For many college students, mortarboards aren't the only things up in the air on graduation day.
An estimated 1 million alumni dropped from their parents' health insurance coverage upon graduating this year. Replacing that insurance is a problem for former college students because they're often short on cash.
Graduates should aim for the most affordable plan: health insurance through employers, says Jon Gabel, senior fellow of the health policy and evaluation department at the National Opinion Research Center at the University of Chicago.
However, college graduates face a tough job market. More than 2.5 million recent college grads are unemployed, a National Association of Colleges and Employers report says. One of them is Samantha Whiteside, 24, a health and fitness major who graduated from Virginia Polytechnic University last year.
Her career outlook seemed promising at first. She found work at an outpatient rehabilitation center in March as a technician and wellness instructor for mentally ill seniors. She was told health insurance benefits would kick in after three months. Three days before her third month ended, she was laid off.
"I've never been in this situation before," she says. "I know everybody's been saying that the economy's bad … but I never thought it would happen to me."
She's working now as a part-time swimming instructor, and her mother, Marla Whiteside, enrolled her in an individual insurance plan with a $96 monthly premium. The coverage is minimal, and Marla Whiteside says she's worried because it only pays 70% of hospital treatment.
But while the plan isn't very comprehensive, it's better than nothing.
Graduates shouldn't join the ranks of the uninsured, warns Cheryl Fish-Parcham of Families USA, a health care advocacy organization.
Something as unpredictable as a car accident, or as simple as a few doctor's appointments, could plunge them deep into debt.
Also, if graduates wait too long to get health insurance, insurers may deny coverage, especially if they've had any major medical issues within the past five years, Fish-Parcham says. She recommends avoiding gaps in coverage lasting more than 63 days. Within that time period, if the graduate develops a serious health problem, federal law requires insurers to offer coverage. But after that, they can refuse you.
So what's a cash-strapped former college student to do? Some options:
Your parents' insurance
Your parents' plan, if it's employer-based, probably offers lower premiums — and more coverage — than individual health insurance.
Twenty-five states allow graduates to do this, says Sara Collins, vice president at the Commonwealth Fund. State law varies. In some places, graduates can stay on until age 24, 25 or 26. New Jersey has the highest age limit, at 30.
Some states limit this option to full-time students or to young people living at home, says Jenny Libster, senior research associate at Georgetown University's Health Policy Institute.
If this option isn't available, see if you can get your college insurance plan extended.
As a last resort, consider the Consolidated Omnibus Budget Reconciliation Act, or COBRA. This federal program allows you to continue coverage under your parents' employer-based plan, but there's a catch — it's much more expensive. You're required to pay the entire premium, plus 2% in administrative costs.
An individual insurance policy
Depending on where you live, it might not be as pricey as you think. A non-smoking, 22-year-old male who lives in Baltimore could buy a comprehensive insurance plan with a $1,000 deductible for $94 a month, according to eHealthInsurance.com. In New Brunswick, N.J., the same coverage costs $355.74. The price differs because state laws vary, Collins says.
Most states give insurance companies a green light to pick and choose whom they insure — which, in most cases, means people with chronic health conditions are shut out.
But five states, known as "guaranteed issue states," require insurance availability for everyone, healthy or not. These states are Maine, New Hampshire, New Jersey, New York and Vermont.
While this is valuable for those with chronic health conditions, it also means premiums are higher, making insurance more expensive for healthy people.
A health maintenance organization
A type of comprehensive, individual insurance plan, HMOs offer a fixed list of health care providers. They're generally less expensive than preferred provider organization plans, which allow you to choose health providers, Gabel says.
Although PPOs offer more choices, grads probably don't need them, Gabel says, because they probably don't have a relationship with a specific doctor yet.
Alternatively, consider a point of service plan, or POS. These plans are similar to HMOs, but offer the option of using out-of-network services, as long as you pay a deductible and higher co-payment.
A short-term plan
If you nail a job but have to wait a few months for the insurance plan to kick in, consider short-term coverage. These plans are less expensive than individual insurance plans. You can use them to fill in gaps in your coverage, up to six months.
However, be aware that they are called short term for a reason: They're designed as a temporary fix. It's risky, for example, to buy one short-term plan after another as a substitute for individual health insurance. You're treated like a new client every six months, which gives the company the ability to refuse you. If you fall ill or get into an accident right after purchasing a new plan, the company may drop you, Fish-Parcham says.
These plans, also known as high-deductible plans, charge deductibles ranging from $500 to $5,000, with low premiums. Although catastrophic insurance doesn't usually cover the cost of regular doctor visits and prescriptions, it does offer coverage for emergencies.
But if you choose to buy one of these plans, "you have to be sure" there's money in the bank to cover the deductible, Fish-Parcham warns.
Policies geared toward young adults
The Kaiser Family Foundation reports that 30% of the uninsured are ages 19-29.
Insurance companies have created plans "developed with this population in mind," says Susan Pisano, vice president of communications at America's Health Insurance Plans, an insurance industry trade association. They include lower premiums —Aetna's BodyGuard, for example, offers plans from $40 to $110 a month.
Aetna spokesman Matthew Wiggin says the monthly cost is low because the plans only focus "on the type of coverage that young adults are most likely to use."
Since young adults are active, and prone to more accidents, Aetna included more emergency care coverage than in its individual plans. Meanwhile the prescription drug benefit is limited to generic drugs.
Another low-cost option is a limited benefit medical plan. Marketed as a low-income alternative, these plans cost less than $200 a month, with little or no deductible.
But many health industry experts tell consumers to be wary, as these plans cap total coverage. If you end up in the hospital, you could be on the hook for a large part of the cost.