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Young Adults and Healthcare: Young Invincibles?

One widely publicized provision of the Affordable Care Act is the capability parents have to cover their children until age 26 in their healthcare plans. Through 2013, more than 2.5 million young adults were added to their parents health insurance. As 2014 and the mandatory health insurance requirements approaches, this increasing number of covered young dependents will be fortunate enough to share in their parents health benefits and avoid potential tax penalties.

What happens when parents aren’t covered by an employer plan or are over age 65? Or when those that are participants in their parents’ plans turn age 27? This demographic, who often refer to themselves as the “young invincibles”, continue to be a difficult group to predict. In order for ACA provisions, like health insurance exchanges to succeed, young adults will need to participate.

Young adults who are no long eligible to participate in their parents plans, or haven’t had an opportunity to do so, must now purchase health insurance or face an IRS penalty. If health insurance is offered by an employer, young employees can certainly enroll. If an employer sponsored health benefit isn’t available, the ACA has created state health insurance exchanges to offer health insurance to anyone, regardless of age or pre existing conditions.

The ongoing premiums associated with health insurance have long been a deterrent for young adults. Many consider themselves to be in good physical shape, unlikely to become seriously ill and have not seen the need to add health insurance premiums to their ongoing expenses. In fact, there are young individuals who may prefer to pay the IRS penalty rather than purchase health insurance. Beginning in 2014, the IRS penalty for not obtaining health insurance is $95 or 1% of income, whichever is greater, up to a maximum of $285. This penalty will increase annually until 2016 when it becomes subject to a cost of living adjustment.

The tide may be turning. A poll conducted June 4-9, 2013 by the Kaiser Family Foundation found that more than 71% of adults younger than age 30 said having health insurance is “very important to them”. More than 44% are worried about the cost of routine care; 66% are concerned about medical bills from an accident or serious accident. The poll, however, didn’t include questions on the cost of this care so it is unclear what this representative group considers reasonable.

The fact that the young invincibles are starting to see the value of health insurance is a positive sign for the exchanges. For the exchanges to be viable, it is critical that young people who are healthy purchase their health insurance there. Otherwise, an overwhelming number of the consumers will be individuals who need health care and who may have had a difficult time obtaining it in the past, making it difficult for the exchanges to operate properly.

What continues to be a challenge for all the exchanges is what people know about health insurance exchanges in general. Some states have been more aggressive than others, but all are scheduled to open October 1. For additional information, contact EAB HealthWorks.