Health Insurance 101: A Cheat Sheet for College Graduates and Their Parents
(ARA) - College graduation is an annual ritual that ushers students into the real world. But with the real world comes responsibility -- jobs, taxes, bills . . . and health insurance. Yes, health insurance. Itís a critical yet often overlooked safeguard that can easily fall to the bottom of a new gradís ďto doĒ list, especially since most are in the prime of their health. Below is some advice to help smooth the transition for those accepting their diplomas and possibly a new job to become part of the working world. Itís important for new graduates to become informed consumers and research their options.
Online resources like PlanforYourHealth.com offer tips and tools to help new job seekers understand the health and financial value of a health benefits plan. Plan for Your Health, a public education campaign from Aetna and the Financial Planning Association (FPA), can help new grads make the most of their health benefits choices. Common questions from college graduates include: Do I need health insurance? Absolutely.
Take a spill while jogging? Need an antibiotic? Health insurance dramatically cuts your out-of-pocket medical costs. Plus, many plans cover preventive doctorís visits, helping you stay healthy throughout the year. But arenít I still covered under my parentsí plan? It depends. Usually, youíre only covered until age 23 and only if youíre still a full-time student. Many college grads who cease to be eligible as dependents under their parentís plan can extend that coverage for up to 36 months under COBRA -- very important if you have a waiting period before your coverage kicks in at a new job. You have only a limited time to elect COBRA continuation, so you should look into this option before (or as soon as possible after) graduation.
So . . . how do I get health insurance? Typically, employers offer a health insurance plan as part of a benefits package. Itís very important that you ask about benefits before you accept the job. On average, a young, single employee earning a $25,000 salary would receive an extra $8,727 in benefits -- a 35 percent increase in salary. In some cases, you may get to choose between different types of plans. Determine whatís best for your medical needs and your wallet. If your employer doesnít offer health insurance, you should consider purchasing an individual plan. In many states, the State Department of Insurance Web site will provide you with information about individual plan options. What exactly does health insurance cover?
It really depends on the type of plan you choose. Things to keep in mind when choosing a plan include whether or not the plan covers preventive visits (like annual physicals and well woman visits) and options like vision benefits, dental coverage and prescription plans. Also think about your individual needs. Would you like to continue seeing your family physician? Then be sure to choose a plan that offers access. Do you take medication on a daily basis? Then youíd be wise to join a plan with prescription drug coverage. What is the difference between an HMO and a PPO? HMOs (Health Maintenance Organization) and PPOs (Preferred Provider Organization), both health benefit plans, are very popular health benefits options. Except in an emergency, an HMO generally provides benefits only for services received from doctors and hospitals that participate in the health planís network. In most HMO plans you select a primary-care physician who can give you a written or electronic referral for specialists (dermatologists, etc.) in that network.
Doctors or hospitals out of that network are generally not covered. A PPO also gives you access to a network of participating doctors and hospitals (typically with no referrals needed). If you seek care through one of the physicians in the network it will cost you less of your own money. Or, if you choose a doctor or hospital that doesnít participate, you pay a higher percentage of the cost of your care. Should I consider a plan with a deductible? Many health plans include a deductible, an amount you must pay of your own health care expenses each year before the plan pays its benefits. (This is the same as the deductible for your auto insurance.)
Typical health plan deductibles range from $500 to as much as $3000 or more. Plans with a deductible can be more affordable, but you should consider how much you could afford to pay out of your pocket if you have a significant illness or injury. Recently the Federal government authorized Health Savings Accounts (HSAs) that work like bank accounts and allow you to save for out-of-pocket health care expenses on a tax-free basis. To open an HSA you must be covered under a health plan with a minimum deductible specified by the HSA law. If you want to begin saving for future health care needs consider the option of an HSA and deductible plan. How can parents help?
Stress the importance of health insurance -- and the implications and risks of going without. Talk about the costs associated with health insurance and how a small monthly payment will protect against the charges for an unexpected hospital visit or illness. Make sure your new grad has a good understanding of the basics. Explain from your own experience how insurance works and the range of options available. For more information, visit www.PlanforYourHealth.com.
How much health insurance should you have ?