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The Echo Boomers are growing up. The first wave of the generation that came of age in the era of the computer and the Internet graduated from college in 1998 and has just begun to break on the working world. But while the Echo Boomers, more commonly known as Generation Y, are uniquely positioned to navigate the high-tech, information-services economy that is increasingly dominating the American workplace, newly released data suggests that in one area at least-health-care coverage-they are lagging behind their predecessors. According to the latest Medical Expenditure Panel Survey conducted by the federal Agency for Health Care Policy and Research, they are less likely to be offered health insurance by their employers than their older Gen X siblings were, and they are also less likely to take it even when it is offered.

Most health insurance in the United States is employment related, and the young adult market is no exception: nearly half of young adults have health coverage through their jobs. But the situation is deteriorating, studies show: Between 1987 and 1996, the number of workers under the age of 25 who were offered insurance through their jobs declined by 8 percent. This, during a period in which the "rate of being offered insurance increased [in general] and for all other age groups," according to Agency for Health Care Policy and Research (AHCPR) researchers Philip F. Cooper and Barbara Steinberg Schone, writing in the journal Health Affairs. What's worse is that even if Gen Yers are offered coverage, they aren't necessarily signing up. Take-up rates among young workers declined by 13 percentage points between 1987 and 1996, according to AHCPR research. As a result, nearly 38 percent of young adults lack coverage. The implications, analysts say, both from a public health and an economic point of view, are staggering: By 2015, according to the U.S. Census Bureau, there will be more than 30 million Americans between the ages of 18 and 24. If the present trend continues, more than 11 million will lack insurance.

Why is Gen Y saying no to health insurance? Price tops the list of explanations. Between 1987 and 1993, according to AHCPR research, the cost of health-care premiums increased by 90 percent, far exceeding the rise of wages during that period. And even though the rate of increase of the cost of health insurance slowed in the early nineties with the advent of managed care, annual health-care expenditures exploded, crossing the $1 trillion mark in 1996. And they're still rising.

Faced with escalating insurance bills, employers are increasingly passing on the costs to their employees, who have had to pay higher contribution rates in order to maintain coverage. Not surprisingly, the number of people who cannot afford to pay their share is also growing. "Young adults in particular are caught in the squeeze," observes Bonnie Sherman, executive director of the Colorado Child Health Plan. This is partly because they are more likely to have low-wage jobs, Sherman says. And while they make up less than one-tenth of the overall population, they account for about one-fifth of the 44.8 million Americans who are uninsured. The situation is "pretty abysmal," Sherman says. And it's likely to get worse, according to Dr. Michael Kobernick, medical director of the Great Lakes Health Plan, a Michigan-based HMO. As the need for cost-sharing is likely to increase, Kobernick predicts, "We will probably see more young adults uninsured and underinsured."

In addition to being pressed by price constraints, Gen Y workers may be more willing to take the risk of doing without medical coverage, and insurance companies haven't put much effort into convincing them otherwise. After all, it seems axiomatic that young adults are healthier than the rest.

It is true that most illness comes with age; 18-to-24-year-olds, for example, are far less likely to suffer from chronic conditions such as high blood pressure or arthritis. Disease is also very rare in this age group, Kobernick says. The result is that "no one pays attention to [this market] because it's not a huge source of income for the insurance industry...People do not recognize this group as having a lot of health-care needs or resources," Kobernick says.

Under normal circumstances, young adults' health-care needs are maintenance needs, such as check-ups, pap smears, and flu shots. But they are the least likely to receive even this level of care. Just 34 percent of young adults aged 18 to 24 have a regular place where they receive health care, the smallest percentage of any age group, according to the Medical Expenditure Panel Survey. Most are simply going without preventative services, their most characteristic medical need at this stage in life.

But young adults are also the most likely of all age groups to suffer from certain acute conditions, especially injuries. The injury rate among 18-to-24-year-olds is 32.7 percent, according to the most recent data from the National Center for Health Statistics.

"Young adults, particularly young males ages 16 to 24, are at the highest risk of all ages for traumatic brain injuries" such as those caused by automobile accidents, says Dr. William J. Winslade, a professor at the University of Texas in Galveston and the author of Confronting Traumatic Brain Injury (Yale University Press, 1998). The success of trauma care has upped survival rates, Winslade observes. "But someone who is badly injured has primary injuries with long-term consequences" and withvarying degrees of disability. Without adequate insurance, he says, they are "simply out of luck."

