One reason? Take-Up Rates Among Those Under 30 Show Unexpected Decline.

Young workers in the U.S. signed up for employer-sponsored health plans at a lower rate than last year, a surprising result that helped keep overall workplace enrollment rates flat.

This is especially surprising as companies had been bracing for a big bump in the number of workers signing up for workplace plans because of the new government mandate that most American adults buy health insurance or pay a penalty. But new data on worker behavior for the 2014 coverage year from payroll-services company Automatic Data Processing Inc. suggest that surge of enrollment never happened, at least broadly across large companies. A separate analysis by benefits consultant Aon Hewitt also found little overall growth in enrollment among those eligible for workplace health coverage. Instead, enrollment as a percentage of those eligible for coverage was largely unchanged, ADP found.

Continuing a longer-term trend, younger workers’ take-up of company health plans declined, meaning participation fell as a percentage of those eligible to enroll. Take-up rates among workers under 30 fell 1.4 percentage points from 2013 to 2014. Over the past five years, that rate has declined by 7.6 percentage points to 62.1% of those eligible. One possible culprit: Rules that kicked in during 2010 allowing parents to keep children on their own health plans through age 26. That likely explains much of the longer-term decline in workplace coverage among younger workers, health-care analysts say.

Vivian Ho, a health-care economist at Rice University in Houston, said her own research suggests that many still may have been unaware of the new option for parents as recently as last fall. “It was surprising how many people didn’t even know about that particular benefit,” she said. As awareness increases, the number of young workers who opt to stay on a parent’s health plan could continue growing. Alternatively, younger workers may have decided to skip coverage altogether, gambling that they would remain healthy and preferring to conserve cash, instead of paying insurance premiums.

They can now stay on their parent’s plans longer, yes, but also are choosing to save money and take the chance they remain healthy. Communicating to this audience to explain the need for healthcare is crucial. You cannot offer the same enrollment materials as say a worker with family health care needs, or an aging worker, may receive as the needs are vastly different.

That scenario is especially likely given that employers continue to shift a greater proportion of health-care costs to employees, Dr. Ho said. The ADP data indicate that trend continued into this year.

Health-care analysts cautioned that a clear picture of the continuing changes in workplace coverage is likely to emerge only over time, as additional data are studied. ADP analyzed payroll data for some 200 large companies employing 550,000 full-time employees. Historically, companies in low-wage industries, including retailing and hospitality, have had the most employees opt out of workplace plans, and they expected the biggest increases. ADP said its analysis included a significant number of companies in those industries. Companies across the board, however, had been expecting at least a modest increase in enrollment for 2014.

Taking Penalities

As many as 7.5 million U.S. taxpayers reported that they owed a tax penalty for 2014 for not signing up for health insurance, the Internal Revenue Service said. That amounted to roughly $1.5 billion in penalties. That was at least 1.5 million more taxpayers than the Obama administration expected to see paying penalties under terms of the Affordable Care Act, according to reported forecasts, and as much as triple what some officials had forecast. The number, however, will come down, as the IRS says 300,000 should have claimed an exemption to the penalty.

Taking a Closer Look at the Workforce: Those Who Opted Out

“What we can say is, they didn’t see the increase,” said Christopher Ryan, ADP’s vice president of strategic advisory services. “What we don’t know is the reason.” ADP didn’t break down enrollment by industry. But several of its findings suggest younger workers, who are disproportionately in low-wage jobs and traditionally have been more likely to opt out of insurance coverage, didn’t flock to workplace health plans.

The percentage of workers under 30 eligible for health plans increased by 2.2 percentage points in 2014, to 85%, ADP said. But the proportion of eligible workers under 30 actually enrolling, or the take-up rate, fell 1.4 percentage points. Only workers over 60 increased their take-up significantly—by about 1.1 percentage points to 77%. Other age groups posted slight gains, ranging from 0.1 to 0.6 percentage points.

Lower participation by younger people, who are assumed to be healthier and therefore cheaper to insure, has been a significant concern with the public health-insurance exchanges established under the Affordable Care Act. The same assumptions hold true for workplace plans, ADP’s Mr. Ryan said.”Maintaining a healthy risk pool is always a concern for any health plan, and that’s true whether you’re self-funded or whether you’re part of a public exchange,” Mr. Ryan said.

Other Factors at Play

Meantime, Aon Hewitt’s data suggest another widely watched workplace health-care trend also may not be as pronounced as expected: companies limiting coverage for the spouses of employees. Aon Hewitt said the number of dependents enrolled for 2014 declined by about 1%, with a few corporate clients showing declines of around 2%, a spokeswoman said. Several high-profile companies, including UPS last fall, have taken steps to bar spouses from workplace plans if they can obtain coverage through their own jobs.

Trends That Saw Increases: High Deductible Health Plans are Attractive as Companies and Employees Save Money

Some major companies have reported being surprised by a larger-than-expected jump in enrollment, including retailing giant Wal-Mart Stores Inc. Wal-Mart says health-care signups jumped by about 100,000 enrollees. The new enrollees, plus greater use of the health plan and rising health-care costs, will add about $330 million in benefits expense, the company says. At Ryder System Inc., a transportation and logistics company, U.S. workforce enrollment rose by 4.7% this year, “reflecting a slightly higher increase than we’ve seen in the past,” a spokeswoman said in February. Last fall Ryder worked to shift employees into a high-deductible plan that costs the company less.Home Depot Inc. Chief Financial Officer Carol Tomé said enrollment in her company’s coverage rose, but declined to characterize it except to say it didn’t affect earnings forecasts. Competitor Lowe’s Cos. said it expects an additional $35 million in additional health-care expenses this year. “Other

[ACA] costs related to things like covering dependents to age 26 were already absorbed into costs in the prior year,” Lowe’s Chief Executive Robert Niblock said in an interview. “Now additional people are opting for insurance under our plan that previously had other sources, or are younger individuals that had chosen not to have insurance.”

 

With some reporting originally published in the Wall Street Journal April 2015.