UPDATED: OCTOBER 02, 2023 | 1 MIN READ
As a young adult, choosing the best healthcare option can be overwhelming, especially with so many plans and insurance providers available. However, taking the time to understand the basics of health insurance, the types of plans available, and the factors to consider can help you make an informed decision. This guide provides a comprehensive overview of everything you need to know to choose the best health insurance for young adults.
Understanding the basics of health insurance for young adults
Health insurance is a way to pay for medical expenses. It works by having you pay a monthly fee, called a premium, to your insurance provider. In return, your provider will cover all or part of your medical expenses. It is important to note that health insurance is not just for emergencies. It also covers routine checkups, prescriptions, and other medical needs.
There are two main types of health insurance plans: individual and group. Individual plans are purchased directly from an insurance company. Group plans are offered by an employer or an organization, such as a school or professional association. Group plans often have lower premiums but may have fewer options for providers.
Understanding health insurance terminology is also important. Key terms to know include:
Types of health insurance plans for young adults
There are several types of health insurance plans available for young adults. They can potentially have insurance coverage through a group or employer plan, or they may be able to opt for an ACA Marketplace plan, or if unemployed or low-income, Medicaid may be an option. Types of health insurance include:
- HMO (Health Maintenance Organization) plans: An HMO health plan offers a network of providers who work together to manage your care. You usually have to choose a primary care doctor who will refer you to specialists as needed.
- PPO (Preferred Provider Organization) plans: A PPO health plan offers more flexibility in choosing providers, but you may pay more if you go out of network.
- EPO (Exclusive Provider Organization) plans: An EPO health plan is a mid-range option between an HMO and a PPO that offers a balance of cost and flexibility. Like an HMO, an EPO typically only covers in-network care (with exceptions for emergencies). Still, it does not require members to choose a primary care physician or obtain referrals to see specialists, similar to a PPO.
- HDHP (High-Deductible Health Plan) plans: An HDHP health plan has lower premiums but higher deductibles. They are often paired with a health savings account (HSA) to help you save for medical expenses.
- Catastrophic health insurance plans: A catastrophic plan has low premiums but high deductibles and is designed to cover major medical expenses.
Employer-sponsored health care
Acquiring health insurance for young adults can be daunting, but fret not, for there are options that won’t break the bank. One such option is to explore an employer’s health plan that is fully paid for. While not as common as it used to be due to the rising cost of healthcare, employer-sponsored plans can still be a cost-effective choice. In fact, most employers will cover the lion’s share of the premiums for your healthcare, leaving you with only a modest amount to pay from your paycheck pretax. Plus, employer coverage will extend to any dependents you may have, making it a compelling alternative to other types of healthcare.
If you’re looking for free or low-cost health insurance, another viable option is Medicaid, a federally funded program for low-income individuals and families. Eligibility for Medicaid depends on whether your state has expanded its program, which is now the case in many states. Under expanded Medicaid, any resident can enroll if their household income is below 138% of the federal poverty level. As a young adult, enrolling in Medicaid could be smart if you’re jobless or work for a company that doesn’t provide health insurance benefits. So why not check if you qualify for Medicaid and get the healthcare you need without breaking the bank?
Health insurance Marketplace plans
When buying affordable health insurance, the ACA health insurance exchange in your state may be just what the doctor ordered, especially if you don’t qualify for Medicaid coverage. On these state exchanges, you’ll typically find five plan tiers: Catastrophic, Bronze, Silver, Gold, and Platinum. Which one is right for you depends on your income and health status.
A lower-tier option like Catastrophic or Bronze might be the best bet for young adults seeking individual plans. These policies are often the perfect fit for young couples or individuals who don’t yet have a family and only need basic coverage. With low premiums and high deductibles, these policies are ideal if you don’t expect to incur many medical costs. It’s worth noting that Catastrophic plans are only available to those under 30 years old.
On the other hand, if you’ve recently started a family, a Silver plan could be a better option. These policies have modest premiums and deductibles, which means you’ll have access to coinsurance and copays more quickly. And if you’re willing to pay more in premiums, a Gold or Platinum plan could be the way to go, as these policies boast the lowest deductibles. So take some time to assess your needs and budget, and pick the right plan for you.
