As of 2010 with the implementation of the Affordable Care Act, nationwide adults 26-years-old and under have the opportunity to stay on their parents’ health insurance plans. A big question might be whether this is appropriate and at what point it is better to just “cut the cord.” Given that at this age most young adults would have already graduated from college or, at the very least, have started their first career, this policy seems to encourage over-dependence on parental units. This perspective might even be further propagated if in the scenario in question the adult-child has their own apartment or even their own family to look after; however, this alone does not justify removal from their parents’ health insurance plan. Based on the low health risks of young adults, the rising average amount of student loans, and the potential tax benefits for the parental household, it is ideal in the average case to allow a child to stay on their parent’s health insurance as long as possible.
Health insurance rates for young adults are typically low due to their overall lower probability of health problems; however, this low risk is also why many young adults, if faced with a thin spread income, might forgo insurance altogether. Post-ACA, the uninsured rate among Americans between the ages of 18-34 dropped by 10 percent. Partially this can be explained by an overall lack of availability for affordable healthcare prior to the implementation of ACA. Yet, an indistinguishable amount of the newly insured individuals can be explained by their incorporation onto their parents’ plan. While the young adult might not find it the best use of limited expendable income to get health insurance, parents who may have more income to spare do. Whether this is done out of the goodness of their hearts or simply because the parents in question due to life experience became more risk-averse with age is left up to debate. But nevertheless, there are further financial benefits for both parties in question with keeping children on parental healthcare plans beyond just the precautionary motives of parents.
For the adult-child in question, even if the desire is present to get health insurance, joint insurance typically will be cheaper per person than a totally independent plan. Perhaps within a household, an agreement can be made for the child to reimburse the parental unit back for being on the cheaper family plan. Given the rising amount of student loans incurred and the inability to defer after a certain point, this cost decrease might make the difference between healthcare access being feasible and unattainable. This arrangement can be identified as mutually beneficial as, assuming the parental household’s income is higher than the child’s, tax benefits can allow this arrangement to be further incentivized. Even if the young adult in question can no longer be claimed as a dependent, paying for their health insurance can be used for tax deductions. The amount of this deduction is wholly based upon other endogenous factors, but without a doubt, it further impacts the fiscal feasibility of attaining healthcare.
At the end of the day, a family’s decision to keep their child on a joint insurance plan is totally dependent on a household’s financial standing, employment situations, and healthcare needs; however, in most cases, a joint plan does have significant benefits for new graduates and/or young professions along with smaller benefits for their parents. A starting salary is already stretched thin from student loans and basic living costs, and joint family plans without precedence allow a lower rate than an individual plan. Of course something is to be said about the need to grow up and become self-sufficient; however, the little support at the beginning of one’s career can have a monstrous impact upon quality of life and ability to maintain morale for the next 40+ years of working to come.