Why Twentysomethings May Reject the ACA

TheStreet.com

SAN DIEGO (MainStreet)—Not many twentysomethings spend a great deal of time thinking about health insurance.

In fact, many are woefully uninformed – lacking even a basic understanding of how health insurance works or of health insurance terminology such as "deductible," "premium" or "co-pay."

But come January 2014, that will have to change.

That's when the bulk of the federal Affordable Care Act takes effect, under which young adults face new requirements for having health insurance – including being slapped with penalties for not having it.

"Right now this generation has very low levels of insurance literacy, precisely because there were so few good options before," explains Tamika Butler, California director of Washington, D.C.-based Young Invincibles, an organization that seeks to expand opportunity for Americans between the ages of 18 and 34.

According to Young Invincibles, young adults remain the most uninsured age group in the country. Here's a snapshot of the statistics:

  • 29% of 18- to 24-year-olds and 26% of 25- to 34-year-olds are uninsured.
  • By gender, 29% of men and 26% of women in these age groups lack insurance.
  • In California, the numbers are far higher than the national average – with 31% in this age group lacking health insurance. In Los Angeles County, the figure jumps to 39%.

Statistics like these have organizations like Young Invincibles, as well as the insurance industry, and federal and state officials, all focused on young men and women this year in an attempt to get them signed up for health insurance.

Young Invincibles recently launched a nationwide campaign called Healthy Young America, under which its been holding grass roots events across the country to educate twentysomethings about the Affordable Care Act and the various low cost insurance options that will be available come January.

The organization has also developed an app for mobile phones that both helps find doctors and helps twentysomethings understand healthcare terminology.

"We really feel like getting young people insured is going to help everyone," Butler says. "You need young folks in the insurance pool to bring costs down for everyone. And young folks are really leaders. So we know young people are going to be this gateway to other folks in their community getting health insurance."

There are three primary options available for twentysomethings when it comes to health insurance under the Affordable Care Act:

  • Stay on their parents' health insurance if they are under 26
  • Access a health plan through their employer
  • Purchase health insurance through the health insurance "marketplace" created under the Affordable Care Act. The marketplace is the new, website-based mechanism to find insurance. Each state may set up its own version of the marketplace or use the federal version, or customize the federal version for state use. Applicants won't have to worry about being denied because of health problems. The Affordable Care Act guarantees coverage to anyone who applies for a policy.

But here's where economic reality sets in.

For the first few years under the Affordable Care Act, the penalty for remaining uninsured is not that steep. In 2014, for example, the penalty is just 1% of annual income or $95 dollars, whichever is greater. (The penalty is paid when filing taxes in April.)

In 2015, the penalty increases slightly – to 2%.

And in 2016, the penalty becomes 2.5%.

When weighing these options, many insurance industry experts say, the choice to forgo insurance is often much cheaper and therefore may be far more attractive to twentysomethings.

"What I anticipate will happen is someone will say 'I'm healthy and young. I'd rather pay the $95 or 1%,' " explains Susan Rider, a broker with Gregory & Appel Insurance in Indianapolis. "Think of someone who is young, single, and only making $35,000. Their penalty is only $350, versus insurance premiums that can be $7,000 or $8,000 a year."

Rider, an insurance industry veteran with 11 years experience, does two to three presentations each week in an attempt to educate the public about the Affordable Care Act. She too sees a lack of understanding about insurance among twentysomethings.

"It's not really on their radar screen yet," she says. "But consumers themselves are not fully educated on what the ramifications are going to be starting in January. It's not just the young people. It's everybody."

The cost of insurance under the Affordable Care Act will vary by state, making it hard for any expert or industry insider to provide a price quote that applies nationwide for a twentysomething or for any age group.

But California is one of the few states that has already unveiled some of the prices it will be charging for health plans. California has established a state-based health insurance marketplace called Covered California. Insurance will be available through this website starting October 1.

There will be four plan levels, - bronze, silver, gold and platinum, explains Craig Gussin with Auerbach & Gussin Insurance San Diego.

California recently revealed prices for the bronze plan (lowest level plan), for people who are 25 years old, Gussin says.

If an individual earns between $11,490 and $17,235 annually, the cost of the silver plan will be between $19 and $57 per month.

If an individual earns between $17,235 and $22,980 annually, the cost of the silver plan will be $57 to $121 per month

For those earning between $22,980 and $28,725 annually, the premium will be $121,to $193 a month.

And finally, if one earns between $28,725 and $45,960, the monthly insurance bill will be $193 to $364.

The Covered California website also has a cost calculator that can be used to help determine what the approximate cost of health insurance will be.

Gussin, who has been fielding more and more phone calls from twentysomethings with insurance questions these days, has also been doing interviews regularly to help educate the public. Slowly, he says, the message is starting to permeate the consciousness of younger people.

"They know about it more now because they are hearing about it on television and mom and dad saying you're going to have to get health insurance," Gussin says. "It's slowly getting out there."

Still he says, it may very well be an uphill battle to sign young people up for insurance right away, given the economics.

"If you have a choice of $200 of month or a $300 fine, most people will just wait until 2015 to buy insurance," Gussin says. "Unfortunately there's not enough penalty to really make someone run out and buy it today."

--Written by Mia Taylor for MainStreet

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