Millennials and health care: Health insurance

Of all the new responsibilities facing young adults, their own health may be one of the most daunting—and often overlooked. As they are leaving home for the first time, leaving their pediatrician to find a new primary care provider, often in a new city where they’ve moved for work or school, at least one thing that they don’t need to worry about is losing their parents’ insurance.

Not so long ago, many young adults lost the insurance they had from their parents’ employers the day they turned 21 or graduated from college. With the Affordable Care Act (ACA), they can stay on their parents’ plan until they are 26 years old—and many are taking advantage.

“We’ve seen a rather remarkable increase in insurance coverage among 21-25 year-olds in the last few years,” said health economist Michael A. Morrisey, PhD, professor at the Texas A&M Health Science Center School of Public Health. “Part of that is because of the recovering economy, of course, but I suspect quite a lot of that has to do with being eligible for pretty inexpensive coverage through their parents’ plan.” Estimates vary, but somewhere between 3.5 and 4.5 million young people have obtained coverage, either through the marketplace or their parents’ plan, than would have otherwise.

The positives, and negatives, of ACA

Indeed, the provision that lets young adults keep their parents’ health insurance until age 26 has been one of the most popular parts of the ACA, with an estimated 3.1 million young adults taking that option. For some with younger siblings still in high school or college, it is often no more expensive for their parents to insure two children than one. There are also tax implications: for parents, who are often in a higher income bracket than their children just out of college, the tax breaks of buying coverage are greater and the family as a whole saves money.

Still, for some young people, staying on their parents’ plan can have its challenges. For example, those who live far away from home might not be able to find physicians that are in network. Others might not feel comfortable having their explanation of benefits statements mailed to their parents. Still others may not have parents with good health coverage themselves. For them, the ACA has been something of a double-edged sword.

“In the old days, young healthy folks would have faced low health insurance premiums,” Morrisey said. “Now, if they don’t have coverage through their employer or through their parents’ plan, coverage is likely to be more expensive for them than it would have been two or three years ago.” This is because the ACA requires everyone to have health insurance coverage and that also requires that the highest premiums be no more than three times the lowest premiums. This means that if the highest premium covers the costs of the old or sick, premiums for young, healthy people will be higher.

“So, young folks for the most part are worse off in the exchanges, unless they have a significant chronic health problem and would have faced really high insurance premiums. For those with serious health problems the ACA can be a real advantage because the premiums is not linked to health status.” For these nearly 30 million 18-34 year olds with a pre-existing condition, the ACA also means they can no longer be denied coverage altogether.

Recent studies have shown that for highly educated young adults aged 19 to 30, the biggest advantage of the ACA has been access to preventive or primary care and peace of mind—knowing they can’t be dropped or charged huge premiums if they do develop a chronic health problem. Still many, young people are convinced that this will never happen to them—that’s they’re invincible.

Those millennials under age 30 may also be eligible for so-called catastrophic plans. Although this coverage gives preventive screenings and shots and does kick in for serious accidents or illnesses, it isn’t eligible for premium tax credits, so many people may find that when tax breaks are factored into the equation, catastrophic plans may not be much less expensive than the basic entry-level health plan on the market.

And students over the age of 25 may benefit as well. To meet the requirements of the ACA, the plan must cover preventive services such as vaccines and essential services such as emergency treatments, hospitalizations and maternity and newborn care. Some student health plans in the past didn’t cover all of these.

But what good are the benefits of the ACA if millennials—even college-educated ones, don’t understand them? In fact, millennials are actually not very savvy about different health care insurance terms—which were complicated enough even before the ACA. Studies have shown that many were confused as well by insurance-related tax credits and how they could make more comprehensive plans actually less expensive than less comprehensive alternatives, such as catastrophic insurance.

High prices may sway some to go uninsured

[pullquote align=”right” cite=”“Enrollment in the health insurance marketplace has been well below original estimates and that trend looks to continue in this third open-enrollment period. From my perspective the viability of the program really depends upon the willingness the millennials to participate.”” link=”” color=”” class=”” size=””][/pullquote] United States residents who don’t have access to other coverage can buy health insurance in the government-run marketplace, and nearly 84 percent of those who did receive a premium tax credit. These subsidies can lower the cost of health insurance for those who qualify, but to be eligible for those subsidies, a person’s income must not exceed 400 percent of the federal poverty level, or $47,080 for 2016 for a single person. Some millennials who earn just over that threshold don’t get any subsidies but still don’t earn enough to easily pay their premiums.

In fact, many millennials found paying for health insurance to be a financial strain and some—representing possibly half of the 10.5 million uninsured Americans—may choose to forgo coverage and pay the penalties.

“The penalties for not signing up for insurance increase this year and increase again next year. While the higher penalties should induce more people to sign up, once they turn 26, a good chunk of them may go uninsured, and most of them will be completely fine,” Morrisey added. Those that do become unexpectedly injured or ill can sign up for coverage for the next year, thanks to the lack of pre-existing condition exclusions in ACA plans. “The good news for them is that they can buy coverage next year, and they’re only ‘on the hook’ until the end of the year.”

Open Enrollment for the Health Insurance Marketplace runs from November 1, 2015 to January 30, 2016, and coverage started as early as January 1. Even outside of this time frame, someone can get coverage if they have experienced certain life events such as getting married, graduating or moving.

Once they’re covered, some young people still have issues accessing care, finding a good primary care physician and other challenges, but at least the 83.2 percent of Americans aged 18 to 25 who now have health insurance (up from 76.5 percent just since the last quarter of 2013) should be able to afford health care.

Regarding the future, Morrisey said, “Enrollment in the health insurance marketplace has been well below original estimates and that trend looks to continue in this third open-enrollment period. From my perspective the viability of the program really depends upon the willingness the millennials to participate.”