Why 20-somethings are crucial to healthcare reform

To make healthcare reform work, insurers need to bring 20-somethings into the system. But the House and Senate differ on how much to penalize people who refuse to buy health insurance.

Health insurance doesn't make financial sense for many young Americans.

That's the conclusion numerous young adults come to when weighing their insurance options, with one-quarter of 19-to-29-year-olds deciding to go without health insurance.

It's also the conclusion of some researchers: Young Americans with insurance end up paying for more than they get in the current system.

Young people "are being asked ... to purchase something that isn't in their economic interest," says Anthony Schlaff, director of the Masters of Public Health program at Tufts University in Medford, Mass.

In doing so, however, they're essentially subsidizing care for older customers, and that is why young Americans are so crucial to healthcare reform efforts unfolding on Capitol Hill. Bringing in the "Young Invincibles," who so often forsake health insurance, is a crucial component in the effort to bring down healthcare costs for others.

As a result, Washington is struggling to strike a balance, making sure more Young Invincibles are insured without making that insurance a burden on a group that is typically paid less and is healthier than other Americans.

The House passed its version of a reform bill late Saturday. It included an fine of as much as $250,000 or five years in jail for people who do not get health insurance. The Senate has yet to vote on its version on the bill, but the penalties in any Senate bill are expected to be much lower. In the Senate Finance bill, for example, the penalty would gradually increase from $200 per adult in 2014 to $750 in 2017. Before 2014, there would be no fee.

Figuring out how much to shift costs to young adults is "a tricky balance," says Amy Lischko, a professor of public health at Tufts.

Why insurers want young Americans

The breakdown of medical expenses in the US shows 20-somethings' appeal to insurers and reformers trying to drive healthcare costs down: They account for 7 percent – roughly $73.5 billion – of the nation's $1 trillion in healthcare expenses, though they make up 15 percent of the population, according to a 2006 survey by the Agency for Healthcare Research and Quality (AHRQ).

That's because most young adults often do not need costly medical care or prescriptions. In fact, 27 percent of young Americans didn't have any health-related expenses in 2006.

When they do require care, young Americans' annual healthcare expenses average $2,200 to $6,800 less than those of older age groups.

In some states, young people are already subsidizing the cost of insurance for older populations. Massachusetts began requiring health insurance for all its citizens in 2007. It has a so-called community rating system that standardizes health – insurance rates across the state and mandates that elderly populations can be charged only twice as much for their premiums as young people. Similar systems exist in other states, though the ratio can vary. Rhode Island, for example, has a 4-to-1 cap.

While this makes insurance for the elderly more affordable, it also raises the cost of insurance for young adults.

For example, online health insurance broker E-HealthInsurance.com shows that a 27-year-old living in California – which does not have a community rating system – can get coverage for about $50 a month, with a $2,500 deductible and 20 percent coinsurance. The least expensive option for that same 27-year-old in Massachusetts is $282 per month with a $2,000 deductible, no coinsurance, and copays ranging from $25 to $40 for office visits.

Why young Americans end up overpaying

The problem for young adults is that all insurance is lumped together when, in fact, it could fit into three general categories, Professor Schlaff says: coverage for catastrophic events, preventive services, and chronic or recurring diseases.

This third, "big middle ground" tends to be the most expensive and is often the least utilized by many young Americans, he says.

Still, Schlaff insists the answer is not to skip insurance.

Instead, reforms should take into account young Americans' income and age to determine an affordable rate. The goal is to address the Invincibles' tendency to forgo preventive care and seek medical attention only as a last resort – when treatments tend to be more expensive.

Ashleigh Boyer entered nursing school because she had seen her father battle with health issues. But when she started feeling unwell herself, she didn't go to the doctor. A few days later – when the pain increased – Ms. Boyer finally went to her school's health services office.

"The nurse asked what it would take for me to go to the E.R., and I told her the pain would have to be so bad I pretty much couldn't get out of bed or was practically dying," says Boyer, who doesn't have health insurance beyond the services her university provides.

Though Boyer did not end up needing a costly treatment, her story highlights why health professionals want to get young adults in the system. Says Professor Lischko: "You might not be the user this year, but you might be next year. To have that protection, you have to pay."