Lost in transition: caught between their parents' health-care coverage and affording their own, young adults account for 30% of the nation's uninsured. Insurers are responding with affordable policies and education campaigns touting the necessity of health insurance.

Key Points

* Young adults between the ages of 19 and 29 account for 30% of the nation's uninsured, according to The Commonwealth Fund.

* Aging out of parents' health plans and working for low wages and in jobs that don't offer health benefits are among the reasons many young adults are uninsured.

* Health plans are working hard to dispel the myth among young adults that they are not in need of health insurance.

Many young Americans are taking a big gamble by going without health insurance. While young adults between the ages of 19 and 29 make up about 15% of the U.S. population, they account for 30% of the nation's uninsured, according to The Commonwealth Fund, a private foundation that supports independent research on health and social issues.

Mac from California knows the fear of not having health coverage. He's been uninsured for several years after being laid off from his job with a Washington, D.C., public-relations firm. For a time he played poker professionally to pay the bills, until he landed a position with a small California-based company. But because his employer doesn't offer health-coverage benefits, he remains uninsured. Mac said in an interview with Best's Review that it wasn't until his uninsured roommate broke his leg and faced tens of thousands of dollars in medical bills that he realized the need for health coverage.

Many in this age group are uninsured because they are in low-paying jobs that don't include health benefits. Others no longer qualify for coverage under a parent's plan once they reach a certain age, or graduate from college, or they don't know how to sign up for coverage, or they choose not to buy insurance because they don't think it's important.

But many health plans are hopeful the trend is beginning to turn. "I believe the younger generation of consumers will be the smartest health-insurance buyers we've ever seen in this country because they are into different types of plans, understand their coverage, and are beginning to buy their own coverage now," said Jeff Carpenter, product development, marketing manager for special products for Milwaukee-based Assurant Health.

Health plans are trying to change the misperception of many young consumers concerning health insurance by educating them about the importance of coverage and offering them affordable plans. In addition, many health insurers are catering to the computer-savvy generation by marketing and selling policies online.

'The Invincibles'

It's a common question among graduating college seniors to their parents: "Why do I need health insurance?" Because many young adults are dependents on their parents' policies until they reach age 19 or graduate college, health coverage for them until that point is generally of little concern. But once they graduate from school and enter the work force, the issue of health insurance takes on a whole new meaning.

While nearly nine out of 10 college and graduate students say they're concerned about going without health coverage after graduation, about one-third remain unsure as to whether or not they will obtain coverage after receiving their degree, according to the recent nationwide "Humana Survey of College Student Attitudes Toward Health Coverage" sponsored by Humana Inc. and conducted by Sigma: Research Management Group of Cincinnati.

Cost is one the largest barriers for young adults in seeking health coverage. In 2002, the average annum premium of policies in force for 20- to 24-year-olds was $1,038 for individuals and $2,283 for families, according to America's Health Insurance Plans. Slightly more than 50% of the Humana survey respondents said the primary reason for not planning to purchase health insurance is that they can't afford it.

In addition to cost, various career and lifestyle transitions drive some young adults to become uninsured. "The U.S. health-care system depends on employer-sponsored coverage to provide coverage to most of the non-Medicare people in the country, and young people go through transitions in eligibility for employer-sponsored coverage as they get older, change their dependent status and move between school and jobs," said Dr. Arthur Southam, senior vice president, product and market management for Kaiser Foundation Health Plan Inc. and Kaiser Foundation Hospitals. Young people also tend to have multiple job changes early in their careers, so each transition is an opportunity to lose coverage, he added.

In addition, many young adults feel immortal or invincible to serious illness or injury. "This is especially true for young males," said Southam. "Many don't have the need for routine health care, and they don't appreciate insurance as an important priority for themselves, so they choose to use their disposable income on other items." Instead, he said, many young adults cite paying rent, purchasing cars, seeking employment, traveling, finding an apartment and starting families as higher priorities than purchasing insurance.

The Bureau of Labor Statistics 2001 Consumer Expenditure Survey found that households headed by young people between the ages of 25 and 34 spend more than three times as much of their income on entertainment and dining out as on out-of-pocket healthcare expenses. For heads of households aged 18 to 24, the annual expenditure on entertainment and dining out is almost five times more than out-of-pocket spending on health care.

Despite young individuals' attitudes of invincibility, a growing number are faced with costly medical expenses each year. In 2001, more than 2.9 million individuals in the 20-to-24 age group suffered nonfatal injuries, according to The Centers for Disease Control. This group's leading causes of injuries include falls, motor vehicle accidents, overexertion and assault. In addition, many young adults are in need of mental health care. Few people make it through their 20s without experiencing depression or anxiety, when nearly one in three young adults have no health insurance and close to half of the uninsured 19- to 29-year-olds received no preventive care in the past year, according to an article by the American Medical Association. In addition, the Institute of Medicine estimates that 18,000 young adults die each year because they lack health insurance to cover their problems.

New Options

Health plans are reaching out to young adults to educate them about the importance and availability of affordable health coverage.

A study of various populations of uninsured with the ability, income and propensity to purchase insurance found those aged 19 to 29 were the largest sector to fit the category, said Steve Synott, general manager of individual services for Blue Cross of California. Cost, complexity of the product and behavioral barriers, such as young adults' tendency toward procrastination, are driving many not to seek coverage, he said.

