Health plans battle for share of youth market

More insurers are coming to the conclusion that if they want young people to buy their health plans, they need to make them less costly and more fun.

"You probably wouldn't buy 50 kegs of beer when you're having three friends over to watch the Longhorns on TV," starts a pitch on the Web site of Livonia, Mich.-based Precedent, which this year launched a youth plan in Texas. "So, why buy more health insurance than you need? It's just like anything else. It's your money, and you want to spend it wisely," the ad continues.

Precedent is one of many companies offering individual plans for 20-somethings. The plans cost less than what the targeted audience might have to contribute to a company plan at work -- though they offer less coverage, too. For example, most don't cover prenatal or maternity services, and many don't go beyond covering only the most basic of services.

The plans are operating under the assumption that a good number of the 19 million people ages 18 to 34 who were uninsured in 2006, were in that state because they believe health insurance is too expensive and unnecessary. The plans are using what they see as hipper marketing to convince younger people that health insurance is necessary and cool. On its Web site, Precedent has two 20-somethings, "Katie" and "Drew," backed by a rock music sound track, talking insurance for "young, healthy" people such as themselves.

"You're trying to talk to people who have pretty much decided they don't want to buy any product in your category and explain your concept," said Peter Michaelson, chief marketing officer for Precedent/Remix, the brand name given to Precedent's youth plans.

These plans are following in the footsteps of WellPoint, which in 2005 launched its youth plans, Tonik and Sound. The company says the youth plans have been successful products, though WellPoint has not released enrollment figures. The number of youth-specific plans is not known, but Health Net and BlueCross BlueShield-affiliated plans have dived into the business recently.

Mark Pauly, PhD, a health economist at the Wharton School of Business at the University of Pennsylvania, said some insurance is better than none. But he said plans catering to young people give them the wrong idea about what insurance is for -- not an investment that is meant to pay dividends, but a safety net.

"I've had fire insurance on my house for 40 years, and it never paid me a dime, but that doesn't mean it wasn't a good idea," he said.

Some plans are trying to make themselves more attractive by offering tweaks on the low-cost, low-coverage model.

Woodland Hills, Calif.-based Health Net, for instance, offers an individual plan called Quick Net, which can cover a member for between 30 and 185 days, and costs about $35 per month with a $2,500 deductible.

The plan is designed for young, healthy people who are in between graduation and their first job, or just in between jobs. But the company says the plan is available to anyone, of any age, who is in need of short-term insurance.

Blue Cross Blue Shield of Minnesota is among the Blues offering an individual plan called "Simply Blue," which provides preventive care and catastrophic coverage at a price below that of comprehensive coverage.

The cost of this plan ranges from $76.50 per month with a $10,000 deductible for a 19-year-old nonsmoker, to $116.50 per month with a $5,000 deductible for a 34-year-old nonsmoker.

The product's online pitch also tries to get at the young, active demographic: "Let's say you have a major skiing accident. You're looking at $50,000 in bills for surgery, hospital care, rehab and medications. The good news is that with Simply Blue, you're covered."

Among Precedent's plans, launched in September, is one that allows members to buy comprehensive coverage after they become sick or are in an accident. If the member crashes his motorcycle or is diagnosed with cancer, he has the option of "activating" up to $5 million in coverage, which would cost him $6,000. That activation premium can be spread out to a monthly fee.

Dr. Pauly said that to succeed, these plans have to answer the question: "'It won't happen to me, why should I buy coverage?'"

There is only one answer, he said: "If something happens -- if you're not insured, whether you're young or old, it's going to be a disaster."