Uninsured Young People Options

September 28, 2005
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GRAND RAPIDS — There are almost 50 million Americans between the ages of 18 and 30, according to the 2004 census. More than a quarter of them do not have any health insurance.

The vast majority of young Americans who do have health coverage take part in an employer-sponsored plan. Less than 5 percent pay for their own “direct purchase” coverage. As the price for health insurance goes up, fewer young people buy this type of insurance. As a result, the ranks of the uninsured continue to swell.

But why? Is health insurance really too expensive for young people to afford? Companies that cannot afford to cover their employees’ health benefits — but want to safeguard their employees’ health — might at least be able to point them in the right direction.

A recent study by the Kaiser Family Foundation found that the average annual cost of individual coverage under an employer-sponsored group health plan is $4,024. The employee typically pays 16 percent of that, or $643.84. That’s around $50 per month. Over 30 million of the country’s 18- to- 30-year-olds are willing and able to pay that premium for “traditional” coverage, which typically has a low deductible and provides prescription drug coverage.

But many young people work in jobs that do not offer health insurance. The Kaiser study found that the number of companies that offer health benefits is shrinking, with the primary reason being that companies simply cannot afford the premium increases. Over one third of companies now offer no health insurance. Among companies that employ minimum-wage workers, the percentage is even higher.

If an individual was entirely responsible for his or her own health insurance, the monthly amount would be $335.33, using the Kaiser survey average. And that assumes comparable coverage at comparable pricing, which is likely not the case, as most group rates include some level of volume discount. Individual buyers are bound to pay more.

There are options available for the budget-minded young person who wants to find affordable direct purchase health coverage. Finding the right coverage can be tricky. And in most cases, the deductibles are high ($1,000 or more), the coverage is limited and there may be eligibility restrictions.

Blue Cross Blue Shield of Michigan offers a plan called Young Adult Blue. This high-deductible plan is only available to Michigan residents (at least six months each year) between the ages of 19 and 30 who are not eligible for any group coverage and cannot be claimed as a dependent on another individual’s tax returns. In addition to the higher deductible ($1,500), coverage is lower than the 80- to 100-percent coverage offered by many employer-sponsored plans. Because of those limitations, BCBSM is able to offer a monthly premium of $47 for traditional coverage or $41.02 for preferred-provider organization (PPO) coverage.

“That’s priced at a very attractive price point, but it’s more of a catastrophic coverage,” said Teresa Bueche, director of customer service for BCBSM’s West Michigan operations. “It doesn’t offer office visits, but it does pick up if there are major services that need to occur: X-rays or labs or hospitalization.”

Bueche said that the plan is designed to act as a safety net of sorts — a plan for people who don’t use much in the way of regular medical services, but desire protection from incurring major medical expenses in the event of an accident or major illness. For example, the plan does not offer prescription coverage.

She said that BCBSM does offer other plans that accommodate individuals who do not qualify for the Young Adult Blue coverage, though the prices are higher, ranging from around $200 to $500 per month. Bueche said that these plans offer lower deductible options, but are still limited compared to group plans.

Direct purchase shoppers will find more choices with Priority Health and Grand Valley Health Plan, the two largest health benefits providers in West Michigan according to the ranking in the Business Journal’s 2004 Book of Lists. Neither offers an age-specific plan akin to BCBSM’s, but both offer a variety of direct purchase options. These range from basic, high-deductible plans to the type of coverage offered by many group plans, but without the volume discounts. Here the limitation is not the type of coverage available to the individual, but rather the premium the individual is willing to pay.

“We offer so many things now … You really have to be flexible to stay competitive,” said GVHP spokesman Michael Zalewski.

One of the options many benefits providers are adding to their menu is the Health Savings Account (HSA). Thanks to the 2004 federal legislation that led to the creation of HSAs, the field of lower-cost health coverage broadened. HSAs combine a high-deductible health plan with a financial instrument that allows participants to pay for their approved health-related expenses with pre-tax dollars. Unlike the past pairing of a traditional health plan and a flexible spending account (FSA), HSA participants can “roll over” their unused funds each year. These funds, in effect, become a de facto Individual Retirement Account (IRA).

But, as the Kaiser Family Foundation study showed, many of America’s uninsured are worrying less about their retirements and more about things like gasoline, rent and groceries.

For those who do decide to invest in direct purchase coverage, the process of finding the right plan can be daunting. Some purchasers go directly to the insurer for service (such as Young Adult Blue enrollees), whereas others employ the services of a health insurance broker. Like independent insurance agents who deal in auto, home and business insurance, health insurance brokers are able to “shop around” among plans from a number of providers. These brokers charge a fee for their services, but are sometimes able to find coverage deals that an individual consumer might not be able to easily access.

The National Association of Health Underwriters is a trade group representing these brokers. The organization’s Web site, www.nahu.org, offers a searchable database of NAHU member brokers. There are many in the Grand Rapids area from which to choose.

Another online option is to use a clearinghouse service such as eHealthInsurance.com or DigitalInsurance.com. These Web services allow the consumer to compare premiums and coverage without the assistance of a broker. eHealthInsurance.com, for example, was able to find coverage for a 28-year-old male applicant for as little as $23.80 per month.

Such a small premium will not buy the kind of coverage enjoyed by many Americans who count company-sponsored health insurance among their job benefits. But employers with uninsured workers might want to direct them to one of these resources It may help young workers avoid the No. 1 cause of personal bankruptcy in the country: uncovered medical bills from a serious illness or injury.    

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