Virtually all Americans will be required to have health insurance under the Affordable Care Act starting in 2014, and President Barack Obama especially wants young, healthy people to sign up.
About two-thirds of the uninsured are younger than 40. They use fewer health services, and their premiums are needed to help keep insurance costs down for everyone else.
Yet the incentive structures in the law work at cross-purposes with this goal and could well undermine its success. It will all come down to costs.
Four out of 5 people younger than 30 will face higher premiums than without the Affordable Care Act even with the subsidies many can receive.
The law requires young people to pay more for their health coverage so older people can pay less. A study published this year by the American Academy of Actuaries’ Contingencies magazine found that because of this provision, “premiums for younger, healthier individuals could increase by more than 40 percent.” Young men will pay even more than young women.
A former director of the Congressional Budget Office, Douglas Holtz-Eakin, conducted a survey that showed fewer than half of young people will sign up for insurance if premiums rise by 30 percent.
Young people also face a daunting approval process in applying for coverage. Applicants must divulge their income, family status and information about their employers, details on any insurance offered at work and their health habits — just to find out if they are eligible for subsidies.
Ezekiel Emanuel, a key architect of the president’s health plan, says he is worried that young people will be “bewildered,” and they may “forgo purchasing health insurance and opt to pay a penalty instead.”
That certainly will be an attractive option for many since the penalty starts at just $95 the first year.
And there is yet another disincentive for young people to enroll in coverage: They can wait to sign up for coverage until after they get sick or injured. The law requires health insurance companies to sell insurance to anyone who applies.
But if young people don’t sign up, the insurance pools are likely to be composed primarily of people who have high health costs. This could cause a “death spiral” where many more older — and sicker — people are enrolled, causing health insurance premiums to rise to cover their medical costs, thereby driving even more young people out of the market.
The White House believes that it will be able to persuade young people, who overwhelmingly supported the president, to enroll out of loyalty.
“The president connects with young people, too, so he needs to use that bond and get out there to convince them to sign up for health insurance to help this central part of his legacy,” said Emanuel, a health care expert at the University of Pennsylvania.
But young people may find that zeal may be severely tested when it comes down to paying thousands of dollars for health insurance that they may not want or need.
Consider, for example, a 27-year-old earning about $34,000 a year. He now could buy health insurance for about $200 a month. However, the new rules and more generous benefits required under the health law mean he would have to pay about $300 a month instead. He could get a subsidy of about $20 a month but, even with that, he still would be paying nearly $1,000 a year more for health insurance than without the law.
The White House is expected to mount a massive advertising campaign this summer to encourage people to enroll.
This will severely test his young supporters, who are having the hardest time finding jobs in our economy. Forcing them to also purchase health insurance — and pay more for it — may cool their enthusiasm to help the president fulfill his legacy.