Rate Shock: In California, Obamacare To Increase Individual Health Insurance Premiums By 64-146%. Progressives are becoming increasingly concerned at the prospect of millions of uninsured young people deciding to push the easy button next year by simply paying a very small fine rather than obtain health coverage.
- Consequently, they have turned to a new argument to get those under 30 to act against their self interest by signing up for the Exchanges. Now we are being told that Obamacare will be a good deal for young people in the long run since whatever short-term losses they incur in the form of higher premiums will be more than made up later when they are older and get to pay lower premiums than they would in today’s market.
- But those making these arguments haven’t offered any analysis to back up their claims. The conceptual point evidently is supposed to be intuitively obvious. Once the time value of money is taken into account, the average young person will be worse off under Obamacare even if they live long enough to be a near-elderly person who pays premiums that are well below actuarially fair rates.
- A recent study by the National Center for Public Policy Research shows that: About 3.7 million of those ages 18-34 will be at least $500 better off if they forgo insurance and pay the penalty. More than 3 million will be $1,000 better off if they go the same route.
- Consequently, many more will opt to pay the extremely modest tax rather than fork over many thousands of dollars to purchase coverage that became substantially more expensive for young people thanks to the misguided pricing rules imposed by Obamacare. The risk that the law will fail in an “adverse selection death spiral” thus has gotten much larger.
What’s so bad about modified community rating?
- Modified community rating essentially is an excise tax on people who buy health insurance. Those who choose to go bare avoid the tax entirely, but for those who do buy coverage, the tax is highly discriminatory, imposing the highest burdens on those who are young.
- Imagine a state that tried to impose a sales tax in this fashion, where everyone would have to show an ID card and the amount of tax charged to 18 year olds would be 18% while those age 30 would only have to pay 5% and seniors would get a rebate.
- People rationalize modified community rating on grounds that what goes around comes around. “Don’t worry kid. Someday you too will be old enough to enjoy premiums subsidized by youngsters your age. It all works out in the wash.”
*Modified from a Forbes.com article