Obamacare and the Young Invincibles


credit: Fonzie's cousin / Foter.com / CC BY-NC-SA

At the end of May, California's regulators announced that premiums in the state's insurance exchange would be lower than expected. But it quickly turned out that individual market premiums would actually be higher, and coverage would be more robust, than in the current individual market.

Since then, there's been a lot of back and forth regarding Obamacare and health premium "rate shock." But at this point, there's little dispute that Obamacare will cause individual market health insurance premiums to rise for younger, healthier individuals, relative to the price of individual market insurance that is sold today. Indeed, some folks are arguing that that's the whole point.

Josh Barro, in his new digs at Business Insider, makes this explicit. "What's happening in California," he says, "is exactly what's supposed to happen: If you're young, healthy, and affluent, your insurance is getting more expensive." And conversely, he says, insurance will become cheaper for the "old, sick, and poor."

The young and healthy are the key issue here. But it's not only the law's impact on the more affluent members of that group that matters. Indeed, in important ways the law's functionality turns on decisions made by relatively less well-off young people. The Economist's Will Wilkinson lays out the choice for a hypothetical uninsured woman in her mid 20s. 

Nicole is a healthy 25-year-old freelance illustrator making $30,000 a year. She is presently uninsured due to cost. How can she be expected to behave under Obamacare? Taking into account Nicole's subsidy, she'll be able to buy the least expensive "Bronze" plan on an exchange for $1,919, according the Kaiser Family Foundation's subsidy calculator

Look, that's not great. After going uninsured for a spell, about a year ago I signed up for a catastrophic plan (found through the Freelancer's Union) that cost me about $100 a month. I was…older than 25. Anyway, it's not always easy to get by on $30,000 in places with high rents, so one can imagine why Nicole might opt to go uninsured. But what about the non-compliance penalty under the individual mandate? Won't it coax her into enrollment?

Over the next two years, as the penalty scales up, it's pretty clear that Nicole would be smartest to pay the initially meagre fine and not sign up for insurance unless she comes down with something expensive. (No exclusions for pre-existing conditions!) But what about in 2016, when the non-compliance penalty is finally fully unfurled? That will be the greater of $695 per uninsured person, or 2.5% of household income over the filing threshold, which is not yet set, but this year was about $10,000 for individuals. So in Nicole's case, that's 2.5% of $20,000, which is only $500. So she's on the hook for $695. For Nicole in 2016, then, the difference between going uninsured and getting a Bronze plan is $1,224, which is just a touch more than I recently paid for a cheap catastrophic plan. If America's Nicoles are going without insurance due to cost, they're not going to be induced to get it under Obamacare. If the programme is going to bring down the cost of an average policy by goading the likes of Nicole into the risk pool, it needs a bigger carrot, stick or both.

I don't know what part of America's young, healthy and uninsured will find itself in a situation akin to Nicole's, but it would seem there's some reason to worry that the programme will not function as promised—especially when most of those eligible for subsidies don't know it, and surveys show that nearly "two-thirds of Americans who currently lack health insurance don't know yet if they will purchase that coverage by the Jan. 1 deadline set by the ACA". In any case, it is not at all clear that Obamacare's subsidies and mandate penalties are sufficient in size to prevent a situation in which the rules of the law "simply shift costs around", or to prevent a cost spiral that would drive the young and healthy out of the market…

How the nation's Nicoles—a group often referred to as young invincibles—decide to respond to these choices will end up having a big impact on how Obamacare functions. As The Examiner's Philip Klein wrote yesterday, "The success of Obamacare hinges completely on the young and healthy. The reason is that the dream of a system in which sicker individuals can obtain coverage at affordable rates is predicated on the idea that the government can corral a lot more young and healthy individuals into the insurance market to offset costs." That may be somewhat difficult, however, if the law's point is to raise costs for those same individuals it needs to cajole into joining the system. 

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  1. Peter,

    This Forbes article is a good explanation of the incredible mendacity of Obamacare’s defenders.


    If you want sick people to have insurance, healthy people are going to have to pay for it. And under Obamacare they will pay for it by being forced to buy gold plated insurance policies they neither want nor need.

    1. That pretty much sums it up. There’s really no financially rational reason for anyone to buy the kind of comprehensive coverage that ObamaCare forces upon people unless (A) your employer is going to pay for it, or (B) you arleady have a chronic helath condition that costs you a few grand a year.

