Update: June 27, 2017
Facing opposition from within their own party, Republican leaders postponed a vote on the Better Care Reconciliation Act (BCRA), the GOP repeal-and-replace bill, until after the July 4 recess. Senate leadership will work to gather support and votes for the bill when Congress reconvenes after the holiday. Considering that both moderates and conservatives have expressed concerns about the bill, they will have their work cut out for them and analysts expect there may be some concessions made.
One aspect of the bill that is unlikely to change, however, is its focus on young people. Like the House version before it, the BCRA would allow insurers to charge older enrollees more than younger enrollees. Bill supporters contend that lower premiums will incentivize younger, healthier individuals, or "young invincibles," to sign up for insurance in greater numbers than ever before. This, backers say, will make risk pools healthier and help drive down premiums.
While it is too early to predict with certainty if this key demographic would embrace the incentives dangled before them, winning over this market – which may ultimately mean the difference between a profitable and non-profitable risk pool – should be a primary goal for payers in this next phase of health reform.
The question is, how do payers “win” with young invincibles? The answer lies in understanding both near-term reform impact and the longer-term needs of this unique demographic.
How new reform aims to attract millennials
The ACA’s individual mandate, in conjunction with other ACA measures, seems to have increased enrollment among young adults. The uninsured rate for people age 26 to 34 years dropped from 23.5 percent in 2013 to 16.3 percent in 2015, according to the US Census Bureau.
Now, supporters of the proposed bill say key elements should motivate young invincibles to enroll in even higher numbers. Specifically, they point to these provisions:
- Premium subsidies for most young adults will be higher than they were under ACA, due to a change in how subsidies are calculated
- Relaxations in age-banding will expand insurers’ ability to charge younger adults lower premiums than older adults enrolled in the same plan
- Changes in actuarial value requirements would allow insurers to offer “skinnier” lower-cost plans that should appeal to younger individuals, who typically do not need as much coverage
Key considerations for payers
The young invincibles market won’t grow overnight.
The first thing payers need to understand about BCRA and young invincibles is that this market will not grow right away. If BCRA is passed in its current form – or anything close to its current form – enrollment of younger individuals may actually decrease in the near term. This is due to several factors, including:
- The ACA’s individual mandate will be repealed immediately, but the BCRA's "lock-out" provision won't take effect until 2020. This provision would require insurers in the individual market to impose a six-month waiting period on individuals who have been without coverage for at least 63 days over the previous year. The hope being that this disincentive will eliminate the issue of people waiting to enroll until they get sick.
- The changes in premium subsidies and actuarial value requirements that favor younger individuals do not come into effect until 2020.
Without a “carrot” enticing them or as stern of a “stick” requiring them, young invincibles are more likely than other age groups to drop their coverage between 2018 and 2020. Consequently, insurers that plan to stay in the individual market should formulate contingencies for this near-term worsening of the risk pool.
The size of the segment will vary by market
The second thing to understand is that the size of the young invincibles segment will vary significantly by market. Obviously, states with a larger population of younger individuals (particularly uninsured young adults) stand to see greater increases in enrollment. However, certain geographies can expect even higher enrollments, due to (proportionally) more generous subsidies for young adults in those areas.
ACA subsides were income-based. In contrast, BCRA subsidies are age-based and set at flat rates. The subsidies do not vary by region or cost of plan, despite the fact that enrollees’ costs vary significantly by geography. Therefore, in areas where insurance is cheaper, young invincibles are likely to receive (proportionally) greater subsidies than under the ACA. Consequently, these areas could see higher enrollment rates among young invincibles.
More than just low prices will be needed to attract young invincibles into the health insurance market. Payers and other healthcare organizations will need to find positive sources of value to entice this demographic.
Research suggests that millennials are more likely to see healthcare as a shoppable service, and they are more likely than older generations to expect a personalized experience. Significantly, they also are more likely than older generations to see value in new healthcare products and services. And that means they may be receptive to targeted products and offerings. Payers looking to court millennials should focus on offerings centered on the following principles:
Convenience. Young invincibles want their encounters with the healthcare system to fit neatly into their lives, just as their interactions with other consumer sectors (retail, entertainment, transportation) do today. Telemedicine, retail health, and fast-track appointments are likely to appeal to young invincibles.
Well care, not sick care. This demographic is more inclined to see health services as a positive contributor to their lives, rather than a service utilized only during crisis. In particular, young invincibles may look for access to wellness centers, fitness classes, and alternative medicine providers.
Guidance. Healthcare is often confusing and difficult to navigate. Young invincibles want direction toward the right decisions. Financial advisory services and personal navigators are possible benefits that can help meet this need.
Playing the long game with millennials
Given their role in defining the risk profile of commercial risk pools, young invincibles are becoming a keystone demographic for health plans. Services that fulfill the specific needs and preferences of these individuals paired with tailored plan offerings would go a long way in attracting this healthier demographic and creating a sustainable individual insurance market.
Todd Van Tol Senior Vice President, Health Care Value, BCBSM
John Rudoy, PhD Director, Marsh & McLennan Advantage, Healthcare