In better times, 26-year-olds staying on their parents’ health-insurance plans may have seemed strange. Now children are relying on their parents’ coverage well into their mid-20s, and the use of this crutch is a symptom of the shaky employment landscape for young adults.
Obamacare’s dependent-coverage provision, which allows young adults to stay on their parents’ plans until December 31 of the year in which they turn 26, was supposed to be a second option, a fallback plan for early-career turbulence. But the real unemployment rate of people ages 18–29 hovers at 16.3 percent, and a tight labor market has forced many young adults to hang onto their parents’ coverage until the last legal moment.
Since March 2010 the Affordable Care Act has afforded 3.1 million young adults access to insurance they would not otherwise have. This change is a vast improvement from the pre-Obamacare days when age 19—older for full-time students—was the cutoff at which insurance companies forced children from their parents’ plans.
The figure 3.1 million is a big number, and in a better economy, it would be smaller. According to a 2011 report by the groups Demos and Young Invincibles, “Just 43.7 percent of all 18- to 24-year-olds and 55.7 percent of 25- to 34-year-olds were covered by an employer sponsored plan in 2009, both significantly lower than a decade earlier.” For anyone underemployed and under 26, Obamacare covers a major shortfall.
There’s another issue: a 26th birthday doesn’t guarantee a job with health benefits. Once they turn 26, individuals have no option but to purchase insurance on their own. Obamacare will approach its final form on October 1, when individuals will be able to purchase insurance through online exchanges, and the government will offer tax credits and subsidies based on the income levels of customers. But the exchanges aren’t quite ready, and the employment outlook for young adults remains bleak.
Aaron Steely, 27, who talks health care as he finishes up his cashier shift at a café in Washington, D.C., has endured the ups and downs of finding health insurance in a stagnant job market. In November 2008, six months after he graduated from college, Steely had to leave his parents’ plan. When he needed it most, he had no coverage. “I went without health insurance for a while and I broke my toe,” says Steely. “Did not go to the doctor because of the ridiculously expensive X-rays and stuff. Then I tried to heal it myself and rebroke it again three months later.”
By March 2010, when the dependent-coverage provision kicked in, Steely still didn’t have a job with benefits. “I went back on my [parents’ insurance] and it was definitely a relief,” says Steely. “I got seen for a bunch of stuff.”
Jen Mishory, deputy director of Young Invincibles, feels that the timing of the dependent-coverage provision was especially effective, given the state of the economy in 2010. “The extension came at a time that it was particularly needed because young people were hit particularly hard by the recession,” says Mishory.
Things started looking up for Steely soon after his 26th birthday in October 2011. By December, he found a full-time job—with benefits —as a geospatial analyst for a defense contractor. A year later, however, with the sequester looming, Steely’s employer hedged its bets with layoffs, and Steely was among the casualties.
Over the past six months he has racked up three part-time jobs, none of which offers health benefits. Steely adds that purchasing coverage is “not worth it when you can Google something and just read everything about it.”
John Browning, who waits tables at a local restaurant, was dropped from his parents’ plan after he turned 26 last November. He graduated from the University of Wisconsin, Madison four years ago. His approach to health insurance is more cautious than Steely’s. Since January, Browning has paid just over $100 a month for a catastrophic plan, so “if I get hit by a bus or something I can not go broke the rest of my life.”
Options for the likes of Steely and Browning are set to improve in the fall. “Beginning in October, all Americans will be able to buy quality, affordable insurance in the health-insurance marketplace, and many young adults will qualify for tax credits to help cover the cost,” said a spokeswoman for the Department of Health and Human Services via email. However, the administration’s struggles to spread the good news are well documented.
As Sarah Kliff noted in The Washington Post last November, “seventy-eight percent of the uninsured Americans who are likely to qualify for subsidies were unfamiliar with the new coverage options in a survey by Democratic polling firm Lake Research Partners. That survey, sponsored by the nonprofit Enroll America, also found that 83 percent of those likely to qualify for the expansion of Medicaid, which is expected to cover 12 million Americans, were unaware of the option.” Additionally, an April report from the Kaiser Family Foundation found that four in 10 Americans didn’t know whether Obamacare was still law.
In spite of the administration’s best intentions to prepare those without coverage for the opening of the exchanges, the late-20s crowd seems just as confused about buying insurance under Obamacare as the rest of the country. Kavita Patel, a health policy expert at the Brookings Institution, worries that young adults don’t know how the law will affect their lives. “People forget that 26-year-olds have health problems, too,” she says. “The big [issue] right now [is] awareness because [young adults] don't know they have an option come October 1.”
And while the exchanges will make health care more affordable, purchasing insurance won’t help young adults find jobs, either before or after they turn 26. Both Steely and Browning want better coverage but can’t afford it right now. Obamacare seeks to remedy some of their problems: in October, the government will provide premium subsidies to anyone making less than $45,960.
Steely didn’t know that Obamacare might help him out in the event of another broken bone. “Honestly, I haven’t looked into anything recently.” Browning feels similarly: “I have no idea how that stuff works.”