One of the fundamental features of Marketplace metal tier health insurance plans is that they can offer premium tax credits. The tax credit you’re eligible for will depend on the household income. This can be a game-changer for young adults struggling to pay for healthcare out of pocket.
Marketplace health insurance plans can be a godsend for young adults looking to save money on healthcare. One of the key benefits of these plans is that they offer tax credits to reduce the amount you pay in premiums.
This can impact lower-income young adults positively, making marketplace plans much more affordable than employer-sponsored health care. In California, for example, Catastrophic and Bronze plans tend to be the cheapest options for healthy young adults with minimal medical expenses.
But a Silver-tier policy might be a better choice if you’re starting a family, thanks to its lower deductible. By shopping around and comparing your options, you can find the right marketplace health insurance plan for your needs and budget.
Average Monthly health insurance rates per tier
Off-exchange health insurance
If you don’t qualify for premium tax credits, don’t despair. There are still affordable options out there. One option is to compare private health insurance policies to find the best deal. In the private marketplace, you can purchase full-benefit policies similar to the ones available on the ACA Marketplace.
The main difference is that you’d be buying health insurance directly from the insurer or through an agent. It’s worth noting, however, that off-exchange plans are not eligible for premium tax credits provided by the government. By carefully weighing the pros and cons of each option, you can make an informed decision about which type of health insurance policy is right for you.
Student health insurance coverage
Full-time students or recent college graduates could consider purchasing coverage through their university when seeking affordable health insurance. Typically, universities offer health insurance plans to students upon arrival on campus.
This option could be especially helpful for those currently covered by a parent’s plan who may have a different provider network in the state where they attend school.
For instance, if a student and their parents reside in Florida but the student is attending college in Illinois, and the parent’s health insurance does not provide coverage in Illinois, the student could purchase a low-cost plan from their school for coverage.
Staying on a family health insurance plan
Young adults under 26 can remain on their parent’s health insurance policy, regardless of their marital status, living situation, financial dependence, or eligibility for employer-sponsored coverage.
This can be a great option if your parents have an existing health insurance policy, as you will not have to pay any premiums. In cases where your parents need financial assistance with the family plan, adding you to their policy may be a cost-effective alternative to purchasing your own individual policy.
Note that while all states allow dependents to stay on their parent’s plan until age 26, New York extends this limit to age 29 with an additional premium. This is a good choice for young adults seeking free or low-cost health insurance.
Short-term health insurance for young adults
A cost-effective health insurance option outside the exchange is short-term health insurance. These plans offer less comprehensive coverage than ACA Marketplace or private insurance policies.
However, they are often more affordable and can be a good choice for young adults with limited healthcare needs or a tight budget. Keep in mind that short-term health insurance plans may not provide coverage for all essential benefits.
Additionally, you may be denied coverage during the application process if you have preexisting medical conditions.
Comparing health insurance for young adults
When shopping for health insurance, it is important to consider and compare various factors, such as the cost of premiums and out-of-pocket expenses, the network of providers available, and the different types of plans offered.
- Health plan eligibility
- Review benefit designs
- Consider out-of-pocket costs and monthly premiums
- Review the provider network
Health plan eligibility
Before deciding on a health insurance plan’s benefit design, you must determine your eligibility for different health insurance options. For example, you may have the option to stay on your parent’s plan but also have access to coverage through an employer.
Alternatively, you may be eligible for an Affordable Care Act (ACA) plan. Once you have determined your eligibility, you can select a health plan with a benefit design that best suits your needs.
Review benefit designs
Health insurance plans come in various types, such as preferred provider organization (PPO), health maintenance organization (HMO), exclusive provider organization (EPO), and point of service (POS) plans, each with its own benefit design.
Your plan’s benefit design can determine whether you can access out-of-network care and need referrals to see specialists.
More flexibility and fewer restrictions typically come with higher health insurance costs, so PPOs are the most expensive, while HMOs and EPOs are more affordable.
Once you’ve determined how much freedom you want in your plan, you can compare costs.
Consider out-of-pocket costs and monthly premiums
When selecting a health insurance plan, it’s important to consider both the premiums you’ll pay and the out-of-pocket costs you’ll face when you receive care. Premiums are the regular payments you make to maintain your health coverage, while out-of-pocket costs include deductibles and coinsurance you pay when you receive care.