"When young adults seek coverage, they want a level of choice and some benefits at first dollar," said Synott. For California Blues, the solution to helping young adults was the creation of its RightPlan PPO 40--a plan that offers low monthly premiums, no deductible, discounts offered on health and wellness products and services provided by independent vendors and practitioners, a $40 copay for office visits and three prescription drug benefit options. While RightPlan PPO 40 is open to individuals of all ages, Synott said an increasing number of young adults are now enrolled in the plan. More than 62% of purchasers of the product were previously uninsured, he added.

Louisville, Ky.-based Humana Inc. also is trying to combat the growing problem of the young uninsured. Under the company's HumanaOne plan--a comprehensive plan designed specifically for individuals and families who may not be insured through their employer--the company created two specific discount programs to assist the population. The HumanaOne College Graduate Health Plan is available for recent college or university graduates ages 18 to 25 and offers the same coverage and benefits as the HumanaOne plan but is available at up to 43% less than standard HumanaOne premium rotes for an initial period of coverage up to 185 days. Depending on geographic locale, a young adult could subscribe to the discount plan for as little as $50 a month; however, rates are slightly increased for young women, who tend to use more healthcare services, said Tom Stoiber, senior director of individual products. The HumanaOne Pre-Employment Health Plan benefits individuals who have started a new job but aren't yet eligible for employer-sponsored health coverage. The plan is somewhat similar to the graduate health plan, but is available for up to 31%, less than standard HumanaOne premium rates for a period of up to 185 days.

Other plans also are trying to extend coverage for young adults. Many plans offered by Excellus Blue Cross Blue Shield, Rochester region, for instance, cover dependents on parents' plans until age 23, or until age 26 if they are bona fide matriculated students. The company is trying to educate young consumers through marketing and its branding logo: "Vital. Valuable. Every day." "We're trying to get across to people that health insurance has value to them every day through discounts, memberships, etc.--not just for major surgeries or other costly health-care needs," said Todd Muscatello, regional vice president of sales in Rochester, N.Y "Young adults look at cost, their often small paychecks and believe they will live forever, and health insurance is something only their parents need." Excellus is targeting several products to the younger sector, including its Blue Choice 25--a low-premium HMO that Muscatello said is a good fit for individuals just out of college or entering the work force for the first time.

In addition, health plans such as Kaiser are reaching out to young consumers via the mode of communication they're very comfortable using--the computer. "And we're doing things good Web marketers do in terms of search-engine placement and making sure information is available and people are aware that health insurance can be had affordably," said Kaiser's Southam.

Southam said it's also important to target this generation by promoting healthy lifestyles, such as through the company's various health information, health promotion, affinity and discount programs. Members can receive discounts on such services as acupuncture, chiropractic, massage therapy, nutrition therapy and fitness and health club memberships. In addition, he believes individual coverage that offers portability is a good fit for many young adults. "Many of these individuals are going through various transitions at that point of their lives, and having affordable individual coverage that's portable through job changes is an attractive option," he said.

Kaiser also is assisting many young uninsureds through its dues-subsidy program in which low-income individuals can apply for assistance in paying for health coverage. Kaiser pays up to 90% to 95% of health premiums for individuals accepted into the program. Last year, the company provided coverage to 42,000 individuals in the markets it serves, with a large portion of recipients being young adults, Southam said.

Calling on Mom and Dad

While health plans are targeting young individuals about the importance of health coverage, some also are recognizing parents' strong influence on their children's decision about such protection.

Humana, for instance, is marketing its HumanaOne discount programs to parents of graduating students. Some parents are even purchasing insurance policies as a graduation present after their children are no longer covered under their policies, said Stoiber. He said the discount plans make ideal gifts because the premiums can be paid with a single credit card payment so there's no monthly billing for the discount period. Humana hopes to soon begin working with several major university alumni offices and major distributors of plans sold to college-aged young adults to market its products to younger consumers.

"Often it's parents who first express concern that young adults lack health coverage," said Humana's Stoiber.

Sooner or Later

The key is getting young adults on board as early as possible, said Synott of Blue Cross of California. "During any kind of life-stage transition people go through, health insurance plays a secondary role in how they choose to prioritize their lives, so bringing people in as soon as you can to get them to become insured, work with them through different life stage transitions and make sure you have products they can transition to will help them."

In addition, Kaiser's Southam said it's an important social and insurance industry issue to bring this age group into the insurance pool. "The rising number of uninsureds in general poses a material threat to employer-sponsored coverage and the viability of the marketplace in general," he said. "Addressing this issue and finding affordable ways for everyone to get health insurance is important if we are to maintain a stable market. And getting young people off on the right foot is part of the equation."

In addition, health plans said they will continue to refine Web-based approaches to reach out to young Americans. They also plan to continue developing affordable products to meet young adults' needs, including products with little to no deductibles and low copays to help afford lower premiums.

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Assurant

A.M. Best Company # 70135 Distribution: Agents

Excellus Health Plan Inc.

A.M. Best Company # 60082 Distribution: Direct sales, brokers

Humana Health Plan Inc.

A.M. Best Company # 68898 Distribution: Agents/brokers, direct to employees, direct

Kaiser Foundation Group of Health Plans

A.M. Best Company # 64585 Distribution: National consulting houses, regional brokers and brokerage firms, membership exchanges, direct

Wellpoint Group (Blue Cross of California)

A.M. Best company # 68970 Distribution: Independent agents, brokers, consultants, direct

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