Health Insurance Values » Insurance

Insuring grads in tough times

This spring, thousands of college graduates are flooding the “real world” with degrees in hand, job searches on the brain and time ticking on their health insurance.

Graduation typically means no more coverage through mom and dad. However, in a competitive—and limited—market, today’s grads cannot assume they will quickly snare a full-time job. Even if they find work, landing a full-time gig no longer guarantees a rich benefits package. Employers are cutting back on benefits in hard times, if not completely cutting them out.

Medical insurance gaps put an individual’s health and finances at risk. Avoiding treatment could result in more serious health problems, and a single trip to the ER may tack a hefty sum onto student loan debt, rent and other living expenses. In addition, when a person goes 63 days or longer without creditable health insurance coverage and then find a job with employer-sponsored benefits, the group’s insurance company can deny coverage for pre-existing conditions up to one year.

What’s a recent grad to do? Read our guide to getting coverage. As you do, keep in mind: Because everyone’s situation is unique, it’s important to consult your insurance agent and read our list of things to consider as you shop around.

COBRA
In several states, children may be covered under their parents’ group plans until they turn 25 years old—and in some states until age 30. Even so, many groups cease their contributions once the child graduates or dips below full-time enrollment, at which point coverage must continue through COBRA. That means paying 102 percent of the total premium, which includes the employer’s contribution, the parent’s contribution and 2 percent for administrative fees. It can be a hefty sum.

According to the 2008 Kaiser/HRET Employer Benefits Survey, the full annual cost of employer-sponsored health insurance for an individual averaged $4,704 annually. At 102 percent for COBRA, monthly premiums nearly reach $400.

Choosing COBRA does have advantages. It allows grads to keep their existing coverage, which may be more comprehensive than alternative plans. In addition, COBRA helps those with pre-existing conditions remain insured—they may have trouble qualifying for other types of coverage and, if they do qualify, face higher premium rates and exclusions.

Grads who tend to accrue an abundance of medical costs may want to compare COBRA premiums against other plans whose deductibles, copays and prescription drug charges may add up, making COBRA a better option.

Short-term medical insurance
Uninsured grads and those waiting for new coverage to kick in may consider this temporary solution. While it is by no means comprehensive, short-term medical insurance (STM) insurance offers a safety net in the event of a catastrophic illness or injury.

STM plans involve quick, easy online qualification and enrollment. Approval comes within minutes, and coverage may begin as early as the next day. To determine eligibility, applicants answer a small number of health-related questions; those with serious health conditions are unlikely to qualify.

STM premiums are usually a fraction of COBRA’s, which makes STM a good option for healthy grads who want to keep costs low. But it is important to remember that out-of-pocket expenses will be higher should they need medical care.

While STM plans are ideal for those who need fewer than six months of coverage, plans may last as few as 30 days or as many as 12 months. Once a plan expires, it is possible to apply for another policy; however, that policy is considered completely new and will not cover illnesses developed under the first one.

Limited benefit medical
Recent grads looking to fill the gap between major medical coverage may also consider limited benefit medical insurance. These plans offer inexpensive, creditable, non-catastrophic coverage. Stated benefit amounts are paid for physician office visits, preventative care, diagnostic work, emergency room visits and more.

Because they are guaranteed issue, and therefore do not involve underwriting, these plans are generally attractive for those considered “uninsurable” due to pre-existing conditions, those who cannot afford major medical insurance but need basic non-catastrophic coverage or those who have exhausted COBRA and have no other options. Limited benefit medical is not suited for those who can afford and qualify for major medical insurance through COBRA or an individual plan.

If a grad lands a job without group benefits or foresees the need for long-term coverage, individual medical insurance offers the most comprehensive protection of any option and fewer out-of-pocket costs; however, premiums are typically higher and qualification is more difficult.

As always, work with an insurance agent to determine the best solution.