Under 26s & The ACA
The Patient Protection and Affordable Care Act (ACA), which was signed into law March 2010, is the most sweeping health care reform legislation since Medicare. However, unlike Medicare, the law directly affects every age group, not just older adults. Young adults under age 26 are going to see some big changes from the law.
Before the ACA, young Americans were much more likely to be uninsured than older age groups. According to a 2006 study, 31 percent of adults aged 19 to 29 lacked insurance compared to 17 percent of adults aged 30 to 64, meaning the uninsured rate was twice as high for young adults as it was for older Americans. [1] If those uninsured young adults did get sick or injured, they would still get treatment at an emergency room to stabilize their condition. However, any rehabilitation would not be covered, and the hospital would demand payment directly from the uninsured.
This may seem paradoxical since health insurers favor adults who are less likely to have health problems, and most young adults fit that bill. However, many younger Americans were not covered under their parents' insurance plans after age 19. At that age, they were just beginning their careers, meaning that they were less likely to work in jobs that offered health insurance and also tended to make less money than older Americans, making it more difficult to purchase coverage. [1] Many young adults were also unable to get coverage because of preexisting medical conditions [2].
How the ACA has affected the number of uninsured young adults
In 2011, the number of uninsured Americans dropped by 1.3 million from the previous year. The ACA attempts to address these issues by making coverage more affordable and accessible for young people. What caused this change? According to Kaiser Health News, "A major factor was an influx of newly insured young adults, many of whom benefitted from a provision in the 2010 health care law requiring insurers to let parents keep adult children on their plans up to age 26."
While young adults are still the least likely age group to be insured, "18-24 year olds were the only age group to experience a significant increase in the percentage with health insurance over the past year, from 70.7 percent in 2009 to 72.8 percent in 2010," according to the Census Bureau. "This is a two percentage point increase in the share of adults 18-24 with coverage and represents 500,000 more young adults with health insurance."
Covering young adults through their parents
An ACA provision mandates that health insurance plans offer complete coverage for children through age 26. [3] This allows young adults to be covered on their parents' health insurance plans through the undergraduate years of college and beyond, even if they are married or their employers offer health insurance. According to the Obama administration, 3.1 million young adults have already gained coverage through this provision.
Banning pre-existing condition exclusions
Another barrier to coverage for many young adults is the ability of insurance companies to exclude individuals with pre-existing conditions. In the past, a diagnosis of diabetes, asthma or any number of other conditions in childhood would doom a young adult to a life without health insurance because companies did not want to take on individuals with pre-existing conditions who would likely have high medical bills. In fact, a 2010 report concluded that 15.9 percent of young adults aged 18 to 24 and 21.3 percent of adults aged 25 to 34 had a preexisting condition that could result in denial of health care coverage. In 2014, health insurance companies will no longer be able to exclude individuals on the basis of a pre-existing condition. [4] This mandate will also apply to people who have previously applied for coverage and been rejected.
Controlling profits
In hopes of decreasing the amount that consumers pay for insurance, the ACA mandates that health care insurers spend no more than 80 percent of the premiums they receive directly on care. [5] The goal is to lower the amount of money that goes toward profits and administrative costs, rather than toward patient care. If health care insurers collect too much in premiums, they will have to refund the overage back to consumers. In 2012, those rebates totaled $1.1 billion, in addition to significant savings on premiums, according to a Kaiser Family Foundation report.
Creating a marketplace
The ACA will establish health care insurance exchanges, also known as marketplaces, where people can compare and purchase policies. These organized marketplaces can be accessed through healthcare.gov. The idea behind the exchanges is to create competition between insurance plans to reduce costs while making information about different offerings easily accessible for consumers.
Subsidizing insurance
In addition to making health insurance easier to buy, the government will offer tax credits to help keep costs for consumers down. Those who cannot receive insurance through their employers and make less than 400 percent of the Federal Poverty Level will receive tax credits to offset their insurance premiums so that no household pays more than a certain percentage (no more than 10 percent) of annual income on health insurance. This should provide direct benefits to young people, since most of the young uninsured fall into this income bracket [1].
Limited age rating bands
The ACA will also place a ban on steep disparities in healthcare costs based on age. Currently, it is not uncommon for older adults to pay five times as much for health insurance as young adults. The ACA will limit this disparity to a three to one ratio. [6] Debate about how this will impact young adults is raging — some say that this will raise the costs for young people, who will have to contribute to coverage of older people. Others say the subsidies on insurance will shield young adults from these costs while decreasing the costs for the older generation.
The individual mandate
Although it will become easier and less expensive to buy health coverage, the federal government will also make it harder to get out of buying insurance. In 2014, the federal government will mandate that every individual purchase health insurance, including young adults who previously chose not to get health insurance even though they could afford it. With some exceptions, those who decide not to purchase health insurance will be subject to an annual penalty tax, starting at $95 per adult or one percent of family income, whichever is greater. By 2016, the penalty will be $695 per adult or 2.5 percent of family income, whichever is greater.
If there wasn't a penalty, individuals could simply wait until they get sick to purchase health insurance, since insurers will no longer be able to deny them coverage if they are already sick. In that scenario, health care costs would skyrocket. In addition, the mandate helps to spread out the costs between the healthy and the unhealthy, and also may encourage preventative care to stop or mitigate health problems in the early stages.
Summary
The ACA provides many potential benefits for young adults, particularly those who seek to remain on the health insurance plan of their parents up to age 26. In addition, the ACA will certainly increase the access many young adults have to health insurance by eliminating the pre-existing condition exclusions and generally making health care less expensive for those who cannot purchase health insurance through an employer.
[1] http://kaiserfamilyfoundation.files.wordpress.com/2013/01/7785.pdf
[2] http://www.familiesusa.org/assets/pdfs/health-reform/pre-existing-conditions.pdf
[3] http://www.hhs.gov/healthcare/rights/youngadults/index.html
[4] http://www.hhs.gov/healthcare/facts/timeline/timeline-text.html
[5] https://www.healthcare.gov/how-does-the-health-care-law-protect-me/#part=10
[6] http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2013/rwjf404637/subassets/rwjf404637_1
Ryan Witt is a freelance writer covering all things St. Louis Cardinals. His work can be found on Examiner.com.
