ASK KIM
Health Coverage After Graduation
by Kimberly Lankford

My daughter is about to graduate from college in a few weeks and still hasn't found a job. I'm starting to get worried about her health coverage. As soon as she graduates, she'll no longer be covered under our policy. What can we do?

Many families are going through the same situation now because most health-insurance policies provided by employers cover kids only while they're full-time students, up to age 25 (and coverage stops when they leave school, even if they're younger than that). But there are several ways to insure your daughter after she graduates.

Even though you won't be able to keep your daughter on your policy as a dependent after she graduates, she may still be able to continue that coverage under COBRA, a federal law that lets you stay in a group plan for up to 36 months after you no longer qualify for coverage as a dependent. (This is the same law that requires most employers to let you continue coverage for up to 18 months after you leave your job.)

These policies are generally a lot more expensive than individual policies if you're healthy -- especially because your employer is no longer subsidizing part of the premiums -- but insurers cannot reject you because of your health.

It's a good idea to sign up for COBRA coverage at first, even if you're healthy, so you know you have some coverage if you end up getting rejected for other policies. People with relatively minor medical conditions can still have a tough time finding affordable individual coverage. Make sure you at least have this safety net before you shop around.

If your daughter is healthy and it looks like she'll be without health insurance for a while, check out prices for regular individual health-insurance policies, which can be a lot less expensive than COBRA if you don't have any medical conditions. For example, a 22-year-old woman in Grand Rapids could get an individual policy through eHealthInsurance.com for just $48 per month with a $1,000 deductible (the cost varies by city and sex -- a 22-year-old male in Chicago would pay about $94 monthly for a policy with a $1,000 deductible).

Getting a high-deductible individual policy also gives you an added bonus: You may be able to open up a health savings account. You can make tax-deductible contributions to HSAs (up to the amount of the deductible, but no more than $2,650 for individuals or $5,250 for families in 2005) and use the money tax-free to pay your deductible and other medical expenses. And if you end up having few medical expenses, the money continues to grow in the account tax-free for future medical costs.

If you believe she'll be able to get employer provided health coverage in the next few months, a short-term policy is another inexpensive option. A 22-year-old woman in Grand Rapids would pay about $60 per month for an Assurant Health short-term policy with a 20% co-pay and a $1,000 deductible ($45 a month with a $2,500 deductible). You can use the policy with any doctor or hospital. Most of these policies are available only for up to 180 or 365 days, and generally don't provide coverage for pregnancy, preventive care and preexisting conditions. For price quotes, check with Assurant Health or Golden Rule, two large national companies providing short-term coverage. eHealthInsurance.com also sells several companies' policies.

Another option that can help families with a bit more time is a student health insurance policy. Some of these policies, like the one offered by Assurant Health, can continue after graduation, but you must sign up for it at least 31 days before you graduate. A 22-year-old in Grand Rapids would pay about $60 a month for an Assurant Health student policy with a $1,000 deductible. There are several limitations, though, including no coverage for dependents, pregnancy or outpatient prescription drugs. To qualify, you must not have any major medical problems, and preexisting conditions will not be covered for 12 months.