      Catestrophic insurance is really the only kind that actually acts like insurance is supposed to. It’s a financial tool that mitigates risk, not a method is foist your risk off on other people.

      1. And that brings up the other crime of Obamacare, community rating. It is obscene to force healthy people to pay the same rates as unhealthy people based on a community rating. Imagine if we did this in car or house insurance. You would be paying rates that were the average of your town and end up with the same car insurance rate as the guy next door who is 25, has two DUIs and five major accidents.

        1. Progressives are statistically illiterate. You have no idea how many times I’ve heard them argue that nobody has ANY IDEA who is going to get sick, it could happen to ANYONE at ANY TIME, as an argument against anyone having different rates from anyone else. As if the whole concept of probability is completely foreign to them, or as if the only statistical distribution they can comprehend is a uniform distribution.

          1. To be fair, most people are statistically illiterate.

          2. What Nikki said.

            Also, you assume that these people are arguing in good faith. I suspect that many of them know better but choose to hew to the narrative.

            1. I suspect that many of them know better but choose to hew to the narrative.

              Ezra Klein claimed that the price increases are okay because 1/4 of people aren’t eligible for the cheapest type of insurance.

              In other words, 75% of people must be forced to pay higher premiums because it isn’t fair that 25% weren’t eligible for that type of insurance.

              I’m not sure if he’s that stupid or is just so invested in Obamacare that he cannot bring himself to admit that he was wrong.

              1. I think it’s less that he’s stupid or invested in Obamacare and more that he’s a genuine douchebag.

            2. Yes. And you can tell that Tonio because in 2009 and 10, many people were saying that rates would go up for the healthy. It is not like you have to be a genius to figure out that community rating and making insurance companies pay for pre-existing conditions was going to raise insurance rates. And people like Ezra Klein lied through their teeth and said this would never happen. Now that it is happening, Klein is saying that we knew this all along and it is a good thing. That is bad faith I think.

              1. It’s really really hard to interpret it as anythong other than bad faith.

                When you switch from “It’s not going to happen” to “Of course it will happen, and that’s a good thing” there are only two explanations: (1) you were lying the first time or (2) you were wrong and don’t want to admit it.

          3. Well it is possible that anyone could get sick or have an accident at any time. Perhaps they just don’t care that it is more likely to happen to some than to others. I think it goes along with the mindset that we can’t allow anything bad to happen to anyone. You just never know what might happen. And then, if you have no insurance, you might have to declare bankruptcy or set up a payment plan. And those are the worst things that can possibly happen.

            1. It’s the idea that nobody should have an unequal amount of bad stuff happen to them. If some people are unlucky enough to get sick, society has to financially compensate them by paying for their medical bills. So nobody’s health results in any unequal finacial losses.

          4. …”nobody has ANY IDEA who is going to get sick, it could happen to ANYONE at ANY TIME,”….

            ‘You’re no different. You’re just one paycheck away from being homeless like that guy on the corner!’

    2. The only good to come out of this will be the gnashing of teeth by all the young idiots who voted for Obama.

      1. Right, like those people are capable of learning lessons.

        1. Some are. Not the party faithful, but they constitute a minority of the electorate.

          1. Hopefully the Reason staffers who voted for Obama have come to regret it.

            1. Right, like THOSE people are capable of learning lessons…

              1. Just FYI, no one that reason queried in 2012 said they were voting for Obama OR Romney.

      2. Obamacare would have been better if not for RETHUGLIKKKLAN UBSTRUKSHUNIZM!!

        1. “Obamacare would have been better if not for RETHUGLIKKKLAN UBSTRUKSHUNIZM!!”

          And don’t forget the evil FOR-PROFIT people who won’t work for nothing for my health!

      3. They’ll just chalk it all up to whichever Republican becomes President in 2017.

        Oh, and korpurashunz.

        1. Well the fees kick in next year, so they’ll have three years before Rand Paul takes over.

          1. But the real bad fees kick in in 2016 and will be felt when you are filling out your 2016 return in…2017.

  2. Young and affluent, old and poor? Isn’t that backwards?

  3. And that group of uninsured, 20-40 billion people that last I heard, — 64% haven’t decided if they are going to get on the Obamacare bandwagon and buy the overpriced insurance.


