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Health Reform Opens Doors for Young Adults

Health reform’s impact on younger adults has received a lot of attention recently — and for good reasons.  About 29 percent of adults in their 20s are uninsured (almost double the rate of the overall population), and the Affordable Care Act (ACA) will greatly improve their access to affordable coverage.

But some of the discussion has made it seem — incorrectly — like the ACA hurts younger adults.  An article by two actuaries from the consulting firm Oliver Wyman is the latest fuel for ACA critics.  The actuaries focus on the fact that the ACA will cause average premiums in the individual insurance market to rise, in particular for some people in their 20s.

Nobody likes a premium increase.  But it’s important to look at why rates are expected to rise in the individual market.  A major reason is that plans in this market today often have glaring gaps — such as a lack of maternity coverage and no or very limited access to prescription drugs and mental health care.  Starting in 2014, these plans must cover a basic set of benefits and meet other minimum standards.  In addition, as the Congressional Budget Office (CBO) pointed out, people are expected to choose to buy more comprehensive coverage after health reform because new federal tax credits will help them pay their premiums.

The ACA also places new limits on how much more insurers can charge older people compared to younger people, thus increasing to some extent the average premiums that younger, healthier people will pay in the individual market compared to today.  But it’s hard to argue that the ACA is a big hit on twentysomethings when so many of them will reap substantial benefits from the assistance the law provides to help pay premiums.

Most of the nation’s 11.2 million uninsured adults ages 21 to 29 have incomes below 200 percent of the federal poverty level (about $22,000 for an individual), according to a CBPP analysis of Census Bureau data.  They will therefore likely be eligible in 2014 for either Medicaid or the most generous tax credits to help with premium costs in the individual market.  More than half of the nearly 4 million twentysomethings who already buy coverage in the individual market also have incomes under 200 percent of the poverty level and will likely qualify for Medicaid or significant premium credits.

For example, someone earning $16,500 per year would pay no more than about $55 per month toward premiums for a basic plan because of the ACA premium credits.  He or she may well pay more in today’s individual market for a far less comprehensive plan than will be available in 2014.  And some young people are shut out of the individual insurance market today — or must pay far more than the cheapest rates quoted for young, healthy people — because they have pre-existing health conditions.  So they, too, will get a much better deal under health reform.

There’s far more to say about this issue, so we’ll return to it in future posts.