As Deadline Nears, Millennials Weigh Paying Penalty Over Buying Insurance

By ACSH Staff — Jan 30, 2016
While many Americans are scrambling to make last-minute changes to their 2016 healthcare plans by Sunday's deadline, others are considering dropping their coverage altogether, especially millennials -- young adults, who tend to be relatively healthy. Many may opt to pay a penalty instead of buying insurance they won't use.
shutterstock_280947320 Healthcare Worker via Shutterstock

The Affordable Care Act deadline is quickly approaching with the 2016 open enrollment period ending Sunday, Jan. 31 While some are scrambling to make last-minute changes to their healthcare plans, others are considering abandoning their coverage altogether. Since going without health insurance is dangerous and risky, why take the gamble? The reason, of course, is cost.

Many young adults, or "millennials," believe they are healthy enough that they do not need insurance, or that the likelihood of using it is small. Moreover, the rising costs of healthcare are daunting for this already cashed-strapped cohort, roughly defined as those between 18 and 34 years old. This group is made up of over 83 million people, which is more than one quarter of the U.S. population.

According to its most recent poll, the non-partisan Kaiser Foundation states that medical costs for a millennial average $1,834 annually. But data on these individuals is pooled irrespective of health status, likely inflating the average annual cost for a healthy individual. As it shakes out, the younger, healthier folks often opt to pay a government fine rather than enroll in a plan they are unlikely to need. Paradoxically, they can conceivably come out ahead financially by ignoring the law.

Take the case of Christina Loucks of Franklin, Tennessee, outside Nashville. In her 30s, she says she'd rather pay the $695 tax, because the insurance plans she's looked at would cost her upwards of $1,200 for the year. And then there's 20-something Christopher Rael of Long Beach, Calif., who hopes that his meager income and college student status will qualify him for an even lower penalty of $150 via his university's version of Medicaid.

It's worth pointing out that, ironically, the penalty for not enrolling in a plan was originally designed to encourage the uninsured to buy into the Affordable Care Act, bringing more consumers into the marketplace. But with a penalty that's lower than the cost of insurance, for some healthy people, that fee is more attractive than the insurance premium, so it's having the opposite effect.

The Obama administration claims success with the ACA, since the percentage of those millennials uninsured has declined since the healthcare law first took effect: 20.3 percent of young people are without coverage, down from 33 percent in 1997. But a significant number -- 31 percent -- say they do not plan on getting coverage for 2016. In its latest Healthcare Tracking Poll, the Kaiser Foundation found that the rate of those still obtaining health insurance has leveled off and survey results also reflect the public s view towards the Affordable Care Act. Just 41 percent of Americans between the ages of 18 and 64 years old have favorable opinions about the law, while 44 percent have an unfavorable view.

Young people need to be a profit center to offset the costs of those who need it and have expensive health issues. The number of millennials who will actually opt out is unknown, but from looking at how the pricing stacks up, and the weight of the economy affecting low-wage earners, we may find a significant share choosing an optional penalty over mandatory protection they don't need.

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