Millennials are transforming the health insurance landscape

Research shows that millennials share certain characteristics that make them less likely to sign up for health insurance. For advisers and employers alike, understanding these preferences and tailoring their offerings are imperative to enticing millennials to enroll.

Putting aside the pros and cons of the Affordable Care Act, it is undeniable that millennials have more health insurance coverage now than before the ACA’s enactment. A recent U.S. Census Current Population Survey shows that out of the 8 million American adults who gained health coverage in 2014, 46%, or 3.7 million, were young adults aged 18 to 34.

In the private insurance market, however, the trend line appears to be going in the opposite direction: Less than half of all eligible employees under age 26 enrolled in an employer-provided health plan in 2015, according to a recent report from the ADP Research Institute. Today, 83% of employees under 26 are eligible for health insurance at work, up 8.5% from five years ago; yet, fewer enroll. While almost 57% of young millennials who were eligible for employer-subsidized health coverage took it in 2011; this year, only 44% did.

One reason seems to be that under the ACA, young adults are allowed to remain on their parents’ health insurance plan until they turn 26. It appears that many are choosing to do so for as long as possible, before taking on the additional cost of their own health insurance.

Why this matters

Why does this matter to advisers and their employer clients? Millennials make up the largest proportion of the U.S. labor force today, and it is expected they will be half the workforce by 2020 and 75% of the workforce in ten years. Yet, even as everyone looks to this population to be the young and healthy members that lower the cost of health plans, according to a recent Forbes article, “Millennials represent the sickest cohort of twenty- and thirty-somethings in the last century.” So, they too are in need of health insurance.

Then why is it so difficult to get this generation to purchase health insurance? Here are four key characteristics of millennials that impact their health insurance purchasing decisions:

1. Millennials are comparatively poor: Greater student debt and poor job prospects have left this group with less money than previous generations. Having entered the workforce during one of the worst recessions in decades, a sizable portion of the millennial generation started out with distinct economic disadvantages.
2. Millennials are digital natives: This group has grown up with the Internet and smartphones in an always-on digital world, and their affinity for technology has shaped how they shop. They are used to instant access to price comparisons, product information and peer reviews, and prefer brands that offer maximum convenience at the lowest cost.
3. Millennials have low health insurance literacy: The majority of Americans struggle with health insurance jargon, but according to a study published in the Journal of Adolescent Health, young adults, who generally have little experience managing their own healthcare expenses, are finding it especially difficult signing up for insurance under the Affordable Care Act. They’re not into it, either. According to a recent Aflac survey, 26% of millennials would rather clean their toilets than research their health benefits.
4. As a group, millennials are late bloomers and have delayed significant milestones such as home ownership, marriage and children. It’s not that they aren’t interested in getting married and settling down, according to the Pew Research Center, but financial pressures are forcing them to do this later than prior generations.

Given how much research has been done on millennials, their habits, likes and dislikes are all well documented, and viewed by many as powerful drivers for change. Here are some ways advisers, employers and insurers can adapt their own practices to attract and retain this pivotal group:

1. Make it simple: While everyone wants choice – particularly price-sensitive millennials who grew up comparison shopping online – too many choices can be overwhelming. A 2015 study published by the National Bureau of Economic Research revealed that too many health plan options result in less rational choices by consumers. In fact, the study found that 85% of employees would be better off if their employer only offered one plan. For advisers, providing a guided shopping experience that supports personalized, informed choices can be a huge value-add.
2. Meet them where they are: Research indicates that individuals ages 18 to 36 spend an average of 17.8 hours a day with different types of media, and among the various forms of media, social is king, with 71% of millennials saying they spend time on social media daily. Advisers can embrace this by using social media in their marketing and ensuring that every customer touch point is supported by mobile devices.
3. Provide education throughout the year: Advisers who are eager to build member-for-life relationships need to be in touch with consumers on an ongoing basis to educate, recommend and delight. Millennials love videos and entertainment, so short, humorous educational videos that demystify health insurance are one way advisers can connect with millennial employees throughout the year.
4. What millennials want, others want too: While millennials may be the most vocal about their preferences, other generations are interested in much of the same functionality that millennials cherish. And while millennials are more likely to manage their healthcare needs using technology, according to a recent McKinsey survey, a considerable number of older Americans are doing this as well.

One effective way to meet the demands of millennials is through a private health insurance exchange. These online marketplaces allow employers and insurers to adapt to the needs of millennials by providing choices, instant access and education tools in what has become a familiar consumer shopping environment.

Millennials are no longer the future – they are the here and now, and much of what they want is aligned with the desires of Gen Xers and Baby Boomers. Advisers, health insurers and employers need to get on the millennial bandwagon—or be left out in the cold. It’s not that millennials don’t dig health insurance; it’s that the traditional health insurance experience doesn’t meet their needs. And as long as that’s all you’re offering, they won’t be in any hurry to enroll.