Health Reform to Cover Most Young Adults by 2014

Oct. 10, 2010— -- More than 12 million of the nation's 15 million uninsured young adults ages 19 to 29 may be able to get health insurance in 2014 as a result of the healthcare reform law, according to a report released Friday by the Commonwealth Fund.

"By providing multiple insurance options for young adults at key life transition points, including graduation from high school and college, the law will significantly reduce both the short- and long-term gaps in health insurance that have historically plagued this age group at all income levels," wrote Sara Collins and Jennifer Nicholson, both of the Commonwealth Fund.

The number of uninsured young adults rose from 13.7 million in 2008 to 14.8 million in 2009. In addition, 5 million insured 20-somethings have very high out-of-pocket costs, leaving them effectively underinsured, the authors noted.

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Citing the Commonwealth Fund Survey of Young Adults, Collins and Nicholson noted two key points at which young adults lose coverage: when they turn 19 -- aging out of dependent coverage as a high school student or under Medicaid or the Children's Health Insurance Program (CHIP) -- and when they graduate from college.

The authors listed several provisions in the Affordable Care Act that will increase the number of young adults with health insurance and when each provision takes effect:

Permitting young adults to remain on parents' health plans up to age 26 (2010)

Instituting new insurance market regulations, including a ban on lifetime limits (2010)

Offering new preexisting condition insurance plans (2010)

Significantly expanding Medicaid eligibility to cover all adults with incomes below 133 percent of the federal poverty level (2014)

Creating new state health insurance exchanges with subsidized private insurance for people with low and moderate incomes up to 400 percent of poverty (2014)

Imposing shared responsibility payments for large employers that do not offer coverage or offer poor coverage (2014)

Of the 14.8 million young adults who were uninsured in 2010, up to 12.1 million could gain subsidized coverage once all the law's provisions go into effect in 2014, the researchers wrote.

The majority of the increase is expected to come through the Medicaid expansion; as many as 7.2 million young adults in families earning less than 133 percent of poverty could gain coverage under that program.

Another 4.9 million young adults earning less than 400 percent of the poverty level could gain subsidized coverage through the insurance exchanges, the authors estimated.

In addition to those gains, another 1 million young adults with incomes over 400 percent of poverty are expected to join their parents' policies over the next 10 years.

Of those remaining uninsured, about 1.8 million are undocumented immigrants and would not be eligible for Medicaid or coverage through the insurance exchanges.

Young adults will play an important role in creating broad and diverse risk pools for private insurers, because they are generally healthier than older adults, Collins and Nicholson wrote. "Indeed, the Congressional Budget Office estimates that the influx of young and healthy people into the exchanges and individual markets will lower premiums by 7 percent to 10 percent."

One thing that may incentivize young adults to enroll is the individual mandate. Beginning in 2014, all U.S. citizens and legal residents will be required to maintain minimum essential health insurance or pay a penalty. The penalty will start at $95 or 1 percent of income above a certain threshold, whichever is greater; and rise each year to a maximum in 2016 of 2.5 percent or $2,085 per family.

The experience of Massachusetts, which instituted an individual mandate in 2007, suggests that young adults will likely comply with the requirement to have health insurance, the authors noted.

A study of the effects of the Massachusetts law found that the uninsured rate among young adults ages 19 to 26 dropped by more than half post-reform, falling from 21.1 percent in 2005-2006 to 8.2 percent in 2007-2008.