Health Insurance for College Grads

Have a child who's graduating from college this spring? Before you send out invitations to the graduation bash, put this at the top of your to-do list: Make sure your grad will still have health insurance after he or she walks across the stage to collect that diploma.

Many insurance companies drop dependents from their parents' policies once they grab that sheepskin. Others limit a child's coverage to a specific birthday, usually ranging from 22 to 25 (check your policy's rules).

Rather than have your child go without coverage, look into a student health-insurance policy before he or she graduates. A student policy is an affordable way to fill the gap between graduation and that beautiful day when your child qualifies for health insurance benefits through his or her new job.

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You'll have to act fast, though, if your child is graduating this spring. Student health insurance is available only to full-time students under age 30. Coverage continues after graduation, but Assurant Health, the largest provider of student health plans, stipulates that it must begin at least 31 days before graduation. With most spring commencements set for the second half of May or the first part of June, now's the time to apply.

Unlike applications for more comprehensive insurance, the questionnaire for student health coverage is brief. For most plans, you can apply online at a site such as eHealthInsurance.com. Applications usually are approved or denied within 72 hours. Disqualifying conditions include heart problems, cancer, diabetes, drug and alcohol abuse, gall bladder and kidney disease, HIV/AIDS and ulcers.

Short-term solution. If you run out of time to apply for student health insurance, consider a short-term health- insurance policy. Both student and short-term policies exclude pre-existing medical conditions for a year, and neither will cover pregnancy or pay for prescriptions drugs. Plus, insurers must authorize all hospital admissions and outpatient surgeries.

Despite the gaps in coverage, these policies can serve as a good temporary fix. Think of them as catastrophic coverage for a major expense such as an auto accident, for example, and select a policy with a low premium and a high deductible-the amount of money your child would have to pay out of pocket before coverage kicks in. Stick with a six-month policy, which should provide your grad with an adequate window while he or she hunts for a job. You usually can cancel the policy at any time and receive a pro-rated refund.

Student health insurance is generally a little less expensive than a similar short-term policy. Unfortunately, you're required to pay in advance for anywhere from six months to a full year of coverage. But the policy has the advantage of being renewable for as long as your child needs it, assuming the premiums are paid.

Short-term policies, on the other hand, generally are good only for six months to a year. You have to reapply for coverage each time your policy expires, meaning you must be healthy enough to qualify.Here's an example of how they compare: A 22-year-old female non-smoker in Denver would pay $66 a month for a student health policy with a $1,000 deductible and 20% co-insurance (meaning the insurer picks up 80% of a claim after the deductible is met). A similar short-term policy with the same deductible and co-insurance for the same Denver co-ed would cost $120 a month.

Student health insurance usually offers deductibles ranging from $250 to $2,500. With short-term plans, you can buy policies with deductibles as high as $5,000 or more. The higher the deductible, the lower the premium-but the more your child will have to shell out until the deductible is met. Health-insurance prices vary widely from state to state, depending on the benefits each state requires insurers to offer.

The COBRA option. If your child has an existing health condition, your best option might be to take advantage of COBRA, the federal law that allows an adult child to remain on a parent's policy for up to 36 months.

Coverage your grad receives through an employer-based or individual health plan is usually more comprehensive than what your child would get with student health or short-term insurance, but it's also more expensive. With a COBRA policy, you have to pay both the employer's and employee's share of your group premium plus a 2% administrative fee. Still, COBRA can serve as a safety net while you look into other options. After a child is dropped from your policy, you'll have 60 days to decide if you want COBRA coverage. If a grad gets sick or is injured during that period, you can retroactively buy coverage to pay the bills.

States to the rescue. Although most group and individual health-insurance policies cover children only while they're full-time students, some states are extending coverage beyond graduation day. Colorado, Delaware, Massachusetts, New Jersey, New Mexico, Rhode Island, and Utah have such laws on the books. Some laws require adult children to live with their parents or to be unmarried in order to remain on a parent's policy. Others allow insurers to charge a higher premium for the additional coverage. Bills that extend health coverage to adult children after graduation are being considered this year in California, Connecticut, Florida, Minnesota, Missouri and New York.

COVERAGE FOR GRADS

Advice for parents

• Contact your benefits office at work to see when your grad loses coverage under your plan.
• Find out the cost of COBRA coverage.
• Compare student health insurance and short-term prices at eHealthInsurance.com or with your local agent.