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Under ACA, more options and penalties for young adults without health insurance

To many adults, having health insurance is a no-brainer. It’s something you just have to have. And now under the Affordable Care Act, it’s required to have medical insurance, or pay a penalty. Even under the new law, the age group that’s the least likely to get insurance, is the healthiest.

This week on “Take Care,” Kevin Counihan, the CEO of healthcare.gov explains all the various options young people have to get insured. Healthcare.gov is the federal government’s marketplace exchange to buy health insurance.

One of the new core benefits of the Affordable Care Act (ACA) is that now young adults are allowed to stay on their parent’s plan until age 26. Counihan says this policy was “pioneered in a number of states even before the Affordable Care Act was signed” by President Barack Obama in 2010.

“It serves a very critical need,” said Counihan. “We know that roughly 30 percent of young adults are uninsured. And we also know that young adults represent the lowest rate of access to employer-sponsored coverage.”

Insurance companies are required under the ACA to allow parents to have their child on their policy until that child turns 26. And the young adult can go on and off their parent’s policy up until that age.

Counihan says the child does not have to live with their parent, or even live in the same geographical area. The young adult does not have to be declared a tax dependent of the parent. The only requirement is the age requirement.

When the young adult turns 26, they have to transition off their parent’s policy on the on the first day of the month after his or her birthday (unless they were born on the first of the month).

After 26, Counihan says a young adult typically has to do one of three things:

  1. If he/she is eligible for employer-provided coverage and they like that plan, they can go on that.
  2. They could buy a health insurance plan through the exchange healthcare.gov or their state’s exchange if they live in one of the 13 states that operate its own exchange (like New York).
  3. Or they can buy a policy directly from an insurance company.

For low-income young adults whose parents don’t have employer health insurance, the options for health insurance vary, depending on a state’s rules and the individual's income level. Medicaid is one possibility, if the young person qualifies.
Counihan says buying health insurance through the marketplace exchange is popular among young people. He says roughly 30 percent of those enrolled through healthcare.gov are in the 18-34 age group. And many of them are eligible for tax credit subsidies, said Counihan.

While there are some exemptions, most people -- of any age -- who do not have some sort of health insurance end up being subject to a penalty on their income tax. Counihan says the goal is not to penalize people, but to get people covered. But Counihan admits the penalty is a motivator. The penalty has gone up each year and is now $695 as a minimum, up to 2.5 percent of household income.

Counihan says there is lots of help available for young people who don’t know how to go about getting health insurance for the first time. Healthcare.gov has a call center, there are health insurance navigators and health insurance brokers who can discuss the option.

But most importantly, Counihan says, is avoid a gap in coverage.

“The best thing to do… is to plan ahead as to what the options are and what they think are the best opportunities for them.”