American Debtor Pool Undergoing Massive Demographic Shift

Recent research on healthcare showed a startling shift in the American populace, especially among young people: incomes are plummeting for those just starting out. Combined with new communications habits, accounts receivables management experts believe the shift may be permanent.

Young adults have the highest uninsured rate of any group in the United States, with some 30 percent of the group going without health coverage. Industry experts have long said that the growth of health care costs would slow down or decline if young adults get insurance.  But a new Kaiser report on uninsured young adults shows that the majority of uninsured 19-to- 29 year olds can’t afford coverage.

Although the report says the majority of uninsured young adults are employed, it also notes that many uninsured young adults work in low wage jobs and for employers who offer limited or no health care coverage.  More than half live in households with incomes below 150 percent of the federal poverty level: less than $17,000 for an individual and $22,000 for a family of two.  Meanwhile, the average employee cost for individual coverage rose from $334 in 2000 to $779 in 2009.  Only nine percent of young adults with incomes near $45,000 — at or above 400 percent of the poverty level — are uninsured.

“Without insurance coverage, these young adults risk both their physical health and their financial security,” the Kaiser Foundation said.

With many young adults already struggling to pay everyday expenses, the findings by Kaiser should give debt collection professionals reason to pause. The report says that uninsured young adults are twice as likely as those with private insurance to have no education beyond high school, which limits their future earnings potential. Other unrelated factors also point to a new reality for today’s young Americans.

After the fallout of the financial crisis in 2008, tighter credit standards will likely make it harder for many young adults to finance post graduate education or obtain loans for real assets, such as a home.

And in the mobile society of cell phones and text messaging, collection professionals will find it even more difficult to match the right debtor with the debt owed.

^pullquote"40 percent of the consumers [we work] with don’t have landlines." – Tim Smith, senior vice president of collections for Firstsource Solutions. ("Text Messaging As the Next Frontier in Collection Communication")pullquote^

“A cell phone has become, in many instances within this age bracket, the only phone number and access point for creditors to their debtors,” said Michael Lamm, an associate with ARM advisory firm Kaulkin Ginsberg, a sister company to insideARM.  “Younger debtors are mobile and their situations are constantly changing which is why it is important to think strategically about how you find and contact them."