Health Coverage Expansions Take Aim at Young Adults

Health insurer WellPoint calls them “the young invincibles,” the workers between ages 19 and 29 in California who don’t have health insurance and believe they don’t need it.

From a business standpoint, young adults represent an important and largely untapped market for insurers. About half of high school graduates who do not go to college, and almost 40% of college graduates, will be uninsured for some time during their first year after graduation, according to a study by the Commonwealth Fund.

Potential customers might be college students no longer covered under their parents’ policies, students just graduated from high school or college and looking for their first jobs, or people starting their own businesses. “A lot of young people are turning into entrepreneurs and looking for coverage,” said Nick Garcia, a spokesman for WellPoint, the parent company of Blue Cross of California, which provides health insurance for about seven million people in the state.

The number of Americans ages 19 to 29 who were uninsured was 13.3 million in 2005, an increase of 400,000 from the prior year, according to the latest available data compiled by Commonwealth. This age group is 17% of the population under age 65, but it accounts for 30% of all uninsured people.

But the problem is that many young workers feel they don’t have the disposable income to afford health insurance, and they “may think they will not get sick or not get hurt, and if they do, someone else will pick up the pieces,” said Ed Kaplan, national health practice leader at the Segal Co., benefits consulting firm. “You need to make insurance very affordable for them.”

However, some advocates see things differently.

Young workers often are in low-paid jobs without insurance coverage, and blaming them for being uninsured is “blaming the victim,” said Anthony Wright, executive director of Health Access, a statewide consumer and advocacy coalition. When coverage is offered at work, these younger workers are likely to enroll at the same rate as other groups, he said.

Specific statewide figures for California show how the problem of people lacking coverage is concentrated among younger age groups.

Overall, 21% of Californians lacked health insurance in 2005, according to an analysis of U.S. Census figures by the California HealthCare Foundation and the Employee Benefits Research Institute. The rate was 31.8% for those ages 19 and 20; and the highest figure was 39.9%, for those ages 21 to 24. The figure then dipped to 31% for Californians ages 25 to 34.

There is some help in the state for full-time college students. California and five other states — Idaho, Illinois, Massachusetts, Montana and New Jersey — require full-time undergraduate college students to have health insurance coverage as a condition of enrollment. But when they graduate, or leave college without graduating, they typically join the ranks of the uninsured. Most insurance policies end at graduation or age 22.

Gov. Arnold Schwarzenegger (R) vetoed a bill in 2005 that would have required health insurance policies to cover dependent children up to age 26. It’s not yet clear whether this idea could resurface again as part of a compromise health reform package between the governor and Democratic legislative leaders as they debate strategies to overhaul the state’s health care system.

What the insurance industry thinks is a good idea for bringing young adults under the health care coverage umbrella clashes directly with the plans being promoted by Schwarzenegger, as well as legislation (AB 8) by Assembly Speaker Fabian Núñez (D-Los Angeles) and Senate President Pro Tempore Don Perata (D-Oakland).

WellPoint, an important vendor in the individual insurance market in California, thinks it has the ideal product for young uninsured workers: low-premium policies called Tonik that carry high deductibles and cut out benefits, such as maternity care, included in conventional policies.

Garcia won’t discuss sales figures for Tonik policies but says, “It has been a very successful product for us.”

But supporters of the plans advanced by the governor and Democratic leaders believe that effective coverage demands a basic package of key benefits and that lesser policies represent ineffectual, stripped-down coverage.

Limited benefit policies “create uncertainty for the individual in terms of the coverage they are getting … and individuals are not sure what is going to be there when they need to get care,” said Peter Harbage, a consultant in Sacramento with the New America Foundation, which played a key role in helping the governor design his plan. Because of the limitations in the Tonik-type plans, someone who “thinks he is fully covered is being misled,” said Harbage. “In health reform, the goal is to get comprehensive coverage.”

Provisions included in the Democrats’ plan would bar WellPoint from selling the Tonik policies, according to Garcia.

“This would drive up premiums (in the individual market) and reduce the kind of consumer choice we have been offering,” Garcia said. “The governor’s plan has not been turned into formal legislation, but he also believes in a standardized package.”

Critics of the governor’s and Democratic leaders’ proposals argue that any standard package, whether proposed by the governor or the Democrats, certainly would cost more than the policies now being sold by WellPoint and others.

Another major point of contention is that both the governor and the Democrats favor guaranteed issue, a concept that would require insurers to sell policies to all customers regardless of their pre-existing health problems.

From the insurers’ viewpoint, this would encourage people to delay buying coverage until they have health problems, and their entry into the insurance pool would drive up costs. Blue Cross says this could force price hikes for a million of its customers.

Blue Cross has mounted an aggressive $2 million advertising campaign against the concept of guaranteed issue, which would require insurers to sell policies to all customers regardless of their pre-existing health problems.

In addition, the governor’s plan calls for all Californians to buy health insurance or face financial penalties. That means the uninsured young adults ages 19 to 29 would be pushed to buy a health insurance policy, regardless of whether they feel they need one. But if they are reluctant to enter the market now, it’s not clear how much more enthusiastic they would be about a mandate. Critics of the proposal argue that auto insurance is mandatory but that a surprising number of people still are driving around without having coverage.

The insurance industry is apprehensive about what reforms might do to the individual market in California, where 2.6 million people get their policies. “Our first message is: do no harm,” said Chris Ohman, president of the California Association of Health Plans. “It’s important to allow rates to be affordable, to be sure that those who have coverage now can continue to get it.”