Christopher Conover, PhD
Support for the Democrats among voters under 30 has plummeted since 2008. Why? The new health reform law packs ample reasons for youth to be very concerned (or even outraged). The law makes health insurance coverage for twenty-somethings more expensive, likely will contribute to their already abysmal unemployment rate, and will force millions to buy insurance they do not want at a price that is a bad deal for them.
The bill makes coverage more expensive for young adults in two ways. First, it restricts how insurance companies can price insurance. Compared to 20-24 year-olds, average health spending for males age 55-59 is more than six times as high, while for males age 60-64 this spending ratio is nearly 9 to 1. But under reform, premiums cannot vary by more than a factor of three across age groups. Young people will pay higher premiums so their parents can pay lower premiums. Since the average income of households headed by 55-64 year olds is 2.5 times as high as that of households headed by those under 25, this rule may strike many young adults as less than fair. Young adults will be permitted to sign up for a catastrophic plan not available to others, but the adverse impact remains: those under 30 either will have to pay more for the same coverage or pay the same for less coverage.
Obamacare also increases premiums by requiring health insurers to offer preventive benefits with no patient cost-sharing (i.e., deductibles or copayments). There is nothing to stop insurers from offering free preventive benefits now; indeed, many do. However, tens of millions of Americans have coverage with cost-sharing for preventive care; for them, the elimination of cost-sharing apparently is not worth the higher premiums required. This is especially true for young adults since many preventive services (e.g., mammography, cholesterol screening, colorectal cancer screening, osteoporosis screening) are only recommended for adults 35 and older. Young adults again must cross-subside older adults who generally have much higher incomes.
Workers under 25 years of age are far more likely than older workers to be unemployed. For workers age 20-24, the August unemployment rate was 14.7 percent. But it was even higher for 20-24 year-old black males (29.7 percent) and 16-19 year-old black males (49.3 percent). Unfortunately, the new health law amounts to a tax on low-skill workers (e.g., teenagers) and those in low-pay entry-level positions (typically young workers).
The best job opportunities for low-skill workers are in leisure/hospitality services and retail trade. Under the new law, employers with more than 50 workers will be required to either offer health coverage or pay a penalty of $2,000 per full-time equivalent worker. (For part-time workers, total hours worked are summed and divided by 30 to obtain FTE workers). This penalty equals 15 percent of average wages in the food and beverage industry, and 9 percent of wages in retail trade. Worse, even employers who offer coverage still face a penalty of $3,000 for every worker who opts out of employer coverage to obtain subsidized coverage in the new health insurance Exchange. The Exchange will offer minimum-wage workers coverage for no more than 3 percent of their annual income (equaling $36 per month). This is well below the amount most employees contribute toward their employer-provided health plan, so many low-wage workers will want to jump to the Exchange.
For jobs paying only minimum wage, employers will be unable to recover the cost of these penalties by reducing wages. This will provide them a strong incentive to eliminate low-wage jobs by automating services or shifting more tasks to the customer (e.g., scanning one’s own retail purchases). Unemployment among teens and young workers will rise even further.
Finally, everyone must buy coverage (which the foregoing shows will not be a good deal for the young), or pay a tax penalty of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5 percent of household income, whichever is larger. Thus, minimum-wage youth workers either must buy overpriced coverage or pay a penalty equaling 4.8 percent of wages.
It’s little wonder that voters under 30 who gave President Obama more than two-thirds of their votes in 2008 have grown disillusioned.
Conover is a research scholar at the Center for Health Policy at Duke University.