When I became an “adult”, one of the first things I thought about was healthcare. That was the way you did things. But today’s new “adults” aren’t wired that way. Healthcare just isn’t top of mind to millennials.
They don’t understand it and they don’t think they need it. They don’t want to go to their parents’ doctors – in fact, they don’t want to go to doctors at all. There isn’t the concern that many older Americans share of seeing doctor who knows them – they are far more concerned with work-life balance than medical care. If they get a cold, they go to an urgent care facility and get medication.
Part of the reason for this is perceived value. Millennials are not big users of care so they are likely paying more into the healthcare system than they are consuming. But another problem is understanding how the healthcare system works. They don’t understand how they could pay all that money out of their paycheck and still incur out-of-pocket costs when they need care.
Our federal government is finding this out the hard way. They can’t seem to get these young and healthy Americans to buy into the healthcare system. This is a segment of the population who would rather pay the penalty than buy plans with high costs and higher deductibles. As evident from the 85% of purchasers of insurance on the state and federal exchanges receiving subsidies, there is a poor cross section of risk which is creating a death spiral of healthcare premiums; as coverage gets more expensive more people perceive that they are net payers into the system and would rather run the risk of penalty.
As a result, insurers are fleeing the exchanges. The average number of plans offered in each state is expected to fall to 5.8 in 2017, from 6.5 in 2016 and 6.9 in 2015. And a 2016 McKinsey & Company report shows that only 30% of insurers on the exchange made profits in 2014. The plan gyrations themselves are confusing, in turn causing even more to flee the system.
To fix healthcare, we need to address this spiral effect. First, we need to increase the penalty for individuals not complying with the individual mandate. This will change the value analysis. Next, we need to simplify healthcare and increase transparency through technology. Millennials are the key to the equations and they like technology. But it’s clear that whoever gets elected is going to have to do something. The exchanges are the underpinning of U.S. healthcare. They have to survive.