Young adults and health reform: A work in progressArticle added by Vanessa De La Rosa on February 5, 2013
You’ve probably heard the quote: “If you’re not a liberal at 20, you have no heart; if you’re not a conservative at 40, you have no brain.” In regards to this past presidential election, this opinion could be, at least in part, affirmed: Obama’s victory claimed the highest percentage of 18- to 29-year-old voters than any other Democratic presidential candidate.
I might speculate that the “heart” in this equation is referring to aims such as the administration’s 906-page health care reform document, which focuses primarily on reducing the uninsured population and decreasing overall health care costs. But are the ideals of the Affordable Care Act actually benefiting the young adult demographic, now that the laws are being put into action?
It definitely is trying. The ACA is in the process of providing more health coverage to young adults than ever before. A young adult can now be insured as a dependent on his or her parents’ health plan until the age of 26, even if he or she is married, a student, and/or not living with or financially dependent on his or her parents.
Back in 2010, the Act declared that health insurers could no longer deny coverage to individuals under the age of 19 with pre-existing conditions, and this law will apply to everyone come 2014.
Starting in October of this year, health insurance exchanges will enable everyone to shop and compare health plans for the best and least expensive option. Beginning January 1, 2014, if a person makes between $11,000 and $45,000 a year (which applies to a large portion of young adults) and does not have access to an affordable plan, he or she can receive a tax credit to bring to an exchange.
These tax credits will be applied immediately, so individuals won’t have to wait until tax time to see a reduction in their insurance expenses. They will also be refundable, so people can receive them even if they pay little or no income tax.
If you’re a young adult who makes less than $15,000 a year, you will be able to enroll in Medicaid in many states. There are also student health insurance plans (SHIPS), which have adopted some of the same basic protections that apply to other health plans, like covering preventive services and contraceptives without a co-pay.
It seems that young adults are indeed reaping the benefits from this reform; after all, the number of insured young adults has risen. According to a September 2012 report by the Center on Budget and Policy Priorities, the health care law has enabled 2.3 million young adults aged 18 to 26 to gain health coverage since 2010.
A Health and Human Services researcher, Benjamin Sommers, conducted a study tracking the percentage of insured young adults over time, comparing them with the slightly older demographic of 26- to 34-year-olds. Unmarried young adults were more likely to acquire coverage than were their married counterparts, and men were more likely than women to become insured. A Washington Post article states that this data, as well as other research on the subject, “indicates that the benefits of the new requirement [extension of dependent coverage] were greatest for people who previously had limited access to affordable coverage.” Insurance rates among young adults showed an overall growth of 7.6 percent through 2011.
But recent research from Health Affairs suggests that, although young adults’ insurance rates were at their highest in the third quarter of 2011, this climb has since begun to plateau. What could be the cause? The Economist says the big question about health care reform is how it will differ from the Democrats’ vision of it. There already seem to be a few side effects that pro-reform young adults had not foreseen (possibly contributing to the apparent plateau in rates) and a few more coming within the next year.
Staying on their parents’ health plans until their 26th birthday might be a no-brainer, especially while in school or freshly graduated and on the job hunt. But many young adults no longer live with mom and dad, either still in school or starting lives in other cities and states. Living far from their parents’ in-network providers can present a challenge, since in-network care is generally covered at a higher rate than out-of-network providers. “Using out-of-network providers can also expose people to higher maximum out-of-pocket limits and balance billing by providers, among other things,” notes an NPR article on the subject.
There’s also the peculiar predicament of being doubly insured. A student might still be covered by both a SHIP and his parents’ health insurance, and must be aware of which plan is the primary one in order to receive in-network care. It’s a strange problem to have, but it does pose an interesting question on how to coordinate or possibly overlap multiple health care plans. A young adult advocacy organization, Young Invincibles, is working with the NAIC to address some of these new issues.
Hoping to reduce costs for another demographic, Obamacare stands to limit the amount insurers can charge older adults for their health insurance. In 42 states, older adults can be charged up to five times what younger adults pay. “This makes actuarial sense,” notes Washington Bureau Chief Kent Hoover, since there is more risk insuring a group more likely to have health problems. Beginning in 2014, the ACA will cap the age band ratio at 3 to 1.
A new study predicts that this ratio will cause young adults’ insurance premiums to rise. Actuaries at management consulting firm Oliver Wyman foresee these new rating restrictions causing a 42 percent hike in premiums for 21- to 29-year-olds, as the young subsidizes the old. The study’s key finding:
“Young, single adults aged 21 to 29 and with incomes beginning at about 225 percent of the FPL, or roughly $25,000, can expect to see higher premiums than would be the case absent the PPACA, even after accounting for the presence of the premium assistance... This is because in today’s market, younger enrollees can buy coverage that more closely reflects their expected actuarial costs based on their age, and this coverage is pooled with other similar risk classes in accordance with standard actuarial principles.”
American’s Health Insurance Plans (AHIP), the lead health plans advocacy group, has petitioned the HHS and the new 3:1 mandate:
"Higher rates for the younger population combined with low mandate penalties during the first years of the ACA implementation will result in adverse selection because younger individuals are likely to choose not to purchase coverage. When these younger individuals do not enroll, destabilization of the individual market will occur, premiums will increase in the individual market for enrollees of all ages, and enrollment will decline.”
Starting January 1, 2014, everyone will be required to have health insurance of some kind or pay a penalty in tax. If premiums do rise, will young adults in need of health insurance be able to afford these new policies? Some may decide to forego the required coverage and pay the penalty instead, which might end up being the cheaper option, at least at first. The 2014 penalty tax starts at $95 or 1 percent of one’s modified adjusted gross income, whichever is greater. In 2015, it will rise to $325 or 2 percent of one’s modified adjusted gross income. In 2016, it will be $695 or 2.5 percent.
If many young adults cannot afford health insurance or decide not to purchase it, the average age of insurance risk pools would increase, leading to a less healthy risk pool. This could also raise costs for those who are in the pool — an all-round loss.
While some might say that young adults are finding more coverage options through the ACA, others might argue that they are only feeling the honeymoon effects of the mandate’s first few installments. There are always unintended consequences with an industry overhaul, especially one as massive as Obama’s health care reform. Will the trends of young adults’ insurance gains persist, or will these predictions of market loss be manifested? Only time will tell. In the meantime, the insurance industry will hold on for dear life.
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