While the Affordable Care Act (ACA) has created affordable health insurance for many Americans, students often find themselves ineligible for a tax credit. This would require a student to pay full price for health insurance, which can average around $200 per month for a 20 year old individual. Coupling this price with the fact that younger people are generally very healthy and therefore hardly, if ever, actually use health insurance, it is not surprising that many students feel they deserve better options.
Since monthly rate is typically the deciding factor it is important that the correct numbers are used. With ACA/Obamacare plans the monthly rate will be based on the student’s household size and household income; however the student files taxes dictates the household size and household income. If the parents still claim the student as a dependent, then the household size includes the parents (if they file jointly) and any other dependents on the tax return. If the student is single with no kids and is not claimed by his or her parents then the household size is one. The tax credit is determined directly from this household information so it is important to provide this information as accurately as possible.
A second and more common option for a student’s health insurance is Short Term Medical policies. These policies have increased in popularity due to many of the grade-A carriers (BlueCross BlueShield, United HealthCare, Humana etc.) improving their coverage on these policies to better compete with the ACA regulated plans. Term Medical is extremely popular with younger and healthier individuals because the policies give the insured person access to nationwide networks of doctors and hospitals, copay options for office visits and prescription drugs, as well as comprehensive coverage for what healthy people worry about most: accidental injuries. Since these policies are not regulated under the ACA, enrollees could possibly still be subject to a tax penalty as if they did not have coverage at all. However, most students will qualify for an exemption from this penalty.
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