Young adults: Friend or foe to insurers?

Will they or won't they? Industry analysts are attempting to answer the question of whether young adults will actually buy coverage available through the new health insurance exchanges that open in October.

And study after study reaches different conclusions. The most recent of which, a survey of employer-based coverage by benefits administrator ADP, finds young adults won't jump at the opportunity to purchase their own coverage.

That's the popular line of thinking--that young adults, or "young invincibles" as they're often called, believe they won't suffer injuries or major illnesses requiring health insurance so they forgo coverage altogether.

If that theory holds true in the marketplace come this fall, insurers will be in quite a quandary. Young adults are often healthier than their older counterparts, so they help offset high medical costs insurers incur by covering older consumers. If young consumers don't sign up--particularly if they face a so-called "rate shock" from rising premiums--insurers will be left with older, sicker consumers and hefty price tags akin to high-risk pools that are often unaffordable for a large portion of the uninsured population.

But then there are studies like the one last month from Kaiser Family Foundation that concluded young adults do indeed want and value health insurance, and they would even buy coverage if they could afford it. About 77 percent of young adults aged 18 to 25 said having health insurance is "very important," and 66 percent said insurance is "something I need."

All this conjecturing is well and good for helping insurers, regulators and lawmakers plan for the future. But some data-driven studies also have clearly shown young adults are bringing their own medical costs for insurers to bear. For example, the reform law, which allows young adults to remain on their parents' coverage until they're 26, shifted $147 million in emergency room-related costs to insurers in only one year. And another study showed the young adult provision cost insurers an extra $2 million as these new members use more medical services than their peers.

Reporting on these back-and-forth conclusions from studies, polls and reports has my head spinning. Will young adults become insurers' friends or some of their worst enemies? It's obviously too soon to definitively reach an answer.

Like many other aspects of health reform, insurers should hope for the best while planning for the worst. Perhaps that includes doing some of their own marketing and outreach to this group of young consumers. Sure, they might not be likely to succumb to a major health illness like heart disease or cancer, but unfortunately, the reality of life means everyone, young and old alike, are subject to accidents and mishaps that often require healthcare. If insurers can appeal to the inherent risk involved in simply living, maybe they can help compel young adults, who are generally more willing to take such risks, recognize the value of health coverage.

And it also likely means insurers could adjust their business plans and finances to incorporate additional costs coming from any new and young members. Although their medical expenses may initially surge as young adults more frequently use healthcare, I suspect those costs will moderate over time, leading to a more seamless transition from their parents' health plans to their own coverage.

The young adult matriculation process into the health insurance system may not be simple or without challenges initially. But with an eye on the big picture, young adults will soon become a great friend to insurance companies. - Dina (@HealthPayer)

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