Disinherited. Diana Furchtgott-Roth
Both plans cover the health-care services he wants, but his new plan includes services that he does not need, such as maternity care, pediatric dental care, mental-health coverage, and substance-abuse treatment. His deductible increased from $1,400 to $1,500 for in-network coverage, and from $2,800 to $3,000 for out-of-network coverage. Tommy is now paying more for coverage that is less valuable to him, all while he was forced to spend tens of hours on the phone from the end of November to the end of March. And it took until September 2014, five months after he had signed up, for D.C. Health Link to show that he was enrolled.
Young people have no way out of this minefield. They can either buy expensive coverage for services they do not need, or they can pay a fine for refusing to buy insurance under the “individual mandate.” No matter which way young people turn, the ACA will take a toll on their pocketbooks.
Since insurance companies are not allowed to charge older people more than three times as much as younger people (a provision known as “modified community rating”), the law artificially holds down the premiums of older people and raises the price for the young. In order to pay for the health-care costs of older people, insurance companies had no choice but to pass those costs on to the young in the form of higher premiums. This is a major factor behind the low number of young people who have signed up for insurance under the ACA.
Before the law, the typical cost of insuring an 18-year-old was one-fifth that of a 64-year-old.1 Because older people are at a much greater risk of serious health problems than people just out of high school, it makes sense that insurance companies would charge the 64-year-old more. But income typically rises with age, so the 64-year-old in most cases would be better able to afford the higher premiums.
Young people, therefore, not only face higher premiums, but they also have a harder time paying for them. This more than negates the benefits to young people of being able to remain on their parents’ insurance plans until they are 26.
In 2013, the White House set a goal that 40 percent of total enrollment in the ACA exchanges should consist of young people between the ages of 18 and 34.2 President Obama reached out to young people during the ACA open-enrollment period, appearing with youth-friendly comedian Zach Galifianakis on his parody Internet talk show Between Two Ferns to promote the law. Joanna Coles, the editor in chief of Cosmopolitan magazine, was invited to have lunch at the White House after she publicly declared that she would use her magazine to promote the ACA.
Some organizations have put out troubling advertisements for the ACA that seem to convey that young people care only about partying and sex. The Colorado Consumer Health Initiative and ProgressNow Colorado Education, for instance, released ads for the ACA targeted at young people.3 One showed a group of college-age men doing a keg stand; the text accompanying the image encouraged young men to get “brosurance.” A second ad showed a young woman holding her birth control pills while standing next to an attractive man; they were identified beneath their photo as “Susie & Nate, Hot to Trot.” The text on this ad was far more offensive than “brosurance.” It read: “OMG, he’s hot! Let’s hope he’s as easy to get as this birth control. My health insurance covers the pill, which means all I have to worry about is getting him between the covers. I got insurance. Now you can too. Thanks, Obamacare!”
Excluding free press by friendly reporters and celebrities, Washington has spent more than $700 million on a public-relations campaign dedicated to selling the ACA to young people.4 One social-media ad featured a young man wearing hipster glasses and plaid, zip-front onesie pajamas. He’s half-smiling and cradling a mug of hot chocolate in his hands. The caption read: “Wear pajamas. Drink hot chocolate. Talk about getting health insurance. #GetTalking.” (Bold in original.) At times it seemed as if Washington was making a bigger push to sell the law among young people than among its target beneficiaries. By the end of open enrollment in March 2014, 28 percent of enrollees were within the target age range of 18 to 34, even though this age group makes up around 40 percent of the uninsured population.5 Why should the government spend taxpayer dollars to convince people to purchase a product they are required to buy anyway?
Washington is targeting young people because the costs of their health insurance are high and the benefits they receive are low. They are generally healthy. People under 30 spend on average $600 a year on medical costs ($388 on medical services, $149 on drugs, and $62 on medical supplies).6 Yet with a silver plan, the average premium for a 27-year-old is $2,680, with an average deductible of $1,842. Premium subsidies would reduce the average premium to $671, but even so, a typical 27-year-old would have to spend $2,513 before getting any benefits.7 No rational person would want to buy such a product, which is why the government has to spend valuable taxpayer dollars to convince people to sign up. It would be more financially advantageous for young people to pay the fine and skip the coverage.
If only those who most need insurance, such as the elderly, actually buy it, then premiums rise for everyone. This price increase causes more young, healthy people, often called “young invincibles,” to drop health-insurance coverage. Only the sickest people will remain, costing the insurance companies even more per enrollee. As this happens, premiums will go even higher, leading to a vicious cycle known as a “death spiral.”
This problem can be mitigated if premiums are low enough to encourage healthy people to buy insurance. But, under the ACA, premiums for young people are anything but low. In 2014, 27-year-old males saw their premiums rise an average of 91 percent because of the law. In contrast, premiums for the average 64-year-old rose only 32 percent.8
When the ACA’s controversial risk corridors and reinsurance bands expire in 2017, premium rates are likely to spike even higher. This will drive even more young, healthy people out of the exchanges. In 2018, if federal subsidies for health insurance exceed half a percent of GDP, premium-subsidy payouts will be cut.9 Washington’s failure to make insurance more attractive to young people today means that the cost of even basic coverage will probably increase sharply in a few years. Insurance coverage at these steep rates will make sense only for those who expect to have high medical costs or risks.
While 91 percent is a major increase, premiums for young people have the potential to rise even more. After all, the law is only in its second year. As more of the law’s mandates go into effect in subsequent years, premiums could rise further. A survey of 17 major insurance companies estimated that the new law would lead to a 180 percent premium increase for young, healthy males.10
Jason Church, a retired Army officer who was injured in the line of duty, knows the difficulties young people face due to growing healthcare costs, many of which are related to the ACA. Jason is covered by the Defense Department’s Tricare, so he is free from the direct effects of the ACA as he recovers from his injury. Regardless, he sees what other young people are going through and cannot help but worry about how they will be affected.
“Are enough healthy, young people signing up for the law to cover the costs of insuring older people?” Jason asked us. “I personally would pay the penalty over paying more for insurance coverage I do not need, especially while the penalty is so low. I am sorry for those who have lost their current plans and are stuck shouldering the costs of ACA.”
Washington is loath to admit to young people that the health-care law is designed to force them to shoulder the costs of their parents’ health care. But the young, it seems, are not biting, as evidenced by their low enrollment rates. Only 28 percent of enrollees in the first enrollment period were between the ages of 18 and 34, well below President Obama’s 40 percent target.11
Not only will young people be paying higher premiums under the ACA, but they will also be forced to buy plans that cover health services they do not want or need. The ACA mandates that all plans available in the individual market offer an array of “essential health benefits,” which, in addition to contraceptive coverage, include maternity and newborn care, mental-health coverage, rehabilitative services, and pediatric care.12 The average 27-year-old is highly unlikely to require all of these benefits, yet the ACA requires people this age to pay for them nonetheless. Such mandates, though well-intentioned, drive up costs for young people, most of whom only need services such as periodic medical visits and