. Sanchez added that it was "really up to the parents" and that you shouldn't assume you'll stick to their plan.

The decision isn't always clear-cut for young adults.

Your parents might be able to save money by removing you from their own job-based plan, depending on the specifics of the coverage. Rates for health care are usually based on tiers; for example, there may be a single rate for an employee alone, a higher fee for an employee and a spouse, and an even higher charge for family coverage that includes children. Your parents might save money by removing you from their health insurance if your siblings aren't already insured by it.

It can make sense for you to stay insured if your parents' coverage includes other siblings because your removal might not affect their premium. Family conversations should be held regarding whether or not they ask you to assist with paying for bills, possibly by covering your own out-of-pocket charges.

In most cases, it is preferable to sign up for your own job-based insurance if your parents' coverage is provided through Healthcare.gov, the federal insurance marketplace. According to medical experts, the cost to the family would go up if you were eligible for affordable employment coverage because you wouldn't be eligible for subsidies that help cut the cost of marketplace plans.)

The podcast presenter, Mr. Weissman, advises contrasting the salient features of your parents' plan with each choice that your employer offers—there can be several options available at different price points.

Check the monthly premium amount first. KFF, a nonprofit health research organization, estimates that the average yearly premium for individual health coverage paid by employees in 2023 was roughly $1,400, or $117 per month.

Examine additional out-of-pocket expenses such as co-payments, also known as co-pays, which are one-time fees you might have to pay at the doctor's office, and deductibles, which are amounts you have to pay for services before your insurance covers them. Depending on your plan, co-pays may or may not go toward your deductible. (Watch this video for an entertaining explanation of insurance jargon.)

Certain preventative care services, such as vaccinations, cancer screening exams like Pap smears, and smoking cessation counseling, are free of cost under the Affordable Care Act. However, you will usually have to pay for additional treatments until your deductible is satisfied. According to KFF, the average yearly deductible for individual job-based coverage in 2023 was $1,735.

You will typically still be responsible for a portion of the costs, usually 20 or 30 percent, up to the out-of-pocket cap (which, for most health plans in 2024, will not exceed $9,450 for care received within the plan's network).

Another thing to think about is pharmacy coverage, particularly if you take certain drugs on a regular basis. Verify whether the plan covers the particular prescription or medications you require by consulting the formulary, which is a list of approved drugs included in every plan.

It also matters which doctors and hospitals are part of your plan's network. Staying there could be advantageous if you have a chronic illness and have a long-term doctor via your family's plan, but you would have to switch doctors with your employer's plan, according to Sabrina Corlette, a research professor at Georgetown University's Center on Health Insurance Reforms.

Make sure that medical professionals are available to you in your area of residence. That might work well if your parents' plan offers nationwide access. However, local care through your employer's plan makes more sense if it's an HMO in Los Angeles and you'll be living in New York, according to Louise Norris, a health policy analyst at Healthinsurance.org, an online resource for information and referrals.

She declared, "There is no right or wrong answer." "It relies on your particulars."

The decision isn't always clear-cut for young adults.

The following queries and their responses pertain to selecting a health plan for a young adult:

Can I be covered by my parents' policy plus the plan offered by my employer?
Yes, however it's usually not advised. When you have dual coverage, your parents' health insurance plan is regarded as secondary coverage, and the health insurance provided by your employer is regarded as primary coverage. The costs would be covered by your job plan first, with any expenditures (like deductibles) that your primary health insurance did not cover potentially covered by your parents' policy.

Coordinating two policies, however, can be difficult and present an opportunity for insurers to dispute about who should pay what, thereby delaying the settlement of claims. These policies may have separate provider networks and deductibles.

According to Ms. Corlette, "it creates far more problems than it solves." "In general, I would advise you to stay away from it."

According to Dr. Jeff Levin-Scherz, population health leader at WTW and benefits consultant, you should particularly avoid dual coverage if you select a high-deductible plan through your employer and use a special tax-advantaged health savings account, or H.S.A., as your primary coverage. With these programs, you can make pretax contributions to the H.S.A., where they can grow tax-free. However, such tax benefits may not be available to you if you have supplemental coverage.

When I am 26 what happens if I'm on my parents' plan?
There will be a special enrollment time available to you. This implies that you don't need to wait for the plan's yearly open-enrollment period to enroll through your employer. To ensure a seamless transition, confirm the specifics well in advance of your birthday by contacting your workplace.

What happens if, after I turn 26, I can no longer get job-based health insurance?
Examine your state's equivalent of Healthcare.gov, the federal health care marketplace, for available plans. (If your parents are covered by the marketplace, you can continue on their policy through the end of the year in which you turn 26.) Your eligibility for tax credits and financial assistance that can drastically reduce your expenses may depend on your income. (In many areas, young adults who satisfy specific requirements can continue on certain insurance plans until they are about 30 years old.)