Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.
By Neal Learner, Editor
June 17, 2013 Volume 4 Issue 12
Young people often think the world revolves around them, and when it comes to the success of the health insurance exchanges, they just may be right. Young adults are prized by insurers and health reform advocates alike who hope to enroll large numbers of them on Oct. 1 when the exchanges open for business. This demographic group, which tends to be healthy, is crucial to ensuring the exchanges have a diverse risk pool, experts say.
But depending on who you ask, young adults either will experience “rate shock” on the exchanges and stay away in droves, or welcome the chance to finally have coverage, much of which will be subsidized.
Starting next year, virtually all Americans will have to get insurance or pay the greater of either a $95 fine or 1% of their income in the first year.
How many young adults will opt for the coverage versus taking the fine is an open question.
Advocacy group Young Invincibles has conducted polls that show only about 5% of people aged 18 to 34 don’t want coverage. “The rest who went uninsured up to this point say they simply haven’t had affordable options,” says Jen Mishory, deputy director of the organization.
“That’s why we have to make sure this population understands new coverage options, like Medicaid and subsidies [on the exchange],” she tells HRW of programs under the Affordable Care Act (ACA). “About 8.7 million of the 11.2 million currently uninsured 21-to-29-year-olds could get Medicaid, if all states expanded [the program under the ACA], or a larger tax credit. Another million will get a smaller tax credit.”
Mishory doesn’t predict how many young adults might forgo insurance. “But we do know there is a sizable population that will qualify for substantial subsidies, making coverage a really good deal,” she adds. “The challenge lies in educating this demographic quickly.”
Other health reform advocates contend that only a small number of young adults actually will experience any substantial premium hikes on the exchanges.
The left-leaning Center for American Progress published a May 20 report that found of the nearly 47 million young Americans between the ages of 19 and 29, only about 3% might see higher premiums in the individual market next year. This is because their incomes are too high to qualify for subsidies to offset premium increases fully, the report said. A breakdown of the remaining group of young adults includes a 7% slice with annual incomes below 250% of the federal poverty level, meaning they’ll either qualify for Medicaid under the expansion or receive premium-assistance subsidies that will offset any rate increases, the report added (see chart, p. 3).
The report was released in response to “a lot of scare tactics” from opponents who claim the ACA is going to devastate young adults, says co-author Maura Calsyn, associate director of health policy at American Progress and a former HHS attorney who advised the department on implementing the reform law.
“We wanted to quantify exactly how many people may see a premium increase,” she tells HRW, adding that the 3% figure represents only 0.5% of all Americans. “We’re talking about a really small number of people,” Calsyn says.
“Even if there is a slight premium increase for some slight population of people, the coverage you get is significantly better,” she continues, comparing the current reform-mandated benefits to those in the pre-ACA landscape. “Even a healthy 25-year-old can end up in the emergency room with a broken leg, and the cost can be $8,000. A lot of that wouldn’t be covered, or the insurer could have dropped you if you get sick.”
Exchanges Don’t Need Full Participation
Young adults and other healthy individuals are important to exchanges, but the exchanges’ viability doesn’t hinge on their total enrollment, she explains.
“They need robust participation of the young adults, but they don’t need 100% enrollment by the young adults,” Calsyn says of the exchanges. “The latest number is they need about 2.5 million young adults to be in that pool next year.”
The fact that young adults now can stay on their parents’ plans until age 26 under a provision of the ACA doesn’t harm the risk pools. “There is still a very large number of healthy, young individuals who are going to be able to enroll,” she adds.
But others paint a much bleaker picture. ACA critic Michael Cannon, director of health policy studies at the libertarian Cato Institute, argues that healthy young adults are vulnerable to rate shock, and if they think premiums are too high, they will pay the small penalty and wait until they’re sick to buy coverage.
“Obamacare supporters are in a near-panic that young, healthy people won’t sign up for coverage, and with good reason,” Cannon writes in a May 31 Cato blog entry.
He points to California’s recent announcement that premiums for individuals on the state exchange, Covered California, would range from 2% above to 29% below the 2013 average premiums for small-employer plans in the state’s most populous regions (HRW 6/3/13, p. 1).
“When others have tried to make the relevant apples-to-apples comparisons, the results are strikingly different from Covered California’s portrayal,” Cannon writes.
He cites estimates from the conservative Hoover Institution that find a 25-year-old male living in San Francisco might pay up to 53% more next year for coverage comparable to what he has now on the individual market. And another analysis by the right-leaning Manhattan Institute finds individual-market premiums could rise as much as 146% for both 25-year-olds and 40-year-olds in California.
“That sounds like rate shock to me,” Cannon argues.
Jury Will Be Out Until 2015
But other experts are taking a wait-and-see approach.
In a June 6 white paper, consulting firm Avalere Health LLC says estimates of anticipated rate shock vary widely, with some studies predicting 169% premium increases for young adults and others projecting 9% to 56% increases. These top-line estimates don’t account for premium subsidies, which will offset the rate hikes for many individuals, according to the paper. Two-thirds of adults under age 30 are eligible for subsidies, says Avalere CEO Dan Mendelson.
“That’s a strong value proposition for them to go sign up,” he tells HRW of the subsidies. “Clearly, some people will decide not to buy insurance. I think that’s going to be the minority.”
Mendelson also expects that more individuals will enroll over time. “This is not the kind of program that can be comprehensively evaluated in 2014, especially given all of the partisan wrangling that has been going back and forth,” he says. “The outreach efforts are challenged. It does take some number of years to work out the kinks of major new health care programs. And this will not be the exception.”
The range of products available could provide something for everyone. Peter Kongstvedt, M.D., principal of health care consultant P.R. Kongstvedt Company, LLC, points to the exchanges’ catastrophic-insurance plans, which he says will be reasonably low cost. “If a payer is aggressively marketing the ‘cat-plan,’ I’m sure they’ll get takeup on that,” he tells HRW of the option that young adults might gravitate toward.
Meanwhile, the clock is ticking to the October enrollment. Young Invincibles’ Mishory sees two challenges in the coming months:
“The first is that there have never been options like these available before, so we need to educate this population about changes — such as expanded quality, Medicaid and access to subsidies,” she says. “The second is that because this population has been so uninsured, young people lack basic insurance literacy to begin with — being able to distinguish which plans work for them could be more difficult when they have no experience with what a ‘copay’ or ‘coinsurance’ actually is.”
Which Young Adults in the Individual Market May See Premium Increases?
*Young adults enrolled in Medicaid, military health insurance, or Medicare.
**Young adults in the individual market who have annual incomes below 250% of the federal poverty level.
***Young adults in the individual market with annual incomes above 250% of the federal poverty level.
SOURCES: Center for American Progress, May 2013, based on 2011 U.S. Census Bureau, Current Population Survey, young adult coverage source by income as a percentage of federal poverty level.
http://aishealth.com/archive/nref061713-02
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