It seems like a no-brainer: Keep your grown children on your health insurance plan until they turn 26 to help them save a little on medical expenses.
But like most healthy decisions, it’s not that simple. And with open enrollment around the corner for many Americans, now is a good time to consider whether letting your grown children skip paying for their own health insurance is the best financial move.
Nearly three-quarters of Gen Z parents (72%) pay for their children’s health insurance, according to a survey released earlier this year of nearly 1,000 U.S. parents with at least one child over the age of 18. This high level of support makes sense given that children can usually stay on their parents’ health insurance until they turn 26 thanks to the Affordable Care Act. As part of this legislation, employers, plans and issuers are generally required to offer dependent coverage for grown children.
Even about 17% of millennial parents (ages 26-41) still have their children on a family health insurance plan. This will likely decrease significantly next year, when most millennials age out of the “under 26” provision entirely. However, several states, including Florida, New Jersey and New York, allow families to get a rider to extend coverage to unmarried adult children over age 26.
The cost of supplemental health insurance isn’t prohibitive depending on the plan structure — parents spend an average of about $157 per month to keep their children on their health plan, according to the study.
But while it may be tempting for grown children to skip health insurance costs for now, staying on a parent’s plan is no guarantee that medical costs will be lower overall. Especially if your grown children live in another state or region and your insurance is a type of health maintenance organization (HMO), exclusive provider organization (EPO), or other limited-network plan.
“If you’re considering staying in your parent’s plan rather than getting your own coverage, it’s important to consider cost and coverage,” says Kim Buckey, vice president of client services at employee benefit program provider Optavise (formerly such as DirectPath).
What is covered and what may be missing
For some families, continuing their adult children’s health insurance to their parents works well. Americans in their 20s are generally healthy, and having some coverage is better than none. Additionally, health insurance plans generally must pay for emergency room visits under the ACA, even for out-of-network emergency services. But even with this coverage, the cost of an emergency room visit can easily be in the thousands.
But emergency coverage doesn’t extend to regular doctor visits, therapists, urgent care, lab work, and even prescriptions. All of these services may be billed at out-of-network rates, which may mean little or no coverage. As a result, older children may incur significant out-of-pocket costs to receive essential medical services and preventive care.
There are also restrictions on the medical procedures that are covered for older children. Not every plan covers, for example, elective abortions or maternity care for dependents, Buckey says. And if a Gen Z child takes certain medications, a parent’s prescription plan formulary may not cover the desired medications.
Also, if an adult child marries or has a child of their own, parents won’t be able to add that new family member to coverage through their health plan, Bucky says. Staying on your parents’ health plan can also mean less privacy. The primary policyholder typically receives notifications of all medical visits billed through the insurance—so they can see billing codes for various procedures and services.
While some grown children may simply rely on their parents’ insurance for 100% of their coverage, others have taken to using it as secondary insurance. But is it worth it to have secondary insurance through your parents? Usually not, says Bucky, in large part because the cost of monthly premiums will likely outweigh any potential benefit.
Children will also have to meet two separate deductibles and juggling rules for both their primary plan through their employer and the secondary plan through their parents. If the primary plan, for example, is an HMO or EPO and the adult child goes out of network for their care, services may not be covered (unless it’s an emergency). And since the services are not covered by the primary plan, the secondary plan may also decline coverage.
“Health plans have coordination of benefit provisions, in part to ensure that you are not reimbursed more than the actual cost of the service. So you may not get much, if any, additional benefit from having two plans,” Bucky says.
Let’s say your child accrues medical expenses of $1,000. If their employer’s plan covers 80% of the cost of the service ($800 in this case) and the parent’s plan also covers 80% (or even a lower percentage), they will receive no additional benefit – because they have already received a payment equal to of what the plan would pay.
If their primary plan covers 70% of the cost ($700) and the parent’s plan covers 80% ($800), the adult child only gets $100 from their parent’s plan. Essentially the difference between what you would have paid and what the basic plan paid, Bucky says. “When you compare that extra $100 to the hundreds, if not thousands, of dollars you’ve paid in premiums over the year, it’s probably not worth it,” she adds.
How to compare plans
When it comes down to it, an adult child’s employer-sponsored health plan may actually cost less — in premiums and cost-sharing — than the parent’s plan.
To compare plans, see premium first. If a parent is covering another dependent child (for example, a sibling), it may not cost them anything extra to continue to cover everyone. But for only children, parents may pay more for coverage. “This is something [adult kids] he should probably refund them,” says Bucky.
Next, look at the cost share – what the deductibles, copays and coinsurance are for each available plan option. How do plans cover prescription drugs? What is the plan’s out-of-pocket maximum. Many times these variables are the main drivers of daily out-of-pocket costs.
A high-deductible, low-premium health plan, for example, can actually be more expensive over the year than a preferred provider organization (PPO) plan with a lower deductible and slightly higher premium, Buckey says. And be sure to review network coverage and what services and supplies the plans cover.
“You don’t want to pay for more than you need, but you also don’t want to be caught without enough coverage if you need care,” Bucky says.
Being able to analyze and choose the right health care plan is a life skill that workers will use throughout their careers. The longer children stay on their parents’ health plans, the longer they delay learning this skill. “The sooner you get comfortable with this process, the better you’ll be at shopping for care and coverage—saving you money in the long run,” says Bucky.