Client Life Events: College, Turning 26, and Other Dependent Changes

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Planning around life’s milestones and changes is one of the easiest ways to create a comprehensive financial plan. It also makes talking about healthcare costs a lot less awkward and makes healthcare planning more seamless to offer. For this blog, we’re going to focus on life events that revolve around clients’ dependents. You’re likely already aware that turning 26 is a life event that impacts healthcare coverage, but did you know that going to college and getting a job are also life events that can impact your clients’ and their dependents' healthcare costs and financial plans?

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College

While some students have access to coverage through a guardian’s plan, there will likely also be an option to enroll in a student health insurance plan offered through the institution. It can be confusing to decide which insurance option makes the most sense.

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Student health insurance is commonly offered and may be packaged into tuition costs. Institutions typically also offer separate plans for coverage. All student insurance coverage must be compliant with the Affordable Care Act (ACA). Thus, to waive coverage, the coverage under another plan instead of plans offered by the institution must also be ACA-compliant.

To determine the best option, it’s important to understand how the college’s or university’s health insurance is structured and evaluate all the options against the dependent’s healthcare needs. 

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When evaluating a student health plan, compare the annual fixed costs (total monthly premiums) of their current coverage against the plan offered by the institution. Then, factor in the possible out-of-pocket costs into the comparison to find out the most the student may pay in a given year.

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If your client decides to keep the current coverage for their dependent, they’re entitled to waive the student plan by submitting the required documents to the institution. Waiver deadlines are often dependent on the academic calendar but the waiver process typically occurs at the beginning of each semester or quarter. For dependents who are covered under a guardian’s plan, under the ACA they can stay on the plan until they turn 26.

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Another option is to go through the Marketplace. Sometimes, these plans may be less expensive than student insurance. Students may also get coverage through Medicaid if they qualify as low-income and meet the state’s eligibility requirements.

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A few things to keep in mind are also where the college is located, the plan type, continued eligibility, and summer coverage.

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Location

If the dependent is attending an out-of-state school, your client will need to consider the provider networks in their health insurance options. For instance, if a plan requires referrals from a primary care provider, they might want to look for a different doctor closer to the dependent’s school. State licensing can also impact availability. For example, if the dependent is planning to go to an out-of-state school and access mental health services with their provider from home, you’ll want to remind your client to check if their provider is licensed in the new state.

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Plan Type

Related to the above is the plan type, meaning if it is a PPO, HMO, or EPO. The dependent will need to check for provider network coverage under their guardian’s plan, especially if their school is in a different state. If their doctors aren’t in-network with their plan’s coverage, they might want to switch to a plan that has access to their providers to assure coverage at an optimal cost. If they change their legal residency, this is considered a qualifying life event, which allows them to make plan changes outside of Open Enrollment or when the semester or quarterly coverage ends.

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Continued Eligibility

Some student plans require enrollment in a certain number of units or credit hours to be eligible for coverage. This is something to keep in mind in case the dependent is thinking of going part-time or taking time off from school.

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Summer Coverage

Some colleges offer summer coverage, even if the student isn’t enrolled in classes. Pay attention to the deadlines to enroll though, otherwise, your client may miss the window for coverage. If they lose coverage over the summer, they might qualify for a special enrollment period to enroll in an ACA-compliant plan on the Marketplace. However, voluntarily dropping a student plan is not considered a qualifying event.

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Turning 26

Under the Affordable Care Act, health plans are only required to cover the policyholder’s dependents until they turn 26. Before the ACA, most health plans kicked dependents off their guardian’s health plans once they reached the age of 19 or stopped attending school full-time. If the dependent is covered under their guardian’s employer policy, they have until the end of the month that they turn 26 to choose a new health insurance plan. So, if the dependent turns 26 on May 4th, they have until May 31st to find new coverage. However, it’s always best to act sooner rather than later to avoid any potential gaps in coverage. If they receive coverage under a guardian’s ACA Marketplace plan, they have until the end of the calendar year, December 31st, before their coverage ends.

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So, when a client’s dependent ages off of their policy, what are their options?

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Well, for starters, this is a life event that qualifies as a Special Enrollment Period. Meaning that the dependent is eligible to enroll in a Marketplace plan no matter what time of the year they turn 26. Enrolling in a Marketplace plan is a good option if the dependent is not eligible to receive employer-sponsored coverage through their job. As the financial advisor, you can help your client’s dependent figure out if they qualify for a premium tax credit to make their Marketplace health insurance premium more affordable.

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Aside from the Marketplace, other healthcare coverage options for people who have aged off their guardian’s policy are:

• Employer-sponsored healthcare coverage
• COBRA
• Student health plans
• Medicaid coverage

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In addition to helping your clients figure out the optimal healthcare coverage choice for their dependent, you might consider reviewing their healthcare coverage. Now that one less person is on their health plan, this will affect the cost of their health plan. Their current health plan might not be the optimal choice anymore either. Let’s say their dependent has a chronic condition that required frequent medical appointments, so they opted for a low-deductible health plan with higher monthly premiums. If your clients are in relatively good health and want to pay less each month on their health plan, they might want to consider enrolling in a high-deductible health plan with lower monthly premiums. You can ask your clients about their healthcare utilization and help them compare plans to choose the best option for their health needs, preferences, and financial goals. And if you want to make that comparison easier on yourself (and them) you can use Caribou’s healthcare planning software.

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First Job

Let’s say your client’s dependent gets their first full-time job before the age of 26 and is eligible for healthcare coverage through their employer. What should they do? Should their dependent enroll in their employer’s coverage, or should they stay on their guardian’s plan until they turn 26? Well, it depends. This is a great opportunity for you to have a conversation with the whole family about their financial goals, healthcare needs, and preferences. Analyze all the plan options available to see which offers the best combination of optimal coverage, costs, provider network, etc. Make sure to look at not only how the decision impacts your client’s finances, but the dependent’s too. This can be a great opportunity to build a more engaging relationship with your client’s dependent. 

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Final Thoughts

Helping clients decide what to do about their dependent’s healthcare coverage and costs, and by extension how it impacts their own healthcare coverage and costs, will not only set you apart as a financial advisor who can offer healthcare planning, but also shows that you care about both parties’ wellbeing. This is an opportunity to deepen the relationship with your clients who are guardians and create a new relationship with the dependent. Plus, offering healthcare planning allows you to create a more comprehensive and accurate financial plan, and that’s always a win.

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