And since it is unlikely that young adults will stop needing health-care coverage, forward-looking marketers may want to rethink employment-based programs that don't court the young in the same way that car and clothing manufacturers do, as Gen Y continues to swell the ranks of young adults.

"It's a difficult market to crack," says Steve Leshner, president of Commonwealth Consulting Group, an insurance broker based in Jenkintown, Pennsylvania. "Young adults may not understand the value of health insurance, and don't readily embrace it as a benefit." Adds Sherman: "People in this age group truly believe that they're immortal."

Even so, anecdotal evidence suggests that Gen Yers are beginning to see the light, in part because some employers are using insurance as a way to lure workers in the current competitive climate. Steven Long, an employee benefits consultant with Sedgwick Noble Lowndes in Philadelphia, reports that in the bio-tech field, for example, which is dominated by young adults, employers are specifically trying to develop very competitive health plans in order to hold onto talented workers who are being courted by other companies.

But it is the fitness of the young that should be setting off the most bells. Some industry experts say that insurers who are ignoring the potential of the Gen Y market are missing the point, because the general good health of young adults makes them an attractive risk for health insurance: the healthier the insured pool, the better the money-making potential. Of the young adults who are uninsured, more than one-third say their health status is excellent.

"Some young adults value health insurance very much," says Valerie Lyon, administrator of university health services at Cornell University in Ithaca, New York. "It would serve the insurance companies well to reach out to younger populations, and have them in there, because they're healthy."

It is ironic, she points out, that when young adults go off of their parents' insurance in their early 20s, "the insurance company isn't thinking about losing them as customers." And, in fact, nearly 78 percent of full-time students have health insurance, in comparison to just under half of all young adults who are not students (46 percent). "The young adult population could really use good, comprehensive health insurance-and that population could be with [insurers] for a very long time," Lyon notes.

ENTITLEMENT MIND-SET But going after the Gen Y market requires more than addressing the usual issues, such as cost and the choice of doctors. Gen Y brings a unique set of needs to the table.

The first is that employment-based health insurance may not be best suited to meet their requirements. Young adults tend to have shorter job tenure than older workers, and are more likely to suffer from health coverage interruptions, according to Carrie Gavora, a health policy analyst with the Heritage Foundation in Washington, D.C. However, in today's tax environment, says Gavora, "There's no incentive for anyone but the employer to provide health insurance." Absent a dramatic change in the tax laws, insurers will have to get to Gen Y through employers.

Another Gen Y difference is their heightened expectations for information, the life-blood of this hyper-educated group. (In 1986, just over half of all high-school graduates intended to go on to college. In 1997, the number had jumped to 65 percent, according to the National Center of Education Statistics.) Because health insurance is a new product for most young adults, the more information they receive, the better.

"I never knew a terrible lot about health insurance until I took over my own," says David Grindel, 22, a staff assistant in the office of U.S. Senator Arlen Specter. Grindel had to choose a plan from a variety of options when he started work. "My biggest beef is that none of the health insurance companies I called before I picked my plan tried to explain their services," he says. They offeredto send him brochures, but he felt that wasn't going to be adequate. "Information is key, especially when you're trying to provide health insurance to people who have never bought it before," Grindel says.

"There's a huge move toward comparative information," observes benefits consultant Long. Gen Y's proficiency with technology and the Internet will enable them to quickly adapt to researching and comparing health plans electronically, and insurers need to be ready for the flood. Young adults are nearly four times more likely than their elders to use the Internet to access health information, according to a 1998 national survey conducted by Rodale Press.

Providing good information, and lots of it, is also important because newly minted college grads are used to being spoon-fed health messages, as they were when they were at school. "We send information out about our services, we offer counseling, and we do a lot of marketing in the dorms," says Lyon of Cornell. "It's challenging to get the word out that the services are there and that they are available to everyone."

The influence of direct-to-consumer prescription advertisements should also not be understated, experts say. Gen Y will be the first generation to have a lifetime of exposure to DTC advertising. "Young adults are barraged by these advertisements," says Long, noting that this has shifted a lot of power to the patient in medical relationships. For members of Gen Y, that shift is taken for granted.

