As we get closer to the scheduled implementation of ObamaCare's major coverage provisions, we're seeing even more evidence of what many of the law's critics warned: Many individuals will see their health insurance premiums rise in the wake of the law.
We've already seen big premium hikes in a handful states. Now a study from the consulting firm Oliver Wyman projects that the law's insurance restrictions will raise health insurance prices for young people.
The study estimates that people in their 20s could see hikes in the range of 42 percent. Those in their 30s could see premium hikes of about 31 percent. That's because the law restricts how much insurers can restrict premiums based on an individual's age; insurers can charge older individuals no more than three times what they charge the young. Which means that younger individuals will have to balance out the greater costs of older beneficiaries; it essentially forces the young to subsidize health insurance coverage for the old.
The insurance industry is warning that this could cause breakdown in the health insurance market, at least for the first few years. Via The Hill:
The lead advocacy group for U.S. health plans recently petitioned the Health and Human Services (HHS) Department to delay its implementation of the 3:1 rule.
"Higher rates for the younger population combined with low mandate penalties during the first years of the ACA implementation will result in adverse selection because younger individuals are likely to choose not to purchase coverage," America's Health Insurance Plans (AHIP) wrote in comments to HHS.
"When these younger individuals do not enroll, destabilization of the individual market will occur, premiums will increase in the individual market for enrollees of all ages, and enrollment will decline."
This sort of effect, often referred to as an insurance death spiral, would not be entirely unprecedented. Prior to ObamaCare's passage, several states enacted similar restrictions on how insurers could structure their charges. The result? Individual insurance market meltdowns in which higher premiums led people to drop coverage, leading to even higher premiums, and so on until the individual markets basically ceased to exist. ObamaCare may not lead to effects quite that drastic. But it seems more than clear that higher premiums and insurance market instability are on the way.