Personal Finance

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Students and their families are grappling with the cost of higher education, but here’s one expense that might be a surprise: health care.

The default option for many college students — especially if they’re under age 26 — might be to remain on Mom and Dad’s insurance, yet that may come with additional costs.

For starters, will a parent’s plan adequately cover a college student if he or she attends school out of state and has only out-of-network providers available?

“If it’s all out of network, it might be worth looking at other alternatives,” said Scott Frank, a certified financial planner and founder of Stone Steps Financial in Encinitas, California.

Before making changes to your medical coverage, assess your available options based on the monthly premium, benefits, co-payments, deductibles and provider networks, said Karen Pollitz, senior fellow at the Kaiser Family Foundation.

Here’s how to choose among the various options.

1. Staying on a parent’s plan

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Many students opt to stay on a parent’s plan, at least until the age of 26, when they can no longer be covered by their parents.

Not only do students generally have doctors they are used to visiting, it also means there will be no change in the household cash flow, said Frank of Stone Steps Financial.

In workplace insurance plans, where employers subsidize a large portion of premiums, the average family of four paid a total of $7,726 in 2018 to cover premiums and cost-sharing, according to the Kaiser Family Foundation.

If it’s all out of network, it might be worth looking at other alternatives.

Scott Frank

CFP and founder of Stone Steps Financial

It is important to consider whether a student will have access to in-network providers where they are attending college. Being in state and close to home, versus out of state, may have a huge impact on out-of-pocket costs.

That’s because if you see a doctor or go to a hospital that’s out of network, your plan may either pay a smaller portion of the bill or may decide not to cover the service at all.

2. Choosing a student health plan

Health plans provided by colleges or universities  may be an option for students who don’t have access to in-network providers on their parent’s plan.

Students should consider their health-care needs and get to know the in-network providers available around campus, said Carolyn McClanahan, a physician and founder of Life Planning Partners in Jacksonville, Florida.

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This is especially important for students with chronic conditions or who require regular doctor visits, she said.

“What you have to think about with each option is what kind of medical service you need,” said McClanahan. “Am I healthy or are there issues I have to be seen for regularly?”

3. Finding marketplace plans

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Purchasing a plan through the federal or state insurance marketplace might make sense for students who are no longer dependents on their parents’ tax returns.

Those who apply for insurance on their own may be eligible for premium tax credits based on their own income. These credits can help defray the cost of the plan they select.

Visit the Kaiser Foundation’s Marketplace Subsidy Calculator to find estimates of premiums and subsidies.

Students who are claimed as dependents on their parent’s tax returns are likely to be ineligible for subsidies due to higher household income, said Pollitz of the Kaiser Family Foundation.

4. Qualifying for Medicaid

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Medicaid is one of the most affordable, comprehensive options for low-income students who will obtain coverage on their own and who aren’t considered dependents on their family’s tax returns.

Under the Affordable Care Act, states can expand Medicaid to include adults with incomes up to 138% of the federal poverty level, which is equal to $29,435 for a family of three or $17,236 for an individual in 2019.

There are catches.

For instance, beneficiaries generally must be residents of the state in which they are receiving Medicaid. Moving to a different state could complicate the process of getting coverage, Frank said.

Further, there are 14 states that haven’t expanded the health-care program, which could make it more challenging for low-income students to obtain coverage.

“If you’re not in a state that expanded Medicaid, you wouldn’t be eligible,” said McClanahan.

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