    Then the gentle souls in the IRS can go after those sad, treasonous uninsured.

    1. The minimum price will be $20,0000. They will pay the penalty. And maybe, if we are lucky, they will by the millions refuse to pay the penalty and we will have a real no shit tax rebellion on our hands.

      1. It’s impossible to not pay the penalty if you have withholding.

        However we will have a lot of pissed off people who won’t be getting their tax refunds.

      2. John, they can’t require you to pay the penaltax, but they can require you to be current before receiving non-emergency care.

        1. I doubt it. That would mean they would have to ban doctors from performing services for cash.

      3. As I recall, and un-con of the ‘It can be read as a tax’ decision is that the IRS cannot actively collect it; you have to have overpaid and they’ll deduct it from your refund.
        If I were in the position of not wanting insurance, I’d examine my withholding amounts very carefully.

        1. That is if your employer lets you control your withholding rates. Mine doesn’t.

          1. I didn’t know an employer had that ability.
            It’s been a while since I worked for someone else, but I recall annual visits with HR to set withholding rates for the coming year.

            1. Yeah, I was told when I was hired that at this company all employees were required to set withholding at the maximum level. I wonder if that is technically legal to control employees withholding levels.

          2. You can at least make sure you aren’t taking any exemptions.

    2. And that group of uninsured, 20-40 billion people

      That dwarfs the number of insured people.

      Also the number of people…

      1. Not if you count the deceased. None of them have coverage, which is just an outrage if you ask me.

        1. AND THEYRE DEAD, so you can see how a lack of coverage turned out for them.

          1. That’s what happens when you don’t have Obozoscare ™!

        2. There aren’t even 40 billion dead people if you count all the humans who have ever lived.

  4. Will TurboTax/HnR Block/Joe the local tax preparer/1040EZ/IRS dial-a-file now ask me if my dependents have health insurance?

    1. Yes.

      I use Taxcut to prepare my personal taxes, and the MA module already does it. They call it a 1099-HC here.

  5. But it will be interesting to see how ObamaCare interacts with the growing grey-economy independent contractor business. With a lot more young people freelancing and working as independent contractors they aren’t going to have benefits, and they also aren’t going to have withholding.

  6. Ugh. Nicoles are the worst!

    1. Right?!?

    2. Agreed. We should have an entire thread about this subject. Two things immediately jump to mind that suck about Nicoles:

      One scheduled her wedding which I have to attend to coincide with the Boston Beer Marathon, which I wanted to do. Another says foolish things on the internet when the men are talking.

      1. It is cute that she thinks her opinions matter during man talk.

        She should really just put on something pretty and post on a website devoted to horses or shoes or something.

        1. Yesterday when we were discussing the intricacies of Game of Thrones/A Song of Fire and Ice she interjected once. I didn’t have the heart to tell her that the men were having a real conversation. Unsurprisingly, her comment was about butts.

          1. Yes, a manly conversation about…a wedding. Which is also half of what you’re talking about now. Who’s the chick again?

            1. They are the chicks, Nikki. Let’s me and you talk about rasslin’ and chewin’ tabaccy.

            2. That wedding was manly as fuck, you ignorant wench.

              There was a bedding ceremony and multiple fatalities, just like all the good weddings.

              1. Well, there was one problem with the bedding ceremony. It was twice as big as needed. The part where the guys all pick up the girl and carry her off to unclothe her makes sense, but when the women drag the man along to do the same is ridiculous.

            3. Nicole, of course you would think the show and book are all about the weddings. Do you even pay attention to any of the parts between?

              And the half of my first post in here that you referring to is me wanting to get out of a wedding (run by a girl, naturally) so I can go drink 26 beers in as little time as possible with thousands of strangers.

              1. Does the wedding have an open bar? Because if it does, you should just drink your 26 beers there. If it doesn’t, you shouldn’t go.

                1. Most wedding bars serve shit beer.

                2. I don’t believe it does. And even if it did there will be, at best, dozens of strangers.

                  1. Damn, your Nicole sucks.

                    1. Why do you think I want to get out of the wedding so badly?

            4. hey we had to debate the advantages of green brocade vs french sleeves

              1. Rasilio, I have no idea what language you are speaking.

                1. It is a sub dialect of High Valerian

              2. There are no “French” sleeves in Westeros.

  7. Pete, that is some lazy alt-text. So lazy that you will probably become unhealthy due to inactivity, thus requiring healthcare that you will get at artificially low prices by me overpaying for my required coverage. You bastard.

