Income divide separates young Americans on Obamacare

The rollout of Obamacare has led to a major drop in the uninsured rate among young adults, but the wealthier among that group saw the biggest decline first, according to a new study.

The report, released Monday in the journal Health Affairs, also underscores that young adults remain more likely to lack health coverage than the general population, even several years into the Affordable Care Act.

"They've always had this incredibly high rate of uninsurance," said Stacey McMorrow, an Urban Institute researcher and co-author of the report.

But the rate has plummeted in recent years.

People speak with an agent as they discuss plans available from the Affordable Care Act in the Mall of the Americas in Miami.
Getty Images
People speak with an agent as they discuss plans available from the Affordable Care Act in the Mall of the Americas in Miami.

In 2009, the year before the Affordable Care Act was passed into law, the uninsured rate among adults age 19 to 25 stood at 30 percent.

By the second quarter of 2014, after open enrollment closed for the first year of Obamacare private insurance plans, the uninsured rate among that age group was 19 percent. Among the overall population, the uninsured rate stood at about 12.3 percent in early 2015.

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The sharp decline in uninsured rates among young adults happened at different times depending on their income levels, according to the study.

From 2010 to 2013, young adults with higher incomes saw a disproportionate decrease in their uninsured rates, the result of an Obamacare provision that allows people under age 26 to stay on their parents' health plans.

The uninsurance rate among that income group, who earn more than four times the poverty level, fell from 15.7 percent to just 6.1 percent during that three-year time frame, according to the report. Young adults who earned between 139 percent and 400 percent of the poverty level saw their uninsured rate drop from 37 percent to 26.4 percent.

But young adults with low incomes, who earn 138 percent or less of the poverty level, saw no significant reduction in uninsurance rates in the first few years after that rule took effect.

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In 2014, however, young adults with either low or moderate incomes experienced significant reductions in their uninsured rate, the result of two other major provisions. Those provisions were the expansion of the Medicaid program to include more people, and the launch of government-run insurance exchanges selling subsidized health plans that went into effect that year, the study found.

The drop in the uninsured rates of that age group was seen to a greater extent in states that agreed to expand their Medicaid programs to include most poor adults, as opposed to non-expansion states.

Low-income young adults saw their uninsured rate drop from 39.6 percent to 30.7 percent from 2013 to early 2014, the report found. And moderate-income young adults saw their uninsured rate fall from 26.4 percent to 19.6 percent during the same period.

But higher-income young adults did not see further declines in their uninsurance rate after those two provisions took full effect, the study found.

Obamacare check up
Obamacare check up   

McMorrow said the disparities between the income groups were not surprising.

"One would think that the low-income folks are much less likely to have parents with access to private health plans" that they could stay on until age 26, she said.

On the other hand, higher-income young adults would not be eligible for Medicaid or subsidies on Obamacare private insurance exchanges, because they earn too much to qualify for either program.

Looking ahead, she noted that about 400,000 more people between ages 18 and 25 bought Obamacare plans in 2015 than the prior year, but it is not known how many of them were previously uninsured.

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She added that about 50 percent of the remaining uninsured young adults have incomes below 138 percent of the poverty level, which would make them eligible for Medicaid in states that have expanded their programs. But nearly 60 percent of the uninsured people in that age group live in one of the 22 states that have not yet expanded their Medicaid programs.

If more states expand Medicaid, that could lead to further reductions in the uninsured rate for young adults.

Another factor that could drive down that rate is the Obamacare penalty for failing to have health coverage. That penalty, which is the higher of $325 or 2 percent of taxable household income this year, rises to $695 per adult, or 2.5 percent of household income, in 2016.

"As the mandate becomes more binding and more expensive, you'd expect that to have some effect," McMorrow said.