How Gen Z and Millennials Can Budget For Healthcare After the ‘ACA Cliff’
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Gen Z and millennial households have been able to keep health insurance costs manageable thanks to enhanced Affordable Care Act (ACA) subsidies introduced during the pandemic. But as those temporary subsidies have expired, healthcare is going to take a bigger bite out of younger adults’ budgets. Rising premiums, higher deductibles and tougher plan trade-offs are forcing younger people to take a closer look at what they can and can’t afford to pay for in healthcare.
Experts laid out ways Gen Zers and millennials can budget for healthcare in the face of the “ACA cliff.”
What the ‘ACA Cliff’ Actually Is
The “ACA cliff” refers to these pandemic-era subsidies phasing out. These subsidies lowered premiums for millions of Americans, and as those supports phase out, “many are struggling to afford their health insurance premiums,” according to Dr. Noor Ali, founder at Dr. Noor Healthcare Advisor.
As subsidy thresholds are tightening in most states, Dr. Ali said that “younger adults are being hit hardest because they built their budgets around those subsidies.”
Premiums, Deductibles and Out-of-Pocket Costs Are Rising
The potential loss of subsidies is having a cascading effect, driving insurers to recalibrate their exposure risk. “Insurance companies are adjusting based on actuarial analysis, which has led to higher premiums, higher deductibles and higher maximum out-of-pocket limits,” Dr. Ali said.
This means that overall plans are becoming “a worse financial deal for many Gen Z and millennial consumers,” she added.
The Most Common Healthcare Budgeting Mistakes Younger Adults Make
While younger adults, on average, may have lower healthcare needs or risks, Dr. Ali warned that it’s still risky “choosing low premium and high deductible just because they’re young and healthy.” Anyone, at any age, can experience an unexpected illness or injury, which can then lead to staggering costs.
“My advice is to choose a more balanced premium and deductible structure, because health status can change unexpectedly,” Dr. Ali said.
How To Reset Your Healthcare Budget After a Premium Shock
When premiums jump, the goal isn’t to find the cheapest plan at all costs — it’s to find coverage that fits both your cash flow and your risk tolerance.
Dr Ali said, “They should first understand what their baseline healthcare budget is and what they can realistically afford.” Then, they should shop for a plan that provides the maximum benefits within that budget.
Comparing ACA Plans Is Still the Best First Move
Even with rising costs, ACA plans often remain the most affordable way to obtain comprehensive and cost-effective health insurance, according to Whitney Stidom, vice president of consumer enablement at eHealth Inc. Instead of opting out, she urged consumers to compare plans.
“With the enrollment window closing soon for Affordable Care Act (ACA) plans, it is important people compare their options based on personal needs, preferences and budgets,” she said.
How Comparison Shopping Can Lower Costs Without Cutting Coverage
Many consumers assume higher premiums are unavoidable, but data suggests otherwise. Internal research done at eHealth found that 79% of Americans who have reviewed their ACA coverage options “were surprised by the high cost of monthly premiums,” Stidom said.
Reviewing multiple plans can surface lower-cost options with comparable benefits. She noted that people who comparison shopped through her own platform potentially saved an average of over $2,000 per year, “all while keeping comparable benefit levels.”
The Pros and Cons of Indemnity Plans
Alternative coverage options such as short-term and medical indemnity plans may appeal to consumers priced out of ACA plans, but they come with serious limitations, Stidom explained.
While these plans provide some financial protection in case of a medical issue, there are limitations, including lack of coverage for preventive services and certain benefit limits. “It is important consumers understand what is not covered when looking at alternatives to ACA-compliant plans,” Stidom said.
Budgeting for Healthcare With Irregular or Gig Income
Freelancers and gig workers especially need to plan for variable income and budget for healthcare to cover low-income months. However, Dr. Ali said that choosing predictable health insurance coverage costs can help prevent financial strain. “Having a fixed or generally fixed health insurance premium that they can afford even during income fluctuations is a smart way to budget for healthcare,” she said.
As subsidies shift and healthcare costs rise, the smartest move for Gen Z and millennials isn’t defaulting to the cheapest option but treating healthcare like any other major budget category.
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