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Good News: Premiums to Go Up 17% for Young People

2:10 PM, Mar 30, 2010 • By MARY KATHARINE HAM
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Obamacare will make it more difficult for young adults to buy their own insurance because restrictions on age-based pricing will shift the costs of insuring the old and infirm to the young and healthy:

Beginning in 2014, most Americans will be required to buy insurance or pay a tax penalty. That's when premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press. The analysis did not factor in tax credits to help offset the increase.

The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years.

For the young man featured in the story, it could mean $300-500 more per year. The bill seeks to offset the costs for individuals by subsidizing insurance for young people making up to four times the poverty level, allowing young singles on Medicaid, and allowing them to stay on their parents' insurance until they're 26.

Young people were the age demographic most likely to support Obamacare during the health-care debate (perhaps because a lot of media didn't write this story until after the bill was passed), and most will likely happily acquiesce in its costs. The AP's study of possible hikes says they'll start around 2014, but one wonders what will happen to companies providing insurance to individual young people as they prepare for the onset of Obamacare's mandates.

As the Wall Street Journal notes, not everything will be static until that date:

The first result will be turmoil in the insurance industry, as small insurers in particular find it impossible to make money under the new rules. A wave of consolidation is likely, and so are higher premiums as insurers absorb the cost of new benefits and the mandate to take all comers.

The individual insurance market, in which many young people buy, is expected to be disproportionately affected by the legislation and see premium hikes between now and 2016. Some of that will happen before Obamacare's subsidies kick in, and of course, some young people will not qualify for subsidies. It will be tough, even for Obama-supporting young people, to pay four years of costs before they see benefits. And, even after benefits kick in, mandates on what kind of insurance young people can have will likely eliminate some of their most appropriate and cheap choices— catastrophic insurance plans with high deductibles paired with HSAs, for instance.

There are those out there who are not thrilled with the prospect:

Jim Schreiber, 24, was once an Obama supporter but now isn't so sure. The Chicagoan works in a law firm and has his own tea importing business.

He pays $120 a month for health insurance, "probably pure profit for my insurance company," he says. Without a powerhouse lobbying group, like AARP for older adults, young adults' voices have been muted, he says. He's been discouraged by the health care debate.

"It has made me disillusioned with the Democrats," he said.

It's nice to see some young people straining at the government dependency bit, if only just a bit. This is a pretty good illustration of how tricky it has always been to insure more people and cut costs at the same time by restricting the market further. These were the specious twin goals of Obamacare, but here, you're jacking up rates for young people, the most easily insurable in the country, making it harder for them to buy insurance in order to make it slightly easier to insure old people, whose care is already subsidized by the rest of us. And, when young people can't afford to buy the health care which should have been cheap but is now expensive, you're subsidizing them. Tell that story to most Americans, and they quite reasonably don't hear "savings."

The young people of the Obama generation are used to being able to change their cell-phone background pictures twice a day, to customize their iPods, cars, and DVRs to their exact specifications on a whim, and in many cases, for free. Obamacare will necessarily mean fewer choices for young people at higher prices, and it will not be the market's fault. Will they always hold the federal government, which takes a third of their income, to such an appreciably lower standard than they hold their $150 smart phones? Democrats are counting on it.

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