On Their Own

During commencement season, young graduates will want to throw away their schoolbooks, not their health insurance.

By Helen Thompson

“Senioritis” is the dreaded affliction that tends to hit two populations this time of year: high school and college students nearing graduation. Fortunately, senioritis doesn’t require medical treatment, but what if it did? Even though this year’s entry-level job market promises to be one of the best in recent memory, new graduates can spend several months—and sometimes years—finding gainful employment that offers health insurance among its benefits.

Most young adults lose health-insurance coverage under their parents’ policies within a month of graduating or leaving school for other reasons. In fact, according to a recent report by the Commonwealth Fund, 40 percent to 50 percent of recent graduates do not have health insurance. Prospecting to the 19- to 24-year-old market may seem daunting, but many of your existing clients have children preparing to graduate or trying to find their first “real” job.

But they’re healthy
For most young people, securing coverage is secondary to other financial considerations, such as getting established in an apartment, paying their student loans and, like, eating and stuff. But if something serious does happen to their health, it will be unexpected and very expensive.

“Raising this issue can solidify relationships with parents and help agents connect with young adults who will have an expanding array of insurance needs,” says David Andrews of Assurant Health, a company that was a pioneer in individual health insurance some 30 years ago when it was Time Insurance Co. “Short-term policies provide critical protection against expensive treatments and save money by excluding routine coverage healthy young graduates don’t urgently need.”

The safety net
Short-term policies protect against the cost of catastrophic illness by capping total out-of-pocket expenses. While rates vary according to state and company, these plans are considerably cheaper than COBRA and have some flexibility based on how high a deductible the insured takes and what sort of coinsurance he elects.

What should you look for when helping clients with their short-term medical coverage needs? Andrews lists five criteria:

1. Where can the client go for treatment? Some short-term plans are like PPOs, with network providers. But college grads don’t always stay put during their downtime; a more traditional indemnity plan may be better.
2. Lifetime maximum: A $10,000 policy won’t go very far on an emergency surgery for an accident or a major illness.
3. What deductible is the client comfortable with? And how many deductibles need to be satisfied? While group plans tend to have per-year deductibles, short-term individual plans can have per-condition deductibles. If your client breaks a leg one month and catches pneumonia a month later, each occurrence could have its own deductible.
4. Extension of benefits: Look for policies that will continue to cover conditions past the coverage term. If your client has an accident the day before his policy expires and is still in the hospital a week later, will he still be covered?
5. What is the rating and reputation of the insuring company?

Flexibility and security
Some companies allow the insured to specify exactly how long the policy will be in force. This is particularly helpful when graduates have a job offer with a company that requires a waiting period for coverage, or when the start date is several months away. Another important reason to carry short-term health insurance is that it meets HIPAA portability regulations.

But the greatest consideration, by far, is the savings to a person who has the coverage when disaster strikes. “Unexpected health problems can add significantly to the debt load many recent graduates already have from student loans,” says Andrews. “These costs can also threaten the financial security of parents by depleting their retirement savings.”