Young invincibles

Members of the United States population between the ages of 18 and 29 who decide that it is in their financial best interest to forgo health insurance are sometimes referred to as young invincibles by the insurance industry, a term coined to express the idea that the young demographic perceives themselves as immune to sickness and injury. The argument is that these individuals are young and in good health, so they have a low risk of experiencing substantial health issues that would lead to large amounts of spending on health care. Further, this group tends to have a mentality of “it won’t happen to me” with regards to most causes of injury. Together, these beliefs lead to the young invincibles not purchasing insurance.

There are risks associated with the young invincibles choosing to operate outside of the health insurance market, stemming from the economic phenomenon of adverse selection. Adverse selection is a principle describing the situation where people purchase insurance based on their expected use. People who anticipate using the most medical services purchase the most generous insurance plans, while people who do not expect to use many medical services are inclined not to purchase insurance at all.

Due to the risk-spreading design of insurance, the adverse selection associated with the young invincibles leads to higher premiums for people who choose to purchase health insurance. As insurance premiums rise, more healthy people decide that it is not worth the higher prices, and drop out of the market, leading to what is called the "adverse selection death spiral." By contrast, if young adults purchase insurance but continue to utilize very little health care services, the money they pay in premiums can go towards support the expenditures of people utilizing many health care services.

This problem of ballooning health insurance premiums has persisted for years, and was important in the debate over the Patient Protection and Affordable Care Act, commonly called the Affordable Care Act (ACA). One set of ACA provisions eliminated the insurance industry’s ability to charge different premiums to people with differing health status and the ability to exclude individuals with pre-existing conditions. Implemented alone, these provisions would greatly increase the risk in the health insurance market, and premiums would increase to cover associated increases in expenditure. Therefore, the ACA includes a number of provisions aimed at incentivizing young invincibles to enter into the health insurance market.

Individual mandate. The individual mandate applies to young adults and young adults may be eligible for a premium tax credit, lowering or eliminating the cost of insurance. This is particularly significant for young adults because they disproportionately compose those with incomes between 133-400% of the Federal Poverty Line who are entering the workforce for the first time. It is estimated that approximately nine million young adults ages 18–34 could be eligible for a subsidy.

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Wikipedia