When the ACA implemented the mandate stating people are able to keep their kids on their health insurance policies up to age 26, it was universally accepted as a massive win. Parents were happy because they didn’t have to bankroll a separate (and expensive) health insurance policy for each child as their kids are starting their adult lives, and kids loved it because one of the most costly monthly expenses were taken off the budget- freeing up room for a better bar tab (not all, but many!). It also allowed parents to hit the family deductible that much sooner. Win-win!
….But is it really ALWAYS a win-win? What if, financially, it actually made sense to move the child onto their own policy… Crazy right?
Actually it’s what we’re seeing many of our clients do every single day now. Let me break down the “why” and “how” for you.
First, you need to understand how the ACA Subsidy System works. This is the cog that turns the machine to make this transition effective. Right now in the US, any individual between the ages of 18 and 65 who claims under $47,000 annually in income can qualify for assistance if they opt into a Marketplace Health Insurance policy during Open Enrollment or through an SEP event. So in essence, if your child will claim under $47,000 annually and opts into their own Health Insurance policy through the Marketplace, they can get assistance paying for a portion of the premiums in the form of a subsidy. The amount of subsidy they receive will depend on their age, income, and county they live in.
So let’s put this idea into action, specifically taking a look at a client we recently transitioned. This client was paying an extra $300/month to have their son on their health insurance. The son had just graduated and was working for a seed company making $35,000 each year. When we ran the numbers, we saw that if the son moved off his parent’s insurance and onto his own, we could get him a better policy for around $120/month with the subsidy he was getting. So in this situation, the parents were able to shave $300/month off their health insurance premiums AND their son was able to get on his own policy for over half the cost his parents were paying. AWESOME!
The honest truth is that the above example happens every single day across the Midwest, and should really be happening more often. Right now there are literally tens of thousands of people in the above situation that, with a little outside-the-box thinking, could be saving themselves hundreds of dollars a month!
So don’t drag your feet. There’s still a lot of 2020 left, and if you’re currently in the situation where you’re insuring your over 18-year-old kids and are curious if this is an option for you, act quick. Every month you wait you could be spending WAY more than what you should. And if you’re not sure where to start, give us a shout. We’ll be happy to run the numbers for you and show you some options.
Thanks and have a great day!