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Wise Beyond Their Years

The young won’t show up for Obamacare.

Dec 9, 2013, Vol. 19, No. 13 • By JEFFREY H. ANDERSON
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Former president Bill Clinton said recently that Obamacare “only works .  .  . if young people show up.” But it won’t work—because young people won’t show up. Obamacare gives them too many reasons not to do so.

...and refuse to enroll, while you’re at it.

...and refuse to enroll, while you’re at it.

Brooks Kraft / Corbis / AP

One reason is that Obamacare makes things more expensive for them. The Obamacare arithmetic depends on more young people choosing to buy government-approved insurance than were previously willing to buy cheaper, often better, insurance through the free market.

In its government-run exchanges, Obamacare raises premiums for the young by suspending actuarial science. It forbids insurers from considering some variables that are actuarially relevant to health care, such as sex and health, while also limiting their ability to take age into account in an actuarially based way. Under ordinary principles of insurance, a healthy young person pays a lot less than a person nearing retirement. Under Obamacare, that’s not so. Yet President Obama’s centerpiece legislation depends upon young people’s willingness to pay these artificially inflated premiums. 

Another reason the young are unlikely to show up in sufficient numbers is that Obamacare gives many of them an easy out: They can stay on their parents’ insurance free of charge until they’re 26. As for the rest, with the elimination of preexisting conditions as a barrier to buying health insurance, many will choose to go without coverage until they’re sick or injured.

In other words, Obama-care makes insurance more costly while simultaneously making it less necessary—especially for the young. 

In order to induce young people to buy in, Obamacare uses the carrot of taxpayer-funded subsidies and the stick of compulsion, enforced by the IRS’s collection of a fine from those who fail to show proof of government-approved health insurance. 

But how attractive will these subsidies actually be? A new study by the 2017 Project finds that the subsidies—which flow to insurance companies, not to individual citizens—benefit the old at the expense of the young, and the near-poor at the expense of the middle class. At a given income, the younger you are, the lower your subsidy will be (assuming you qualify for a subsidy at all). In fact, it turns out that younger Americans will generally be better off financially if they simply pay the fine and forgo the expensive product that the government is trying to compel them to buy. In the long run, Obamacare’s website “glitches” will pale in importance next to nonparticipation by the young.

The 2017 Project study (online at 2017project.org) examines premiums and subsidies for plans sold through Obama-care exchanges in the 50 largest counties in the United States (excluding Massachusetts, which Obama-care allows to play by different rules, and Hawaii and Maryland, where the state-based exchanges weren’t working and thus did not allow for data-collection). Those 50 counties comprise more than 29 percent of the U.S. population. The study compares the costs and subsidies under Obamacare for various ages and incomes, in 5-year and $5,000 increments, starting with a 21-year-old making $20,000. 

The findings are striking. Consider a 26-year-old (newly ineligible for Mom and Dad’s coverage) making $30,000 a year. Across these 50 counties, the average cost of the cheapest subsidized plan—the cheapest “bronze” plan—available to someone of that age from the Obama-care exchanges would be $2,134 a year. That’s roughly three times the cost of the cheapest plan this person could have bought pre-Obamacare, according to figures from the Government Accountability Office. Meanwhile, this 26-year-old’s taxpayer-funded subsidy, on average, would be $482, or just 23 percent of the premium. By contrast, a 61-year-old making that same $30,000 would, on average, get a subsidy of $4,018, covering 82 percent of the $4,885 premium for someone of that age. 

In the normal world of actuarially based insurance, a health plan would cost a 61-year-old about five times as much as a 26-year-old, reflecting the roughly fivefold difference in the expected price of their care. But in the peculiar redistributive world of Obamacare, that notion is turned on its head. Once the respective subsidies are factored in, the 61-year-old would pay, on average, $867 a year in premiums, while the 26-year-old would pay, on average, $1,652. That’s right—under Obamacare, the person who’s expected to cost the health care system only about one-fifth as much would, on average, have to pay about twice as much. 

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