How long can child stay on health insurance

Home > FAQs > Can young adults still remain on their parents’ health plans until age 26?

Q. I know that in 2010 the ACA began allowing young adults to remain on their parents’ health insurance until they turned 26. Has anything changed about that rule? Is it better to remain on my parents’ plan or get my own plan? When I turn 26, what options are available?

A. Nothing has changed except that grandfathered group plans must now allow adult children to remain covered until age 26 regardless of whether they have other employer coverage available. Prior to 2014, grandfathered group plans could refuse to cover young adult dependents if they had access to other employer coverage, but that’s no longer the case.

Allowing young adults to stay on their parents’ insurance adds an extra coverage option for people at the start of their careers. But that does not mean that remaining on a parent’s health plan is always the best choice.

The ACA doesn’t require small group health plans to offer dependent coverage, although most of them do. Large group plans must offer coverage to full-time employees and their dependents in order to comply with the ACA’s employer mandate. Plans that do offer dependent coverage must allow adult children to remain on a parent’s plan until age 26, regardless of whether the young adult lives with the parent, is financially dependent on the parent, has other coverage options, is a student, or is married.

(Note that coverage does not have to extend to the dependent’s spouse or children. If a young adult has a child of their own while still covered under their own parents’ health plan, they will likely need to secure separate coverage for the baby. And if they get married, they will likely not be able to add their spouse to their existing coverage. CHIP or Medicaid may be available for the baby, depending on income. And either of those events — marriage or the birth of a baby — would count as a qualifying event that would allow the young adult to disenroll from their parents’ health plan and enroll in a new health plan together with their spouse and/or new baby. The new health plan could be an employer-sponsored plan or a plan obtained in the marketplace/exchange.)

If a family has minor children as well as young adult children under age 26 — and if their premium is one family rate regardless of how many children are on the plan — it probably makes sense to keep the young adult members on the policy until age 26, unless the young adult lives in a different area where the family’s plan doesn’t have any in-network providers.

But if the only dependents on the plan are young adults, or if the premium is based on the number of dependents, there are other considerations to take into account. Some employers contribute only to employees’ coverage, with dependents’ premiums entirely payroll deducted. In that case, the total cost to insure a family might be lower if young adults get their own coverage in the individual market.

This is especially true for young adults with relatively low incomes who qualify for a subsidy in the exchange, or for premium-free coverage via Medicaid. If your parents do not claim you as a dependent on their tax return, you can apply for a policy in the exchange with subsidy eligibility based on your income alone. If your parents do claim you as a dependent, your subsidy eligibility is based on the entire household’s income (here’s another FAQ that explains how premium subsidies are calculated in situations like this).

Special considerations: Provider networks and maternity coverage

If you don’t live in the same area as your parents, it might make more sense to shop for your own policy, since the provider network for your parents’ plan may be limited in your area. And although maternity coverage is now included on all plans, it’s not required for dependents on large group plans. Getting your own policy guarantees that you’ll have maternity coverage. If you’re not yet 26 and you still have coverage on a parent’s plan, you can shop for your own plan during the annual open enrollment period (in most states, that’s November 1 to January 15), or if you experience a qualifying event, such as moving to a new area. You can also enroll in your own employer’s plan if that option becomes available to you.

Special enrollment periods to transition to your own plan

Losing coverage on a parent’s plan when you turn 26 is a qualifying event that triggers a special open enrollment period for individual health insurance, or enrollment in a group plan through your employer if you’re eligible. Your parent’s plan might cover you only until the end of the month in which you turn 26, or they might extend coverage through the end of the year you turn 26, so double-check with the plan to make sure you understand when your coverage will end.

You have 60 days before and after that date to enroll in a new individual plan (or 30 days to enroll in your employer’s group plan). And the special enrollment period that allows you to sign up for a plan in the individual market applies even if you have the option to extend your coverage under your parent’s plan using COBRA.

You can shop in the exchange/marketplace or off-exchange — the special open enrollment window applies either way (as noted in the next section, premium subsidies are only available if you shop in the exchange). If you enroll during the 60 days prior to your loss of coverage, your new plan will be effective the first of the following month after your old plan ends, which generally allows for seamless coverage. But if you enroll in the 60 days following your loss of coverage, the soonest your new plan can take effect is the first of the month after you apply, meaning that you will have a bit of a gap in coverage.

Financial assistance

Depending on your income, you may qualify for premium tax credits (subsidies) that pay a portion of your premiums as long as you shop in the exchange. (Subsidy eligibility also depends on the unsubsidized cost of the coverage. Here’s another FAQ that explains this in more detail, but know that subsidies are larger and more widely available in 2021 and 2022 due to the American Rescue Plan, so coverage is more affordable than it used to be.)

There are also exchange policies available with lower cost-sharing requirements if your income does not exceed 250% of the poverty level.

Catastrophic individual plans are available to applicants under age 30, with premiums that are generally lower than bronze plans. But premium subsidies are not available on catastrophic plans, so a “metal” plan is likely a better choice if your income makes you eligible for a premium subsidy.

Medicaid is also an option if you’re eligible. In states that have expanded Medicaid, you can qualify as a single person with an income of about $18,754 in 2022 (this is in the continental U.S.; the limits are higher in Alaska and Hawaii, and DC provides Medicaid coverage at higher income limits). The Medicaid eligibility threshold is tied to the federal poverty level, which generally increases each year. The new federal poverty level numbers are announced in mid-late January each year.

If your parents’ policy qualifies for COBRA continuation, you’re eligible to elect COBRA for up to 36 months after aging out of the coverage at age 26. But you’ll be responsible for the full cost of the coverage, plus an administration fee of up to 2%. In many cases, there are less expensive options available in the individual market. And as noted above, the option to buy your own plan during a special enrollment period triggered by your loss of coverage is available even if you also have the option to extend your plan with COBRA.