    1. Redundant alt-text is a crime in the Church of Reason. What say you? Burning, staking, or drowning?

      1. Why just one?

  8. Somewhat on topic: Sebelius, with solmonic wisdom “No lung for you, little girl.”

    Now every medical decision can be pushed up to some political crony who will then decide who lives and who dies based on poll numbers and tweets.

    We are so fucking doomed.

    1. but you can just bet if one of her cronies has a sick child, a special exception – under the radar, of course – will be made.

      1. If you have her seeekrit email address, you will be allowed to live….for now.

    2. What’s really troubling is that more than a few 9-15 year olds die every day (mostly car wrecks) and that more parents don’t donate their organs as a gift of life to other kids on the various donor lists.

      1. I gotta save those parts for myself, duh.

        1. He means “why don’t they donate their dead kid’s organs?” now “Why don’t thge parent don’ate their own organs to their kids?”

      2. Eh, if the FDA got out of the way, we’d probably already be cloning organs on 3d printers.

      3. …”parents don’t donate their organs as a gift of life to other kids on the various donor lists.”…

        The hospital makes money on transplants, as do the MDs, nurses, assistants, medical device suppliers. In fact everyone involved does.
        Except for those doing the donating; that would be unethical!

      4. The estate of the deceased should sell the organs.

        1. That’s MY IDEA!

          I’ve been promoting the notion that people should be allowed to leave their organs to their heirs, so when they die the organs are sold and the money goes to their estate.

          That way, even people with no inheritance could leave (say) $25,000 to their kids. I die, my organs are sold, my kids get a little nest egg.

    3. Meh. That’s a bullshit “look at sad little girl” story. This is a problem with the stupid way organ donations are treated. I’m not going to get excited about which stupid policy would be better. If there were a proper market for organs, then Sebelius wouldn’t be involved at all. Anyway, how much better will it really be to be on the 16,000 name adult waiting list?

    4. Actually, Sebelius is doing the right thing here. The trouble is that given that such pleas are ALREADY happening, it illustrates how difficult it will be for politicians to refrain from manipulating who gets what services. They’ve already packed the “mandatory minimum” insurance package with handouts to special interests (free birth control pills, free mammograms at any age).

  9. The purpose of insurance is to pool similar risks so everyone with an X% chance of a payout pays only about X% (+ epsilon for profit) of that expected payout. At a very gross level, it’s the reason why people obtain auto insurance if they drive and don’t obtain such insurance if they don’t.

    What Obamacare is doing is forcing people into the same pool, actively ignoring?rather than making use of?knowledge about which risk pool a person really belongs in. This way, people with an X% chance of some terrible illness pay much less than X% of the expected cost of treating that illness, while people with a 0% chance of the same illness pay much more than 0% of that expected cost. It’s like forcing non-drivers to buy auto insurance just to make auto insurance cheaper for drivers: the healthy subsidizing the unhealthy.

    1. it’s the reason why people obtain auto insurance if they drive and don’t obtain such insurance if they don’t.

      Slow down. You’re telling me that, as a non-driver, I’ve been missing out on the option of buying car insurance all these years?! Wtf?!?!

      1. I’m waiting for the Affordable Auto Insurance Act.

        1. Will it cover brake liners? And carwashes, we NEED carwashes. I bet those evul teabaggers will start a Cold War on Cars.

          1. If you aren’t covering the cost of Sex and the City bumper stickers, you hate women.

        2. “I’m waiting for the Affordable Auto Insurance Act.”

          No! NO! I’ll never be able to afford service on the thing again!

      2. You bastard! You haven’t been paying for auto insurance all these years just because you don’t have a car? Next you’ll be telling me that you aren’t willing to pay for your own hysterectomy and your wife’s prostate exams.

    2. Comparisons to car insurance only work when liberals want to say the government can make you buy insurance, and even then, only in a very vague and unexamined way.

    3. Actually most people buy auto insurance either because the bank or the state requires them to.

      I suspect that without those laws that auto insurance would be a very tiny market and possibly even be non existant and would instead just become a rider on other types of liability insurance.

