Turning 26? How to Handle Health Coverage on Your Own

One of the last great milestones of your 20s is turning 26 – it marks the age you need to find your own major medical coverage if you are still on your parent’s plan. Handling health insurance on your own may seem like an overwhelming process but we’re here to help.

Understand Your Options

Your personal health needs and financial situation will impact which kind of plan you should select. Evaluate the monthly premium amount that will be taken from your paycheck, the deductible amount you are expected to pay from your own funds, as well as copays and out-of-pocket maximums. Each of these make an impact on how much you will need to budget for healthcare costs each month.
Familiarize yourself with more common insurance terms

Many employers offer both High Deductible Health Plans (HDHPs) and lower-deductible medical plan options such as a preferred provider organization (PPO) or health maintenance organization (HMO). These plans have different premium costs, deductibles and copay amounts.

Read more about the differences between HDHPs and lower-deductible medical plan options to know which plan is the best for you.

Consider Supplemental Benefits

Supplemental benefits are designed to complement your major medical insurance coverage by providing financial benefits for expenses that your medical insurance may not cover. For example, policies like accident insurance, critical illness insurance, hospital indemnity insurance, gap insurance, and cancer insurance may help you cover some of your deductible and out-of-pocket max. Read this example of how supplemental insurance helps with deductibles

Another advantage of supplemental insurance is that some benefits may be paid directly to you instead of a provider. This allows you to have the freedom to use that money however you need. You could you use it to help pay toward your copayments, coinsurance, deductibles, or other life expenses.

Open a Reimbursement Account

A reimbursement account is a type of account that you use to pay for eligible medical expenses. These accounts provide tax advantages for you and have other benefits as well. Let’s break down the differences between each account:

What is a Healthcare FSA?

A Healthcare Flexible Spending Account (Healthcare FSA or HCFSA) is an employer-sponsored plan that allows you to contribute a pre-tax portion of your paycheck to help pay for many out-of-pocket medical expenses. Healthcare FSAs can be used to pay for your copays, coinsurance, and deductibles. It can also be used to pay for more specialty items like acne treatment, contraceptives, and some sunscreen. By contributing to your Healthcare FSA, you can potentially be saving hundreds of dollars. The main differentiator for the Healthcare FSA is that the account is fully funded at the beginning of the plan year. Your contributions essentially “pay back” your total election over the course of your entire plan year. This is beneficial for people who need to pay for eligible medical expenses at the beginning of their plan year. However, unlike a Health Savings Account (HSA), the funds do not roll over each year.

View a full list of Healthcare FSA-eligible items

What is an HSA?

An HSA allows you to save money on eligible out-of-pocket medical expenses by allowing you to contribute a pre-tax amount to your account. An important thing to note is that you can only contribute to an HSA if you are covered by a qualified High-Deductible Health Plan (HDHP). Unlike a Healthcare FSA, a great benefit of an HSA is that unused funds will roll over to the next year. After the age of 65, you will be allowed to withdraw funds for non-medical purposes penalty-free, but you will have to pay income tax.

View a full list of HSA-eligible items

What is an HRA?

Health Reimbursement Arrangements (HRAs) are employer-funded plans designed to reimburse employees for eligible out-of-pocket medical expenses. HRAs are 100% employer funded. Your employer decides how much they will put into the plan and then you can request reimbursement for the medical expenses incurred up to that amount.

Here are some articles for more information:

Although there are many things to consider, choosing your health coverage shouldn’t be a stressful process. By properly educating yourself and finding the best options for you, this milestone in your life can be a breeze.

This information is intended to be educational. It is general in nature and should not be considered financial, legal or tax advice. Consult an attorney or a tax professional regarding your specific situation.

This blog is up to date as of June 2023 and has not been updated for changes in the law, administration or current events.