Obamacare

ObamaCare To Result In Higher Premiums for Young People Too

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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. 

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  1. 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.

    RC Dean…Paging Counselor RC Dean…please pick the white courtesy phone.

    1. When you can snatch the Iron Law from my posts, grasshopper . . . .

  2. Also, excellent Alt-text, Suderman! That’s exactly how I recoup my fees.

  3. But, but, but it’s called the Affordable Care Act! That means it will make health care affordable! How can it make insurance cost more? It’s got ‘Affordable’ in its name!

  4. I guess a dog biting a man is actually news if the majority are under the impression men biting dogs is the norm.

  5. This isn’t even an unintended consequence. This is exactly what “community rating” is designed to do, that is its purpose: To “even out rates” with lower rates for the older/sicker by raising them on the younger/healthier.

    1. I spent the entire run up to the passage of the Act attempting to explain this to my cohort. Their reaction was not unlike sarcasmic’s above post.

      The worst thing the boomers ever did was father my generation.

  6. Hahahaha, I’m so glad the college socialists who voted for this idiot are going to starve.

  7. All of Obamacare was based on completely stupid and illogical premises.

    1. That we could insure millions of people who can’t afford it now without spending any money.

    2. That someone with insurance somehow costs the system less than someone who doesn’t as if insurance companies print their own money.

    3. That making insurance companies cover pre-existing conditions will not raise the rates of those who already have insurance.

    4. That having a community rating won’t screw the young and healthy.

    All of that is just nonsense. Yet the entire bill was sold on just those four statements.

    1. You forgot a few other premises:

      1. Laws are magic. So when results differ from stated intentions, it has to be the fault of the free market.
      2. Money is wealth. So when the government prints money it creates wealth.
      3. Higher costs foisted onto greedy insurance companies will come out of their dirty profits, and not result in higher premiums.
      4. It’s Bush’s fault.

      1. Number 4 could definitely be number 1, too.

  8. Premiums are only increasing because the insurance companies are greedy KKK-orprashuns. The obvious, common sense, sensible, sensibly common solution is to outlaw selling insurance and make health insurance a function of the federal government.

    And nothing will go wrong.

  9. “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.”

    As we all know, the only sensible response is to make it impossible for those young freeloaders to opt out.

    1. Yes it is called the mandate. At heart, that is what Obamacare was about, forcing the young and lower middle class to subsidize the healthcare of the poor via forced insurance coverage.

      1. Obviously, we will increase the penalty until it exceeds the cost of insurance. Then, our young, healthy hosts can never rid themselves of parasites. If the young can’t pay, just take their organs. As Roy Blaty put it “I want more life!”

  10. Will this actually result in a death spiral if, as there are in Obamacare, subsidies that pick up 100% of the cost increases over a certain income threshold for a majority of the purchases? That is, even if the sticker price premium spikes because of the 3:1 rule, a young person that qualifies for subsidies is protected from most of the increases, and so will not opt out.

    1. As someone who works in healthcare, this is how it works:

      People who don’t have insurance generally don’t have it because they just don’t want it, can’t be bothered, etc. etc.

      Even if its free. We get lots of people in who are eligible for Medicaid but have never signed up until they were sick.

      So, yes, no matter what the subsidies, a sizable portion of the population that is uninsured now will stay uninsured until they need it.

  11. Transfer payments from the poor to the rich — its the socialist way!

  12. i hate people

    1. Welcome to H & R! You’ll fit right in.

  13. Whether you delay implementation of the community rating provision doesn’t matter.
    People will eventually figure out whether health insurance is worth the price relative to the penalty and will rationally choose not to purchase it if it isn’t.

    Eventually you will have to raise the penalty to a coercive level.

  14. The Individual Health Insurance market is adjusting to The Affordable Care Act and Consumers are slowly accepting the change.The benefit to individuals and Families is hopefully Affordable Health Insurance.The Large number of uninsured Americans is unsustainable by the health care system.With the Affordable Care Act now law consumers are benefiting from the changes to Health Insurance plans and coverage.Consumers are now in charge of their own Health Care,while Insurance companies have new health care mandate.

  15. The cost of Florida Individual Health Insurance premiums have increased over the years and still continue to increase at the time this article is written .The fact is that consumers have to start wondering whether the premiums that they are paying for Florida Health Insurance Plans is really worth the benefits received, especially when you are healthy.

    There are no easy answers when it comes to Florida health care cost. With the Government getting involved in order to control cost and at the same time getting consumers back in charge of their own care with Health reform,this will have long term benefits in years to come.

    There are many changes taking place in the current system. Some will be visible to consumers and some won’t. As the new law takes effect the new changes are designed to benefit the Insured, UnInsure, Providers and of course the Government.

    Why do you really need Affordable Health Insurance.? Having Individual health insurance you are insuring your self against the risk of incurring medical bills as a result of a Medical illness or Accidents.Health Care cost has a direct impact on Individual Health Insurance premiums.

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