Obamacare: A bad deal for young people
By Alyene Senger
By now, young adults have heard that they are key to making Obamacare work, and the Obama administration has spent ample resources trying to convince them that the law is a good deal for them.
But they don’t seem to be buying in. A new Harvard poll shows that 57 percent of young adults polled disapprove of the health care law. And with good reason: The law will impact young adults’ wallets far more negatively than older adults in two big ways.
1. Higher premiums. First, it’s the Obamacare community rating rule. This rule forces insurers to limit the difference they are allowed to charge based on age. The result is that younger adults will have to pay artificially higher premiums than they would have paid before Obamacare, to help offset the higher costs of insuring older and sicker people.
This means young adults are by far hit the hardest when it comes to the massive premium increases consumers will face moving from their previous policies to Obamacare-approved policies — many will pay more than double.
2. Not such a great deal on subsidies. The law’s supporters always claim that the rate shock factor isn’t a big deal because most people in the exchange will qualify for subsidies. Moving past the fact that subsides are not free — the Congressional Budget Office projects they’ll cost taxpayers over a trillion dollars by 2023 — many young adults won’t qualify for subsidies, or if they do, their subsidies will be far less than those received by older adults.
Here’s how the subsidies work: In the exchanges, those who aren’t offered minimal essential coverage elsewhere (like through an employer) and who earn between 100 percent and 400 percent of the federal poverty level (FPL) are eligible for a premium subsidy after they pay a certain percentage of their income in premiums. The applicable percentage of income increases with income level. Subsidies will be based off of the second-lowest cost silver-level plan in a given area.
Premiums vary by age, but the applicable percentage of income for premiums does not. Thus, older adults with the same income will receive a more generous subsidy than younger adults at the same income level.
The National Center for Public Policy Research examined premium data in 15 exchanges and found that subsidies for most young adults phase out at 300 percent of FPL, while older adults (51-64) will receive subsidies up to the threshold of 400 percent of FPL.
The authors provide this example:
Compare two individuals each making $35,000 annually, the first age 30 and the second age 60. For both, the dollar amount of their applicable percentage is $3,325. In only two of the 13 exchanges examined in this study would the 30-year-old receive a subsidy, while the 60-year-old does in every exchange. On average, the 60-year-old would receive a subsidy of $3,354.
The authors then apply the weighted average nationally: “If the average incomes at which subsidies end in the 15 exchanges examined in this study are extended to the nation as a whole, then over 1.1 million of those age 18-34 who are single, do not have children and have incomes below 400 percent FPL will receive no exchange subsidies.”
Another study by The 2017 Project determines the median and average subsidies by income and age for 50 of the most populated counties in the U.S. and finds similar results — young people will receive far less in subsidies than older adults.
Substantially higher premiums and no subsidy or smaller subsidies — this doesn’t sound like a “good deal” for young adults.
When you consider that the penalty for not purchasing insurance is far less than the cost of coverage, it doesn’t bode well for incentivizing the population Obamacare so desperately needs to make the premium math work for the rest of exchange enrollees.
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