Health Insurance for Graduating Students

KM | January 1, 2010

Health insurance is not a top concern for your graduating student this spring. Yet the financial risks of even a minor uninsured medical procedure could ruin a young adult's credit and put a family in debt for many years. Fortunately, the insurance gap can be covered quickly with affordable high quality short term health insurance.

At this exciting time of life, many new graduates have not considered that they will be automatically dropped from their parents' health plans or their school's student health plan on June 1 or July 1. Most colleges and universities, trade schools, internship programs, sports teams, and community-sponsored travel opportunities require health insurance as an admission requirement. Without health insurance, admission in most programs is not possible. As a result of these requirements, almost all students are covered by a parent's policy or some type of student health insurance. At graduation, this changes dramatically. Most students find themselves without insurance for at least a short period of time and many will need to purchase their own insurance policy for the first time in their life. Parents may also be aware of the issue so it is not uncommon for parents to enroll their graduate in an alternate health insurance plan just to make sure that this important issue is not overlooked.

Health insurance is readily available and easily affordable to protect a young person's most coveted asset: a long and healthy life ahead. For most of us, the ability to obtain top quality medical care for the most serious types of health care problems - things like transplants, extended hospital care, physical rehabilitation, and long term outpatient care - depend more on whether the patient has adequate health insurance than any other factor. Even a simple attack of appendicitis could easily wind up costing more than $25,000. Health insurance for a typical young graduate costs only $50 to $80 per month. In contrast, if we wait until a medical problem surfaces, it becomes difficult and very expensive to buy health insurance that covers these items. This type of coverage for pre-existing medical conditions typically costs more than $600 per month.

There are several types of health insurance plans available to recent graduates. The most popular options are listed below.

Parent's Policy - Children over age 18 who are not attending school are dropped from their parent's policy on the 1st day of the month following graduation even if they are living at home as a dependant of their parents. For example, if graduation is in June, coverage will be dropped July 1. Full time students who want to continue on their parent's policy should make sure that the parent has submitted a written verification of eligibility form prior to the cancellation date. Some students with serious ongoing medical conditions may wish to consider more expensive coverage through COBRA after a parent's coverage expires for reasons other than the student's graduation.

Employer Group Coverage - Most employers provide group health insurance to their full time employees and pay for some of the cost of this insurance. A new employee should consider two issues. First, employer-provided coverage usually becomes available on the first day of the month following 90 days of employment, so depending on your hiring date, there is a gap in coverage during the first 30-119 days of employment. Secondly, group health insurance is based on the average cost for all employees, regardless of their age or health. Even when the employer pays part of the cost, a young healthy person can often find better coverage at a lower price on their own outside of the group through an individual policy. Employer-provided coverage typically required an employee contribution of more than $100 per month. In contrast, the average total cost of a policy issued here on MedSave.com to a person in the twenty-something age group is about $80.

School-Sponsored Coverage - These are usually uninsured managed care arrangements to provide care to students in the local area of the college or university. These plans only provide coverage in the physical location of the school and this coverage ends shortly after graduation.

Commercial Health Insurance Policies - Major medical policies specifically designed for students provide excellent coverage at a reasonable price. If a student was enrolled in one of these policies before graduation, the insurance may be continued after graduation as long as the graduate need coverage. These policies are portable since they offer coverage to the student in any location in the U.S. These plans also cover students in graduate school. MedSave.com is one the largest national providers of this coverage. In most parts of the U.S., students can enroll in a catastrophic-type health insurance plan for less than $75 per month. These policies may not provide many benefits for smaller routine care expenses but do ensure that the best medical care will be covered in the event of a serious need. See the state-by-state listings for details and links to available options.

Short Term Medical Insurance Policies - Interim or gap insurance policies are available to cover periods ranging from one month to 36 months. This coverage is inexpensive and easy to obtain online in most states. The quality of the coverage is excellent and payment is provided with any doctor or hospital in any state in the U.S. Longer periods of coverage may be obtained by taking several consecutive polices but coverage is not available for pre-existing medical conditions. Most states have several high quality policy choices listed at www.MedSave.com. Simple STM and American Health Shield are most popular for most common situations because of their discounted price to the under-30 age group. If you have a medical history, are not a US citizen, need longer coverage, or have other specific issues that hinder eligibility for insurance, then Secure STM or Celtic Insurance are the best solutions. A few insurance companies that are not listed at MedSave.com have a higher consumer complaint history and should be avoided. The free OnlineAdviser service is available to help choosing the best coverage.

International Travel Policies - Students planning overseas travel should purchase a separate medical insurance plan for the time that they are traveling, since most student health plans do not cover charges incurred outside of the U.S. These policies are specifically designed to pay for medical expenses and deal with the other international complications (language, currency and business issues) typically incurred while obtaining medical treatment overseas. These polices are the least expensive, typically about $1 to $2 per day of travel. Some policies also provide coverage for lost luggage and trip cancellation. A list and short description of all of the these policies is available on this Website.

Glossary of Health Insurance Terms

Since many graduates will purchase health insurance for the first time in their lives, the following glossary of terms may be useful in researching the best coverage:

Assignment of Claim - a contract requested by most hospitals that gives the medical provider the right to bill this insurance and collect payment directly from the insurance company. In return for giving up this right to receive payment directly from the insurer, the patient is not required to submit medical bills, does not have to pay at the time of treatment and the total bill payable by the patient may be reduced.

Deductible - this is the portion of the bill that you pay before the insurance pays anything. Increasing the deductible most effectively reduces the cost of the insurance. Increasing the policy deductible by $250, for example, may save $300 in insurance premiums.

Co-payment - a fee paid to a doctor or medical provider for each incident of usage of medical care. Not to be confused with the term "co-insurance".

Co-insurance - a portion of the medical bill that is above the amount of the policy deductible but still not paid by insurance. Many medical providers waive this portion of the fee in a document a patient signs called an "assignment of claim". Not to be confused with the term "co-payment".

HMO - stands for "health maintenance organization". The HMO may pay to keep you healthy, rather than only cover problems hen things go wrong. HMOs tend to be popular among young healthy people, but criticized by people receiving more serious medical care. Private physicians tend to feel that they lose control over the quality of a patient's care when an HMO is involved.

Indemnity plan - means that the policy reimburses you for the cost of ordinary and necessary medical expenses incurred. This is the most liberal type of health insurance coverage but may also be the most expensive.

Managed Care - this means that the insurer has some authority to influence the type of health care you are provided. Managed care plans, including HMOs, cut healthcare costs but may also limit treatment options.

Pre-existing condition - a medical situation that started before the insurance policy is often not covered by a health insurance policy.

Premium - the cost of an insurance policy, typically ranging from $40 to over $200 per month.

Tax-deductible - Some health insurance costs reduce taxable income. Premiums paid by businesses and self-employed individuals are tax-deductible. Health Savings Account deposits are always tax deductible. Most health insurance costs are not tax deductible by individuals.

Tax-free - the payments made by a health insurance company are usually not considered to be taxable income to a policyholder.

Underwritten - this means that the application will be screened for acceptance based on individual medical history. Not everyone is eligible for a medically underwritten health insurance policy. Premium rates are lower for those who are accepted, but these insurance plans do not offer coverage to people with significant pre-existing medical conditions.

More information and a state-by-state listing of available health insurance plans for graduates can be found at www.MedSave.com.   Free e-mail support is available through OnlineAdviser service to answer any other questions.

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