Op Ed: Millennials Shouldn’t Gamble their Wealth on their Health

Op Ed: Millennials Shouldn’t Gamble their Wealth on their Health

This article originally ran in the Deseret News on Friday, May 13, 2016.

Millennials are increasingly making traditional “adult” purchases. In 2015, Americans in their 20s and 30s bought 4 million vehicles — more than any generation other than baby boomers — and over a third of millennials now own homes.

Unfortunately, nearly 8 million millennials are putting such assets at risk by forgoing a far more important purchase — health insurance. Viewing health coverage as a needless expense, these so-called “young invincibles” roll the dice that they will avoid serious accidents or illness.

Gambling with one’s financial health by remaining uninsured is almost always a losing bet. An unexpected, uninsured trip to the hospital can result in financial ruin.

Some of those uninsured millennials may desire coverage but legitimately cannot afford it. There are, however, at least 1.5 million high-income young Americans who simply decline to buy policies. This behavior persists in spite of estimates that the average American under the age of 65 has a 1-in-10 chance of incurring over $30,000 in medical bills in any given year. Furthermore, health care costs continue to increase much faster than inflation. In 2015, health care spending rose about 6 percent.

As health care grows more expensive, so does health insurance. The average premium for a midlevel “silver” plan through the Affordable Care Act’s insurance exchanges for a 30-year-old individual is $312 a month, or roughly $3,700 a year. While individuals with incomes up to $46,680, and families of four with earnings up to $95,400, are eligible for refundable tax credits through the exchanges that can help cover the cost of insurance, higher earners do not receive any help covering their premiums.

With premiums so high, many millennials neglect to buy policies. The average uninsured American under 65 will face total health care bills in any given year of $2,700. So these gamblers reckon that they’re better off paying bills out of pocket and saving thousands by avoiding premiums.

That line of thinking, however, is dangerously shortsighted.

Purchasing health insurance is not about seeing a return at the end of the year. Rather, obtaining coverage helps reduce the risk of financial hardship resulting from unanticipated medical catastrophes.

Insurance plans have out-of-pocket maximums, which cap the amount consumers have to spend on health care in a single year. Typical silver plans, for instance, ensure that individuals will not spend much more than $6,000 and families will not spend more than $12,000. Any health expenses above those limits are paid entirely by the insurer.

Without those caps, medical bills can be ruinous. A three-day hospital stay can cost as much as $30,000. Treating a particularly bad urinary tract infection — the second-most common type of infection — in the emergency room could cost up to $73,000.

With prices like those, it is no surprise that medical bills are the No. 1 cause of bankruptcy in the United States. Unmanageable medical bills are responsible for 1 of 9 home foreclosures.

Even if steep medical bills do not result in financial ruin, individuals and families could have to deplete their savings if they skip out on health insurance.

It may be tempting for young people to assume that they can ward off chronic diseases like heart disease or diabetes with proper diet and exercise, but nobody can eliminate the possibility of massive unexpected bills stemming from a car accident or cancer.

Buying insurance is a smart bet. And it does not need to be a hassle. Consumers can outsource much of the legwork of researching and comparing policies to insurance agents and brokers. Roughly three-quarters of agents spend their time explaining coverage options to clients. That expert guidance is why consumers who sought assistance when signing up for exchange plans rated agents and brokers as more helpful than any other source of coverage information.

Young Americans are increasingly purchasing homes and vehicles. Health insurance policies can help these millennials protect their new assets and avoid financial disaster.

Scott Wham is a member of the Principals Council at the National Association of Health Underwriters as well as the Director of Compliance Services at Kistler Tiffany Benefits.