The ACA’s impact

In September 2015, HHS released data regarding changes in insurance coverage across various demographics in the years before and after the implementation of the ACA. Determining exactly how many young adults have remained on their parents’ health plans is challenging, but we do know from the HHS data that coverage across young adults (ages 19 – 25) increased by 5.5 million people from 2010 through September 2015.

Nearly half of that gain (2.3 million people) occurred between 2010 and October 2013, before the bulk of the ACA’s reforms were implemented (exchanges, guaranteed issue coverage, premium subsidies, etc.). So it’s likely that a good chunk of those 2.3 million young adults gained coverage via a parent’s plan. Since then, the increase has likely been a combination of young adults remaining on their parents’ health plans as well as young adults purchasing their own plans in the exchanges.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

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Q1:How does the Affordable Care Act help young adults?

Before the Affordable Care Act, many health plans and issuers could remove adult children from their parents' coverage because of their age, whether or not they were a student or where they lived. The Affordable Care Act requires plans and issuers that offer dependent child coverage to make the coverage available until the adult child reaches the age of 26. Many parents and their children who worried about losing health coverage after they graduated from college no longer have to worry.

Q2:What plans are required to extend dependent child coverage up to age 26?

The Affordable Care Act requires plans and issuers that offer dependent child coverage to make the coverage available until a child reaches the age of 26. Both married and unmarried children qualify for this coverage. This rule applies to all plans in the individual market and to all employer plans.

Q3:Will young adults have to pay more for coverage or accept a different benefit package?

Any qualified individual must be offered all of the benefit packages and cannot be required to pay more for coverage than similarly situated individuals.

Q4:Can plans or issuers who offer dependent child coverage impose limits on who qualifies based upon financial dependency, marital status, enrollment in school, residency or other factors?

No. Plans and issuers that offer dependent child coverage must provide coverage until a child reaches the age of 26.

Q5:Does the adult child have to purchase an individual policy?

No. Eligible adult children wishing to take advantage of the coverage up to age 26 will be included in the parents' family coverage.

Q6:Does Medicare cover adult children in the same way that private health coverage does?

No. Medicare does not provide coverage for dependents. Dependents must be individually eligible in order to have Medicare coverage. This provision, therefore, does not apply to Medicare.

Q7:Are both married and unmarried young adults covered?

Yes.

Q8:Are plans or issuers required to provide coverage for children of children receiving the extended coverage?

No.

Q9:I understand that there are tax benefits related to the extension of dependent child coverage. Can you explain these benefits?

Under a change in tax law included in the Affordable Care Act, the value of any employer-provided health coverage for an employee's child is excluded from the employee's income through the end of the taxable year in which the child turns 26.

Q10:When did this tax benefit go into effect?

The tax benefit became effective March 30, 2010. Consequently, the exclusion applies to any coverage that is provided to an adult child from March 30, 2010 through the end of the taxable year in which the child turns 26.

Q11:Who benefits from this tax treatment?

This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Q12:May employees purchase health care coverage for their adult child on a pre-tax basis through the employer's cafeteria plan, if an employer chooses to offer a cafeteria plan?

Yes. In addition to the exclusion from income of any employer contribution towards qualifying adult child coverage, employees may pay the employee portion of the health care coverage for an adult child on a pre-tax basis through the employer's cafeteria plan - a plan that allows employees to choose from a menu of tax-free benefit options and cash or taxable benefits. The IRS provided in guidance Notice 2010-38 that the cafeteria plan could be amended retroactively up until December 31, 2010 to permit these pre-tax salary reduction contributions.

Q13:It seems like plans and insurers can terminate dependent child coverage after a child turns 26, but employers are allowed to exclude from the employee's income the value of any employer-provided health coverage through the end of the calendar year in which the child turns age 26. This is confusing.

Under the law, the requirement to make adult coverage available applies only until the date that the child turns 26. However, if coverage extends beyond the 26th birthday, the value of the coverage can continue to be excluded from the employee's income for the full tax year (generally the calendar year) in which the child had turned 26. For example, if a child turns 26 in March but is covered under the employer plan of his parent through December 31st (the end of most people's taxable year), the value of the health care coverage through December 31st is excluded from the employee's income for tax purposes. If the child stops coverage before December 31st, then the premiums paid by the employee up to the time the plan was stopped will be excluded from the employee's income.

Q14: I'm a young adult currently covered on my parents' health plan. What are my options for health coverage once I reach age 26?

Once you reach 26 and "age out" of your parents' coverage, you may have several options. If you (or your spouse) are employed and that employer offers a health plan, ask whether you are eligible for coverage under that plan. Losing coverage under your parents' plan may qualify you for special enrollment in any other employer plan for which you are eligible. Special enrollment in another employer plan must be requested within 30 days of your loss of coverage.

If your parents' plan is sponsored by an employer with 20 or more employees, you also may be eligible to purchase temporary extended health coverage for up to 36 months under the Consolidated Omnibus Budget Reconciliation Act (COBRA). To elect COBRA coverage, notify your parents' employer in writing within 60 days of reaching age 26. In turn, your plan should notify you of the right to extend health care benefits under COBRA. You will have 60 days from the date the notice was sent to elect COBRA coverage. If your parents' plan is sponsored by an employer with 20 or fewer employees, you may have similar rights under State law, instead of under COBRA. You should ask your parents' employer, or your State Insurance Department if this applies, and if so, how you would request the extended coverage.

You may be eligible for special enrollment in individual coverage purchased through the Health Insurance Marketplace. To special enroll in Marketplace coverage, you must enroll within 60 days of aging out of your plan. For more information or to enroll, visit HealthCare.gov.