Will Young Adults Pay for Health Insurance Under Obamacare?



The Obama administration hopes to sign up about 7 million people for health coverage through new insurance exchanges opening this fall as part of Obamacare. The most challenge part of that goal will be to sign up some 2.7 million young, healthy people the administration estimates it needs in order to balance out the risk pool, and keep premiums down for all. A new report on how young adults approach health insurance illustrates, perhaps inadvertently,how much of a challenge this will be.

The question for the officials in charge of marketing the health law is how to reach the hard-to-get young and healthy demographic that has traditionally shied away from coverage. What's prevented them from obtaining insurance up until now? One idea holds that many younger individuals just don't think insurance is all that important. They're young and invincible. Insurance isn't something that interests them.

But a new report from the Commonwealth Fund suggests that this may not be the best way to understand why young, healthy individuals avoid insurance. It's not invincibility. It's value. If they go without health insurance, it's often because coverage is just too expensive.

You can see this attitude on display in a Minnesota Public Radio report on efforts to convince young people to purchase coverage. The opening of the story centers on Robert Bauer a "young, lean, and healthy" 24 year-old graduate of the University of Minnesota. He works on an organic farm three days a week, and is uninsured. "I just don't think it's worth the money for me to get health insurance at this point," he told MPR.

That's the sort of attitude that Obamacare's enrollment push will have to overcome in order to succeed by the administration's standards. The Commonwealth Fund suggests that Obamacare is equipped to overcome these challenges. 

Maybe. But in a lot of ways, it still looks like a tough sell. Partly because in many states, young people are likely to see big hikes in premiums for the cheapest available plans. "A 27-year-old, non-smoker would pay $135 per month next year for the state's cheapest catastrophic plan — the skimpiest level of coverage available through the healthcare law's new insurance exchanges," The Hill reported this week. "That's about 140 percent more than the cheapest policy on the market today."

Nor is Colorado the only state where individual premiums are projected to rise under the law. Officials in populace states like Florida and Ohio are also projecting increase in average premium prices, in part because the law mandates more expansive coverage than was previously allowed.

Obamacare has also created a bit of a problem for itself by allowing dependents up to the age of 26 stay on their parents' insurance plans.

That provision has been in place for several years, and according to the Department of Health and Human Services, has resulted in coverage for about 3 million young adults already. HHS has billed this as one of Obamacare's successes, but it limits the number of younger, healthier people who might be seeking out individual insurance on their own. In addition, those young people who are able to get coverage through their parents plans are more likely to come from relative affluence, and thus more likely to be able to afford insurance on their own.

The Commonwealth Fund's report hopefully points to a big increase in coverage amongst the young following the implementation of Romneycare. "In the year following enactment of the Massachusetts health reform law in 2007, the uninsured rate of the state's 19-to-26-year-olds fell from 21 percent to 8 percent," the report says. But the Massachusetts system has also gone out of its way to attract young adults with special "Young Adult Plans" geared specifically toward 18-26 year olds.

The Commonwealth Fund report also notes survey responses showing that a large majority of young adults (about 67 percent) accept coverage when offered through work. But there's a big difference between accpeting coverage as part of a employment compensation package and buying it on one's own. 

What about the subsidies for buying insurance through the exchanges? The report points to those credits as a key tool for overcoming young adult cost concerns. "Subsidies," it says, "will keep premium costs low for most young adults covered through the marketplaces."

What counts as "low," of course, is in the eye of the beholder. So let's look at some numbers. Relying on a premium calculator put together by the Kaiser Family Foundation, the report notes that "on average, young adults earning about $15,000 will pay no more than $38 per month; those earning $23,000, no more than $121 per month; those earning $29,000, no more than $193 per month; and those earning $35,000, no more than $273 per month."

Some young adults will probably look at these numbers and think: that's a great deal. But my strong suspicion is that quite a few won't. A nearly $200 per month payment for an individual making just shy of $30,000 a year isn't exactly pocket change. Indeed, it's a pretty significant commitment. That's about the price of a monthly loan payment on a brand new Toyota Corolla. How many young adults in that salary range are ready to shell out that kind of money for coverage? Especially when the alternative, next year, is to pay a $95 annual fine—a fine the IRS can't even collect, should you choose not to pay it, unless you have a big enough tax return for them to deduct from. And when open enrollment on the exchanges starts again just a year later, meaning the decision to go without coverage can always be changed sometime down the road?

To be clear: I'm not saying that anyone should skip out on buying health insurance. That's an individual decision, and young adults are more than capable of making it on their own. But I do think it's worth asking, given what we know about the decisions they've already made, and the pocketbook priorities for many in that age group, how many young adults—many of whom have already decided to go without coverage due to cost concerns—will prove willing to pay those sorts of prices. And how many will, like Robert Bauer, simply decide that it's not worth it, right now, because the price is too damn high?