Young uninsureds ask, “Do I feel lucky?”

Last month the New York Times used Milliman research to illustrate the choice facing young people who are currently uninsured: Do I buy a policy on the Patient Protection and Affordable Care Act (ACA) state exchange or pay the penalty for going uninsured and take my chances? An article in Newsweek picked up on this question by using Milliman data to assess the probability that an individual exceeds certain thresholds in medical costs.

• $0: There’s a 7% chance an average adult incurs no health expenses in a year.
• $10,000: There’s a 24% chance an average adult incurs $10,000 in health expenses in a year.
• $30,000: There’s a 10% chance an average adult incurs $30,000 in health expenses in a year (sourced from the Times article).
• $100,000: There’s a 2% chance an average adult incurs $100,000 in health expenses in a year.

These numbers help to further put the insurance purchasing decision in context. Newsweek ties the $10,000 number to the Kaiser Family Foundation’s estimate that individual premiums cost $9,068 and uses this to suggest “health insurance is a crummy deal most of the time.” While the chances of exceeding $10,000 in costs are “only” one in four, the risk of costs climbing above that are not insignificant. To quote Stu Rachlin from the Times piece:

“Getting struck by lightning is an insignificant risk,” said Stuart D. Rachlin, a principal and consulting actuary at Milliman, who calculated that the average American under the age of 65 had a 10 percent chance of incurring more than $30,000 in medical charges, including drugs, in a year. “To me, a 10 percent risk is a meaningful possibility.”

Many young people will go ahead and take their chances. And you can’t blame them based on their typical usage patterns. Earlier this month Fox, also using Milliman numbers, reported on average physician usage by young people:

For those who are insured, the New York health care consultant company Milliman says men 19-34 years old will see a doctor 1.8 times a year compared with women, who will on average see a doctor 3.6 times. The two data points suggest many young people may not see health insurance as necessary.

Of course there’s potential that anyone could see far more extensive medical costs in a given year. A second New York Times piece sizes up this risk:

The obvious problem is that you can’t know in advance if your costs for the year will be typical. If you are unfortunate enough to have a costly medical problem, you could end up with far higher bills. Milliman calculated that 5 percent of the population will incur bills, absent insurance, exceeding $47,300… Of course, Milliman doesn’t know whether you are likely to become sick and to be among the top 5 percent or even the top 20 percent (who are billed more than $13,300). When choosing insurance, consumers need to consider their personal situations — and their stomach for risk.

With the first round of open enrollment for ACA policies now complete, some people who were previously uninsured have now made their decisions for 2014, with latter open enrollment periods still to come. Time—and individual circumstance—will determine whether people are happy with their decision.