While it's important to have health insurance in case of emergency, it's not good to spend money for something you already have. If you're enrolled in college and under 31 years old, you may be covered under your parents' health insurance policy. You may even be covered if you are not in college, depending on the rules set forth for your individual state.
In order to find out you if you need to purchase health insurance, you will have to research your parents' health care policy's rules and the rules of your state's Department of Insurance. (For more, see For Top-Notch Insurance Coverage, Compare Quotes.)
Depending on the individual state your parents reside in, your coverage could stop anywhere between ages 19 to 31. You can find this information on your home state's Department of Insurance website or by calling your state's Department of Insurance.
When researching, pay attention to whether rules are mandatory or left up to insurance companies. If you see the word "requires," this means health insurance companies within this state must follow this law. However, if you see "allows," this means the health insurance company has the ability to follow this rule if it chooses to do so. Anything not mentioned is left up to the individual insurance company. For example, if there isn't a state law about continuing coverage when you take a break from full-time status, then it may vary from company to company.
Differences Large and Small
Look for differentiations in what small and large businesses are allowed to do. For instance, according an American Health Insurance Plans (AHIP) briefing on dependent coverage, the state of Nebraska specifies coverage until 30 if the dependent child meets other requirements for large business employees, while the 23rd birthday is the cutoff point for small business employees.
In quite a few states, there are rules allowing parents to keep dependent, unmarried adult children on their plan up to varying ages as long as the children don't have their own health insurance yet. Check the insurance rules carefully. You may be surprised by how long you can extend coverage. (For more, see Five Insurance Policies Everyone Should Have.)
According to an American Health Insurance Plans (AHIP) briefing on dependent coverage, Michelle's Law allows, "full-time college students covered by a parent's health insurance plan to maintain their coverage for up to 12 months while taking a medical leave of absence from school." This law applies in all 50 states, but the leave of absence has to be deemed necessary and certified by a doctor.
Check Mom and Dad's Health Insurance Policy's Rules
Your parents need to check the rules to see if you have to be part-time, full-time or can continue coverage a few months after graduation. You also need to know what health care providers work with your parents' insurance company in your area.
If you or your parents move to a different state, you will want to recheck the rules of the new policy. Simply ask your parents to call their insurance company and get answers to the following questions:
- What is the maximum age limit for covering my children on my health insurance policy?
- What circumstances could cause my children to be dropped from my policy?
- Do you currently show my children on my policy?
Save for Deductibles and Co-pays
If you don't have to buy your own health insurance, sock away the excess money you aren't spending to cover your deductibles and co-pays. Any money beyond that can become extra money for savings, perhaps even an emergency fund.
Let's say you planned on spending $150 per month for your college's health insurance plan. You don't have to purchase an insurance policy because your parents still have you covered under their policy. However, your parents' plan has a $500 deductible for out-of-network doctors and your co-pay is $20 for primary care, $30 for specialists and $50 for emergency room visits.
Start by saving the $150 a month in savings account. If your college includes basic care for allergies, coughs, colds and flus within your mandatory tuition and fees, and you don't get seriously ill, you could have the full $1,800 stashed away in savings at the end of the year. In four years you'd have $6,400 - without interest - which you could use for an emergency fund or paying off some of your student loans after graduation. (For more, see Student Financial Aid Changes: FAFSA 2009.)
Buy Coverage You Don't Have
If you aren't covered under your parents' policy, consider options available through your university. You may be able to get a low-cost policy you can continue to use through your first year after college.
In college you need every spare nickel you have to minimize what you have to borrow in student loans. Don't buy a health insurance plan you already have, but do ensure that you're well covered. If you don't, consider the health insurance options available at your university. Not buying insurance can cost multiples of what your university's insurance plan would cost if you develop a serious illness. (For further reading, checkout Build Yourself An Emergency Fund and Buying Private Health Insurance.)