There has been a lot of emphasis on getting the “young invincibles” (Americans aged 18-34) to enroll in health insurance plans. Risk pooling has changed tremendously since the adaptation of The Affordable Care Act. In essence, the individual market has created a system where young individuals premium payments will be used to cross-subsidize those of older people. In other words, the system needs young people to enroll in health insurance plans to help offset the medical costs of older people who generally incur greater expenses.
So, how does it work? Premiums cannot vary based on health status or gender anymore – gone are the days of pre-existing condition questionnaires. Premium variations are now solely based on age. For this system to work, young people need to enroll in sufficient numbers to produce a surplus in premium revenues to prevent insurers from raising premiums in upcoming years.
Insurers typically set their premiums to achieve a profit margin of 3-4%. Some insurers are optimistic about young enrollees and have set premiums accordingly (lower). Others, do not share the same optimism and have set higher premiums across the board. The important point here is that insurers still expect to earn a profit and will adjust rates accordingly. Obamacare is predicated and reliant upon the young invincibles to enroll, to keep health insurance costs affordable.
It should be noted that risk pooling occurs state by state. Therefore, we will likely see some states with more stable markets at year end - The states that are able to attract and enroll young adults into individual health plans.
The State of Washington has employed several marketing tactics to appeal to the young invincibles. Originally, the state’s Washington Healthplanfinder ran commercials showing young people getting into freak accidents, including one involving a vicious raccoon. Healthplanfinder has now partnered with giant concert promoter, Live Nation. With the use of traditional marketing tactics, Healthplanfinder hopes to appeal to Washington concert goers (typically comprised of a younger demographic) by leveraging trust and encouraging enrollment. The integrated program will include an interactive presence through Live Nation’s websites, print, radio advertising and social media channels.
The key component of the Affordable Care Act to work is to achieve a balanced risk pool. This will attract insurers to the market, and more importantly, keep insurance costs down over time.