"Consumers are 'self-prescribing' medicines," Long says, largely because of this uptick in DTC ads. Ortho-TriCylcen, for example, an oral contraceptive made by Johnson and Johnson's Ortho-McNeil unit, is the only brand of birth control pill that has received FDA approval to advertise its anti-acne side effects. The company has been sending this message to teens and young women through magazine and television audiences and it's working: The number of prescriptions for the drug surged 73 percent in the first half of 1998, compared to the previous year, according to a September 1998 article in The Wall Street Journal. Meanwhile, prescriptions for rival pills grew by less than 2 percent.

But the clamor for more specialty prescriptions, beefed up by the $1 billion a year pumped into consumer advertising by the drug industry, has also contributed to the sharp increase in the cost of prescription drugs overall, an average of 15 percent to 20 percent a year, Long says. "If people continue to demand X, Y, and Z drugs, eventually health plans will limit access more than now," he says. And that won't play well with Gen Y. "There's an entitlement mind-set in young adults," he says. "There are certain things that are just not covered, such as oral contraceptives, but they feel like they are entitled, that their claim should be paid no matter what it is." And as drug costs rise, so too will employee out-of-pocket expenses, another aspect that many young adults are not prepared for. "What people want is choice," says Gavora of the Heritage Foundation. Employers or insurers who are courting echo boomers may have to rethink the sorts of insurance packages they offer, because Gen Y is likely to be less tolerant than older generations of health plans that limit choice.

They want the flexibility to choose alternative medical care, for example, including acupuncture and herbal supplements, things that are often not covered by health plans but are very popular among young adults. People age 18 to 24 are the most likely group to use such alternative treatments or therapies: 35 percent used alternative health care in the last 12 months, according to a study in the May issue of JAMA: The Journal of the American Medical Association.

"People should be able to pick holistic treatments," says Jennifer Kim, 22, who works for a product development consultancy in Lancaster, Pennsylvania. "If it were covered for me to go to the acupuncturist, you'd bet I'd be there." For this, she'd even be willing to dig deeper into her own pocket: "I'd be willing to pay 20 percent more to be able to take alternative treatments." If insurers are going to be the companies of the future for young generations, Kim says, "they are going to need to provide that holistic stuff and have it covered," in the same way that conventional treatments are covered today.

Such sentiments may be somewhat unrealistic, however, at least in the near term. They also reflect the breadth of attitudes about health care priorities held by young adults. Kim's PPO, for example, which she subscribes to through her employer, does not cover vision and dental benefits, let alone herbal therapy. But although these are important to her, she says she cannot afford to pay a higher premium to get the coverage and is trying to get by on old prescription lenses.

Insurance broker Steven Leshner wouldn't be surprised to hear Kim's point of view. He says the way to design a program for young adults is to provide the health products and services that they "sense they have personal exposure to," including alternative medicine, oral contraceptives, vision and dental benefits, even health club discounts.

"You almost have to design around the 'frills' and not around the actual package," Leshner explains. The frills could even include benefits that aren't health insurance related, such as subsidizing employee transportation. "Include things that enhance lifestyle. That's a real benefit," Leshner says. "And the nice part about these quasi-medical benefits is that they can cost less to provide than actual medical benefits."

There are important differences within the Gen Y demographic that will also affect the marketing of health insurance programs. Young African American men, for example, are the least likely to have health insurance-a whopping 61 percent. "I think that the race/ethnicity disparity is quite striking, as is the disparity by gender," observes Jessica Vistnes, an economist at AHCPR. Although 31 percent of young adult whites overall are uninsured, they are still more likely to have health insurance than their African American and Hispanic counterparts. And young men are more likely to lack health insurance than young women, in part because young women are in their childbearing years.

What is in the health insurance future for Gen Y? "My crystal ball is broken, based on the chaos in the marketplace," says Bonnie Sherman, referring to a health-care system that she sees in "total chaos and disarray. The structure is topsy-turvy. HMOs are bleeding red ink." But as the ranks of young adults swell with the Gen Y wave, the problem with-and therefore the demand for-health insurance products for young adults will only increase.

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