Networth: A real-world test for new college grads

Congratulations: You've graduated from college.
Now for a real-world test: finding health insurance.
Unless you have a job with health insurance lined up, you need to get your own coverage.
Most group health policies cover dependents up to age 23, 24 or 25 as long as they are in school full time. Once they drop out, graduate or go part time, they will be removed from a parent's policy unless they choose COBRA continuation coverage, which is expensive.
If you have been on a parent's group plan, you probably will be covered until the end of the month you graduate, but some plans give a longer grace period, so be sure to check. College-sponsored plans might cover students for several months after graduation.
There are two reasons not to dawdle.
The obvious one is the risk of having a serious illness or injury when you are not covered. This could put you -- or your family members if they choose to help -- in financial jeopardy.
The less obvious one is the Health Insurance Portability and Accountability Act, or HIPAA. This law guarantees you certain rights as long as you don't go more than 63 days without creditable coverage, which includes enrollment in most individual and group health plans.
"Having continuous coverage without a significant break keeps you HIPAA-eligible," says Amir Mostafaie, consumer health insurance expert with eHealthInsurance.com.
This is especially important if you have a medical condition for which you are receiving or have received treatment.
When you enroll in a new plan, the plan can refuse to pay for pre-existing conditions for up to 12 months if you have had a significant break in coverage (more than 63 days).
"Say I have asthma. I use Advair or something that costs $200 a month. I've been insured by my parents' insurance. I graduate, my insurance runs out. My medication will last three months so I don't get insurance. Three months later, I apply for insurance. They accept me, but when I try to get Advair, they say (asthma) was a pre-existing condition, we will not cover it for 12 months," Mostafaie says.
If you have a serious health issue, insurance companies can deny you coverage altogether. But as long as you remain HIPAA-eligible, you could buy guaranteed-issue insurance, which is very expensive, but at least it's insurance. If you go more than 63 days without coverage, you might not get any insurance unless you live in one of five states with guaranteed coverage. (California is not one.)
If you are young and healthy, you can get a barebones policy for around $100 a month. It won't pay for much routine care, but it would help with a devastating medical problem.
It's crucial to understand the health insurance terminology and shop around. Web sites such as www.eHealthInsurance.com provide basic information (click Help Center and Glossary) and let you get rate quotes from many companies. Also consider speaking with an insurance broker. Your college health center might provide information, counseling and broker referrals. Here's a quick look at some options:
-- Continuation coverage: If you have been covered under a parent's group health plan, you can stay in that plan after graduation for up to 18 months under a federal law known as COBRA. However, you will have to pay the full cost, which can be quite expensive.
If you have a serious medical condition or plan to get pregnant, this could be a good option until you can enroll in a group health plan at work.
Your parents should inform the insurance company as soon as you graduate and it will send out a COBRA package explaining the premium and deadlines for applying.
If you have been on university insurance, it might provide an option to convert to an individual plan that would cover the pre-existing condition, says Heather Pineda, director of the University of California-Berkeley's health insurance program.
-- Individual policy: If you are young and healthy, you can probably get a cheaper policy on your own. Your lowest-cost option is a catastrophic or major medical policy that generally does not cover doctor visits or routine care. It generally pays for hospital care, but only after you have paid a certain amount out of pocket in a calendar year. This amount is the deductible. The higher the deductible, the lower the monthly premium.
There are endless variations on this theme. Some low-cost plans will subsidize a certain number of doctor visits or prescription drugs. But the more options you add, the higher the premium.
It is crucial to understand what the plan does and does not cover, which out-of-pocket expenses count toward your deductible and which don't and what doctors you can see.
In California and some other states, Anthem Blue Cross has created a plan for young adults known as Tonik. It lets you see any doctor in the Anthem Blue Cross network.
Ankeny Minoux, president of the Foundation for Health Coverage Education, says it's best to "stick with the larger carriers" and beware of plans that sound too good to be true.
For a list of seven signs a health insurance plan may be a scam, see links.sfgate.com/ZHGE.

(E-mail Kathleen Pender at kpender(at)sfchronicle.com. For more stories, visit scrippsnews.com.)

(Distributed by Scripps Howard News Service, http://www.scrippsnews.com)
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