For 26-year-olds, good health meets insurance anxiety

The dreaded age of 26. Many of you are thinking: Huh? What I wouldn’t give to be 26 again!

Well, I’m here to tell you that 26 can be a scary age. It’s the expiration date, so to speak, for children covered by their parents’ health insurance. Older generations are probably scoffing at the fact that there are young people taking such a long ride on their parents’ dime. However, with the torrid growth in health care costs, it’s a more reasonable — and tempting — decision than you might think.

Parents’ policies offer some benefits

One of the most popular provisions of the Affordable Care Act, the still-controversial legislation passed in 2010, is that children may remain on their parents’ health insurance until age 26. As a result, fewer than half of all eligible employees under age 26 enrolled in an employer-provided health plan in 2015, according to the ADP Research Institute. Can you blame them? Consumer health care inflation grew 2.9 percent last year. Though better than the 5 percent expansion of 2007, that’s still much faster than the broader consumer price index. Last year, in-network health insurance plans charged an average $1,200 deductible (the amount you pay before coverage starts), almost double the 2007 figure. That doesn’t count co-payments or your portion of the monthly premium (employers often pay some portion of employees’ premiums).

Moreover, the insurance of young adults’ parents is more often than not better than that offered by their employers — and if a son or daughter is especially lucky, their parents won’t even make them pay! The only downside to being on your parents’ insurance is if you don’t live near your parents. That could make finding an in-network doctor difficult.

Obamacare policies can be costly

You might be thinking: “You’re 26 now, so suck it up and buy into your employer’s insurance.” Sure, except employer-sponsored health insurance continues to cost more and offer less — and there are still many millennials who are unemployed or underemployed.

“Get insurance on the Obamacare exchange,” you say. According to eHealth, the average monthly premium for coverage found on the Health Insurance Marketplace is $161 for 18- to 24-year-olds and $221 for 25- to 34-year-olds. Using $191 as the average monthly premium for the millennial age group, this means they’re paying on average $2,292 a year in health insurance premiums for policies purchased on the exchange. Based on the highest and lowest median incomes by state, millennials living in D.C. are paying around 5-6 percent of their annual gross income on insurance premiums, and Montana millennials are shoveling out roughly 12-13 percent. That’s a sizeable chunk!

The gamble and the penalty

Many millennials are still rejecting Obamacare and are willing to pay the penalty for not having health insurance — off the top of my head, I know of two friends in this camp. The “I’m in good health and I just can’t afford it” mindset is a gamble, but not a surprising one. The penalty, officially called the individual mandate, went into effect in January 2014 and requires that most Americans (there are exceptions) obtain and maintain health insurance. For 2016, the annual fee comes to $695 per adult and $347.50 per child (up to $2,085 for a family), or 2.5 percent of your household income above the tax return filing threshold for your filing status, whichever is greater.

For those of you out there on the cusp of turning26 — particularly if you’re one of the millions of millennials who is an entrepreneur or self-employed — I hope this information helps. Armed with knowledge, it’s time for you to create a smart health care plan and budget.

Jennifer Pagliara is a financial adviser with CapWealth Advisors LLC. Her column appears every other Saturday in The Tennessean. For more information visit www.capwealthadvisors.com.