Health insurance tough sell for young? Blame mom and dad
Getting young Americans to sign up for health insurance has been a big challenge for Affordable Care Act officials. A new report from payroll processor ADP finds that the nation’s largest companies also have had trouble persuading the majority of young employees to enroll for coverage.
“With a lot of organizations that we talk to, it’s still a question of the younger generation needing to become more aware,” said David Marini, a vice president and managing director with ADP. “As the penalties for not having insurance start to kick, there’s an expectation that they will take up more.”
ACA incentive to reject coverage
Between 2010 and 2014, the rate of full-time workers under 30 taking up employer health benefits fell 7.6 percent. Some of that decline may be because of a provision in the Affordable Care Act that lets parents keep adult children on their employer plans until age 26, even if those children are working and offered coverage elsewhere.
“People that are in the younger group are going onto their parents’ plans,” said Marini. This trend has resulted in a shift among older workers taking up more dependent-care coverage from their employers, he said.
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Since 2010 an estimated 3 million young people have gained coverage through their parents.
Smallest premium increase since ACA
For those without financial support from parents, affordability remains one of the biggest hurdles to enrolling for employer health benefits, said Jen Mishory, deputy director of the advocacy group Young Invincibles.
“From the data and polling we hear from young people, when they don’t have coverage, it’s often because of costs,” she said. “They don’t have access to something they think they can afford.”
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In 2014, premium costs at large firms rose an average of 1.7 percent, the smallest increase in four years. Since the start of ACA coverage requirements in 2010, the average monthly premium for employer-sponsored plans has risen 15 percent to $870 from $756 per month.
While employees may feel like they are being asked to shoulder more of the burden for their health-care costs, and a number of employers cite the ACA for coverage changes, ADP data showed large employers have cut their contribution levels by just 1 percent for individual plans over the last four years, and 1.5 percent for dependent coverage.
“The perception is different than the actual data,” said Ahu Yildirmaz, head of the ADP Research Institute. “When you look at the premium increases this year, you really see the increases leveling off.”
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Companies are holding down premium costs by shifting to higher deductible plans, which result in higher out-of-pocket costs. Those lower premium plans are increasingly attractive to healthy older and younger workers alike.
2016 could mark a shift
The tax penalty for not having insurance will rise sharply over the next two years, from a minimum of $95 for an individual or 1 percent of income this year, to at least $695, or up to 2.5 percent of income, by 2016.
“When the penalties start to get larger, that’s when you’re going to start to see movement happening,” said Marini.
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While large employers can’t force their young, healthy workers to take up coverage, starting in 2016 under ACA they can automatically enroll employees for health insurance.
Large company executives have found that automatic enrollment for savings benefits like 401(k) plans has resulted in higher participation rates, because fewer workers take the initiative to opt out.
—By CNBC’s Bertha Coombs.