      1. No. Banks would force us to buy auto insurance as a condition of the note. No way would a bank loan on an uninsured piece of collateral. But yes, people who own their cars would often chance it.

        1. If you have significant assets and a nice car, a reasonably prudent person would purchase insurance to prevent having everything they own taken away in a lawsuit, and to protect their car against being totaled if they couldn’t afford two sets of car payments simultaneously.

          1. If you have significant assets and you drive carefully, you would self-insure. Although you’d still want liability insurance, in case someone sued you.

          2. Yes you would purchase some sort of liability insurance, the question is whether it would be specifically an auto policy or simply part of a broader liability policy.

            Collision insurance is much more of an open question because if you are a relatively safe drive you are probably better off self insuring for collision damage (stick $50 a month into a savings account to cover of potential damages to the car)

            1. I wouldn’t buy auto insurance unless my car was worth more than $10,000.

              My rule of thumb is never buy insurance for something you can afford to replace out of pocket. If you do, you’re just subsidizing the insurance company, because your premiums will (by definition) be greater than your expected losses. (Otherwise the insurance company could not make a profit).

              1. Oh ,well I would carry liability insurance obviously, because I cant afford to pay a $2 million settlement. Duh.

                1. Obviously a reason the minimum wage needs to be $200/hr.

        2. IIRC when I bought my first car the bank did in fact require me to carry a comprehensive insurance policy on the car.

          1. HM,
            True for those who borrow money for a car purchase.
            Most of the cars I’ve owned were bought cash.

      2. I think that most drivers who have any kind of assets would still carry liability insurance, at least.

        I’m not required to have insurance at all where I live and I do.

        Do I live in the only state (NH) that doesn’t require insurance for all drivers?

        1. As far as I know all States require minimum amounts of liability insurance NH included. A quick google search shows that in NH the minimums are …

          “$25,000 per person injured in an accident;
          $50,000 per accident if more than one person is injured;
          $25,000 per accident for property damage, and
          $1,000 in medical payment or “med pay” benefits.”

          Or alternatively you can file with the state showing you have the assets to self insure and cover payouts to at least that level.

          Either way however the liability insurance is a requirement.

          1. Those are the requirements for liability policies in NH, not requirements for every driver.
            If you cause an accident in NH, you can be required to carry liability insurance, but there is no general requirement. My old truck that just does dump runs has no insurance on it at all.

        2. “Do I live in the only state (NH) that doesn’t require insurance for all drivers?”

          Yes. Some stays however, like TX defacto don’t require it as there really isn’t anyway for their DMVs to know if you are carrying it or not. But NH is the only state without a legal requirement, and still about 90% of people purchase insurance.

    4. Just forget all that garbage about pooling risk.

      Insurance can be conceptualized purley as an individual risk-management tool. You pay the insurance company a monthly premium to take on your financial risk. Depending on how risky YOu PERSONALLY are, your premiums will be higher or lower. If you are riskier, you will have to pay more. If you are less risky you have to pay less. That’s it, and that’s all from the consumer’s perspective. There is not “shared risk’. There is no “pool”. The only point that pooling comes into play is from the perspective of the insurance company trying to reduce IT’S risk by having a large number of customers.

      1. Exactly. If an insurance company had only one customer, it would be a bad business. But the deal for the customer would still be good.

  10. there’s some reason to worry that the programme will not function as promised

    Gov’t Programs 101.

    Welcome to the discussion, finally.

  11. Ok I may be missing something but isn’t the “fine” going to be another revenue source for the Govt? The insurance companies are not going to get any benefit from someone paying the IRS part of their income.

    1. in theory the fine is supposed to fund the government subsidies for low income folks at least in part and therefore would infact end up in the insurance companys pockets eventually.

    2. Congrats, you are qualified to be Chief Justice.

  12. but it would seem there’s some reason to worry that the programme will not function as promised

    An insurance pool designed by people who are not only NOT underwriters or actuaries, but who know fuck-all about insurance, not functioning as intended?

    Who could have anticipated that happening?

    1. Democrats who really want single payer?

  13. There is something wrong in the US when a 400 lb, chain smoking heroin and alcohol addict cannot get health insurance for the same price as a 105 lb marathon runner who has never had a sick day in her life.

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