To choose the right plan for you, compare the costs of premiums and out-of-pocket expenses. For example, you might choose between a plan with a low premium and a high deductible or one with a higher premium and a lower deductible.
If you’re shopping on the ACA marketplace, Bronze and Silver plans typically have lower premiums but higher out-of-pocket costs than Gold and Platinum plans. If you’re young and healthy and don’t anticipate needing much medical care, a Bronze or Silver plan may be a good option.
Review the provider network
When you enroll in a health insurance plan, you join a network of healthcare providers with which the plan has contracted. The providers in the network can affect where you receive care and how much you will pay for it.
If you have an HMO or EPO plan, you will be restricted to receiving care from providers within the plan’s network. However, if you have a PPO or POS plan, you may be able to receive care from out-of-network providers, but at a higher cost. It’s essential to ensure your preferred healthcare providers are in the plan’s network to avoid unexpected out-of-pocket expenses.
Therefore, checking each plan’s provider network is crucial and ensures that your preferred healthcare providers are included. Following these steps, you can compare and choose the right health insurance plan.
Factors to consider for young adults choosing health insurance
When choosing a health insurance plan, there are several factors to consider, including:
- Affordability: Look at both the monthly premium and the out-of-pocket costs, such as deductibles and copays. Choose a plan that fits your budget but also provides adequate coverage.
- Network: Ensure that the doctors and hospitals you prefer are in-network. Going out of network can result in higher costs.
- Coverage: Understand what medical services are covered and excluded. For example, some plans may not cover mental health services or prescription drugs.
- Prescription drug coverage: Assess the plan’s formulary and medication cost-sharing. Some plans may have higher copays or deductibles for certain drugs.
Additional tips for finding the best health insurance for young adults
- Consider special circumstances: If you have a chronic condition or need mental health services, ensure your plan provides adequate coverage.
- Research health insurance marketplaces and state-specific programs: Many states offer healthcare marketplaces where you can compare plans and enroll in coverage. Some states also offer special programs for low-income individuals.
- Utilize resources: Insurance brokers and online comparison tools can help you find the best plan for your needs.
- Don’t forget about dental and vision insurance options.
Does the Affordable Care Act cover young adults?
ACA plans do cover young adults. In addition, health insurance plans and issuers are required to offer coverage to adult children of enrollees until they turn 26 years old, regardless of whether they live with their parents, are claimed as dependents on their parent’s tax returns, or are enrolled in school. This rule applies to plans offering dependent coverage, ensuring young adults can access health insurance during critical times.
Do most young adults have health insurance?
Although young adults represent only 18 percent of the adult population, they account for 28 percent of the uninsured adult population. Almost half of young adults have employer-sponsored insurance coverage, while 10 percent have Medicaid or other public coverage, and another 10 percent have non-group coverage.
Is health insurance cheaper the younger you are?
Yes! Younger individuals typically pay lower health insurance premiums on the ACA Marketplace. For example, based on our research, the average 21-year-old pays $313 monthly, while a 27-year-old pays $330 monthly for a Bronze plan.
How much is health insurance for a single person?
The term “ObamaCare” is commonly used to refer to health insurance plans offered through the Marketplace that are made more affordable by the Affordable Care Act. The average cost of these plans typically ranges from $328 to $482 per month. Still, the actual cost for a single adult can vary depending on the insurance company, type of plan, and geographic location.
What is the least expensive form of health insurance?
Various options are available if you don’t qualify for Medicaid, considered the least expensive form of health insurance. The Health Insurance Marketplace provides plans funded by tax subsidies established under the Affordable Care Act (ACA).
Health insurance is paramount to living a healthy life. It allows young adults to access preventive healthcare and treatment if they become ill. Find out about health insurance options for young adults in your area.
AgileRates extracted and analyzed data from the following to provide data in this article.
- “Getting covered if you’re under 30” (Healthcare.gov)
- “Health Plans and Benefits” (U.S. Department of Labor)
- “Health Plans for Young Adults” (WebMD)
- Getting an Individual Health Insurance Plan
- Are High-Deductible Health Plans Good or Bad
- How Many Uninsured Americans Are There?
- Why is Health Insurance Important if You’re Young and Healthy?
- Health Insurance For 26-Year-Olds Who Lost Their Parent’s Insurance
- Understanding Health Insurance Costs For a Single Person