College
seniors are counting the days until graduation -
preparing for finals (hopefully), concentrating on
finding a job (maybe) and filling up their social
calendars (definitely).
In the
midst of this final eventful stretch on campus, it's a
pretty safe bet one thing is not on their radar
screens, and maybe not on yours either: what to do
about health insurance once the sheepskin's in hand.
Most of
the nation's college seniors, who presumably have been
covered under your health plan at work, will lose
protection soon after graduation. Those policies
typically cover dependent college students only while
they are enrolled full time, generally up to age 23 or
25.
If your
new grad is heading straight to a new job with good
health benefits, you can mostly relax because the
insurance transition will be relatively seamless. For
students heading to grad school, current coverage
should remain in force as long as they are full-time
students and meet the age limits.
But, if
your son or daughter doesn't have anything lined up
after school ends other than an indefinite vacation,
then he or she will need to find insurance. Some
employer-provided group policies terminate student
coverage 30 days after graduation, but others are less
generous. Thus, the first thing you need to know is
the exact date in which your student gets booted off
your policy.
The
good news: There are plenty of options, especially if
your graduate is healthy. In this situation, policies
have fewer limitations, but can be pricey. Coverage
can begin in a matter of days after filing an
application.
There
are two common choices: Permanent health insurance
that provides broader coverage, or temporary plans
that can be purchased month-to-month, but with limited
benefits.
If
you're looking for more complete coverage, then a
permanent plan may be the best choice. Much like an
employer-provided group plan, these individual
policies offer a prescription drug benefit and cover
wellness checkups. And in some cases there's even
dental coverage.
A
healthy 22-year-old male nonsmoker, for example, would
pay a premium of $113 a month for a Humana individual
policy with a $2,500 deductible, a prescription drug
benefit and dental coverage. Three other policies I
checked - from BlueCross BlueShield, Aetna, and
Coventry - had premiums in the range of $105 to $115 a
month.
For
students who may be looking at a relatively short time
before landing a job, temporary insurance could work.
These plans generally run for up to one year, and
provide only catastrophic coverage for injuries or
illness. The policies I checked on
ehealthinsurance.com cost $45 to $65 a month. The
downside: The plans don't pay for a doctor's office
visit or prescription drugs, and policyholders could
risk losing insurance protection at renewal time if
they've had a major claim from an illness or accident.
My
personal preference: Stick with the longer-term
individual policy. However, as a savings strategy,
consider temporary coverage but set aside money to
cover out-of-pocket doctor visits or drug costs.
Another
option: If your student was enrolled in the
university's health plan, check on whether it allows
extensions past graduation. Many schools offer renewal
options - often at a higher price - for up to a year.
Also, eight states have passed legislation requiring
health plans to extend coverage for a dependent for a
few years beyond college graduation.
Then,
there's COBRA, the federally mandated program that
provides employees and their families with temporary
continued access to employer-sponsored health benefits
for up to 36 months. This may be the only option for
new graduates who have illnesses or other medical
issues that could prevent them from qualifying under
traditional health plans.
COBRA
coverage comes at a high price. Using my previous
example of a healthy, 22-year-old male, I was quoted
COBRA rates ranging from $274 to $495 a month
depending on coverage options.
Before
making your decision, look at consumer complaints
filed against the company you're thinking of doing
business with. (For this information, go to
www.naic.org, the Web site for the National
Association of Insurance Commissioners in Kansas City,
Mo.)
The
bottom line: Look at the comparative advantages and
disadvantages of various health insurance options.
Then run the numbers.
Whatever
you decide, don't roll the dice and go without any
health-insurance on your new grad. A catastrophic
illness or accident can be financially devastating,
and if your son or daughter develops a serious illness
while uninsured, it could make it extremely expensive
or impossible to get coverage in the future. Why risk
it?
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INSURANCE
RESOURCES
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For more information on health insurance for young
adults, check out www.planforyourhealth.com. The
educational Web site, sponsored by Aetna and the
Financial Planning Association, includes an insurance
terminology tutorial and rundowns of various policy
options.
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To get quotes on health policies, go to
www.ehealthinsurance.com.
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For information on temporary health insurance offered
through federal COBRA guidelines, go to
www.individual-health-plans.com.