Obamacare Challenge: Getting Young Workers to Buy Insurance

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In health policy circles, they are called the young invincible – healthy adults under the age of 30 who don't feel they need to buy health insurance. Even when they're offered coverage at work, a new ADP study found only half of young adults opt to take their company plan, compared with 70 percent of workers over age 40.

"This has historically been the case that younger folks tend to want to go it alone, so to speak, at a much higher rate than older folks," said Tim Clifford, president of ADP Benefits & Talent Management Services.

Young adults make up a disproportionate share of the nation's 50 million uninsured. Getting them to sign up for insurance coverage will be a major focus of the government this fall during the roll-out of the Affordable Care Act, or ACA, also known as Obamacare.

It's also important for companies with 50 more full-time employees to offer their young adult workers coverage, and get them to sign up, or face potential penalties starting in 2014. That may mean a big shift in benefit plans for some employers.

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ADP Research Institute's new Annual Health Benefits Report found that younger workers are less likely to be offered benefits. This year, one in five full-time workers under 30 wasn't eligible for health insurance, compared with just 8.2 percent of workers in their fifties who were ineligible.

Some of those young workers may be finding coverage on their parents' insurance plans, says ADP's Tim Clifford. Under ACA, young adults under 26 can be claimed for dependent coverage. But many go without, because they can't afford it.

"It is the cost vs. income issue, which continues to exacerbate itself," Clifford said. "Their wages don't rise as fast as the health care premiums, so as a percentage of their income, it continues to exacerbate the issue."

Single workers who earn up to about $45,000 a year, or up to 400 percent of the Federal poverty level, will be eligible for tax subsidies to buy health insurance on the state and federal health exchanges, which are scheduled to begin operation for open enrollment season on October 1.

The Obama administration has targeted enrolling at least 2.7 million young adults through the state and federal exchanges for coverage in 2014. But there's still a big question about whether young adults will enroll, or just opt to pay the penalty, which for the first year could be as little as $95.

"It's that age bracket that feels like they don't really need coverage, so they can get away with not paying that cost right now," said Kristie Arslan, president & CEO of the National Association of Self-Employed (NASE).

Arslan says her members will be buying their insurance on the exchanges for next year. She recently attended a White House briefing on ACA enrollment plans. She's worried, despite assurances from Washington, that too many young invincibles opt out of enrollment.

"If they don't get the ratio that they need in the state-based exchanges, it's going to be like high-risk pools," she said. "They're going to be very unaffordable, because you'll have all sick people and no healthy people."

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"A $95 penalty, which isn't even due this fall but at tax time—and it's kind of invisible at that point—is probably not enough to change behavior," said ADP's Tim Clifford.

Clifford says employers he's talked to still haven't gotten a handle on just how big a change they're in for this fall. They could see a big bump up in the insurance participation rate among young workers who haven't bought coverage in the past. Then again, young adult participation may buck the trends again.

"I think we have a potential disruptive population that's probably going to serve as a very interesting focus group," he said.