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Published on : January 15, 2014

Millennials and Healthcare Reform

Millennials and Healthcare Reform

Whether you call it Obamacare or the Affordable Care Act (ACA), one fact holds true:  young Americans are slow to warm to the idea of purchasing individual major medical coverage in 2014. According to a recent Harvard Public Opinion Project poll, less than one quarter of young people ages 18 to 29, otherwise known as Millennials, say they will definitely or probably enroll in insurance through an exchange.  Of those waiving exchange-based coverage, data shows cost to be a major inhibiting factor.The issue isn’t whether Millennials need health coverage or not.  The issue is affordability, even if they are eligible for a premium subsidy to help them purchase a plan. With open enrollment ending in just a few short months, they have very little time to find an alternative to going without health insurance.

The ACA mandates that exchange plans include Essential Health Benefits, or EHBs, that many young people may not consider valuable at this point in their lives.  For many in this group of young, healthy Americans, preventive care, maternity and even prescription drug coverage may not be a high priority.  Exchange plan premiums tend to be more expensive due to the cost of EHBs.The penalty for not purchasing coverage is not a driving factor in the purchase decision for this purchasing group, particularly in 2014 when the shared tax penalty is relatively small. According to the National Center for Public Policy Research, nearly 2.9 million of the 4.3 million Millennials studied will be better off financially if they forgo exchange-based coverage and elect to pay the shared tax penalty.  However, this assumes the uninsured Millennial remains healthy.  This is a gamble that could be financially devastating should an accident or major illness occur. The message from Millennials is loud and clear:  they need an affordable alternative to exchange-based or employer sponsored health insurance coverage, or risk going uninsured.

One alternative is short-term medical insurance, or STM.  STM plans may be purchased for periods of 30 to 364 days in many states.  These plans are designed to bridge a gap in major medical coverage. Millennials could find STM to be a more affordable option for the short term.STM policies may offer premium savings in many instances when compared to an exchange-based plan.  STM coverage is generally less expensive for several reasons. First, the product is usually medically underwritten and not all applicants will qualify for coverage.  Those that do qualify will not have coverage for pre-existing conditions as compared to an Affordable Care Act (ACA)-compliant plan. Generally,STM plans exclude diabetics, cancer survivors and people with major pre-existing conditions from being issued a policy. Second, STM policies do not cover all Essential Health Benefits (EHBs), as required by the ACA.ACA-required benefits such as maternity, mental illness and substance abuse and preventive care are often excluded from coverage. Finally, STM policies are not meant to be a permanent solution for health insurance. Unlike an ACA-compliant plan, STM policies are not renewable.Once the coverage period ends the consumer must reapply and be re-underwritten for a new policy. 

STM coverage can be tailored to include coverage that Millennials find valuable, such as accident medical expense coverage and may include outpatient physician office copays. Many young people with active lifestyles are more concerned about the impact of an accident than they are an illness. Accident Medical Expense policies, sometimes called AME coverage, is a popular add-on to STM plans to provide for out-of-pocket expenses associated with accidents.

Affordability is not the only concern in reaching this tech savvy generation.  Millennials expect nearly instant gratification in everything from social media to grocery shopping.  Based on the admittedly clumsy rollout of both federal and state run exchange websites, Millennials are not receiving the instant gratification they expect.  STM policies can be purchased directly online, often without speaking to an agent.  Access to an agent is still available for those that want to speak to a live person; and they can still enroll online quickly.Technological capabilities allow for enrollment on a PC, tablet or smartphone. Having access to multiple enrollment options allows consumers to enroll in the manner that is most convenient and comfortable for them.

With open enrollment ending for most individual health plans on March 31, 2014, expect to find more consumers with a need to bridge the gap until the next open enrollment period. It is expected that the Department of Health and Human Services (HHS), along with many states and special interest groups, will ramp up their awareness campaigns toward the end of the open enrollment period.  Despite this, it is still likely that some consumers will not enroll in a timely manner and be locked out of coverage until 2015. For these consumers, STM will potentially be their only opportunity for coverage if they do not have a qualifying event in 2014.

It is important when working with any potential customer on STM to note that the product is not right for everyone. Since it is not an ACA-compliant plan, those who purchase an STM plan will still be impacted by the shared-tax penalty and will not have many of the protections offered by ACA-compliant plans. With any STM plan, it is good to remind your client that this is not intended to be a permanent solution, and that the plan is designed to bridge the gap until the next open enrollment period.

About the Author:

Dave Keller

Dave Keller is Chief Marketing and Sales Officer of of IHC Health Solutions, a member of the IHC Group. He has worked in the insurance industry for over 25 years, serving as vice president of marketing at Assurant Health prior to joining IHC Health Solutions. Dave obtained his bachelor’s degree from Denison University.