The Young Aren't Buying It | Citizens Against Government Waste

The Young Aren't Buying It

The WasteWatcher

More and more stories are appearing about growing opposition to Obamacare, also known as the Affordable Care Act (ACA), from America’s youth and that’s not good news for the Obama administration.  Simply put, when it comes to signing up for Obamacare the “young invincibles,” the cohort of the U.S. population that are desperately needed to make the healthcare law work, aren’t buying it.  It clearly explains why the White House found it necessary to have a Youth Summit on Wednesday.

Here are parts of a story from today’s The Hill, a Capitol Hill newspaper:

Mounting opposition to ObamaCare among young adults is creating a new crisis for the White House.  While the federal enrollment website appears to be improving by the day, polls show the “young invincibles” key to making the law work are becoming less likely to enroll.

Younger people were skeptical of the healthcare reform law even before its troubled rollout, despite their support for President Obama.  But polling indicates the problems facing — a site the administration initially touted as a hip, tech-friendly experience — have reinforced their doubts about the need to have health insurance at all.

If the young invincibles do not sign up for Obamacare, then the “death spiral” will occur in the exchanges. Without young people paying premiums to offset the costs incurred by sicker Americans in the exchanges, insurance companies will be forced to raise premiums significantly, which will in turn discourage more healthy people from purchasing a plan.

Just recently Harvard University’s Institute of Politics released their yearly survey of 18- to 24-year old college undergraduates.  The survey project was begun in 2000 and for 13 years has analyzed undergraduates on a broad set of “longitudinal and current events issues.”

Here are some excerpts from Ron Fournier’s article in the National Journal on the survey that describes the young invincibles’ disappointment with the president and Congress that also includes a distrust of Obamacare:

The survey, part of a unique 13-year study of the attitudes of young adults, finds that America's rising generation is worried about its future, disillusioned with the U.S. political system, strongly opposed to the government's domestic surveillance apparatus, and drifting away from both major parties. 'Young Americans hold the president, Congress and the federal government in less esteem almost by the day, and the level of engagement they are having in politics are also on the decline,' reads the IOP's analysis of its poll. 'Millennials are losing touch with government and its programs because they believe government is losing touch with them…

The survey of 2,089 young adults, conducted Oct. 30 through Nov. 11, spells trouble for the Affordable Care Act. The fragile economics underpinning the law hinge on the willingness of healthy, young Americans to forgo penalties and buy health insurance.

According to the poll, 57 percent of millennials disapprove of Obamacare, with 40 percent saying it will worsen their quality of care and a majority believing it will drive up costs. Only 18 percent say Obamacare will improve their care. Among 18-to-29-year-olds currently without health insurance, less than one-third say they're likely to enroll in the Obamacare exchanges."

CAGW has been saying for some time that because of ACA’s community rating rules, premiums for young, healthy adults will be much more expensive than they are now.  (The rules restrict the ability of insurance companies to charge more for premiums based on age, health conditions and sex, for example.)  The premiums may be more expensive than what many young people will be willing to pay and choose the fine instead.

For the first year, the fine is $95 a year or 1.0% of taxable income, whichever is greater.  The fine increases over time to $695 a year (with continued inflationary increases) or 2.5% of taxable income in 2016.  Since young adults between the ages of 19 to 25 make up 17.3% of the uninsured, their participation is crucial to Obamacare’s success. (Adults 26 to 34 make up 21.6% of the uninsured so the two cohorts together are approximately 40% of the uninsured.)

Jeffery Anderson of the Weekly Standard examines the likely scenario of young adults walking away from Obamacare in an article entitled, “Wise Beyond Their Years: The Young Won’t Show Up for Obamacare.”  He says:

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."

Anderson is also the executive director of the Weekly Standard's 2017 Project that works to "bridge the worlds of policy and politics with the purpose of developing and advancing a conservative reform agenda."  In the aforementioned article, he discusses a 2017 Project study that “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.”

You can find the study here.

He gives an average of what a young person may expect to pay for an Obamacare plan.

… 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."

I decided to take a look at some of the fines compared to the price of a subsidized plan of Obamacare.  Here are some examples:

  • A 26-year old in Palm Beach, Florida making $35,000 a year, the cheapest Bronze plan would be $1727 (no-subsidy.)  The fine would be $253.  The savings from paying the fine instead of purchasing a plan would be $1474
  • A 31-year old in St. Louis, Missouri making $25,000 a year, the cheapest Bronze plan would be $811 with the subsidy.  The fine would be $153.  The savings from paying the fine instead of purchasing a plan would be $658
  • A 36-year old in Westchester, New York making $40,000 a year, the cheapest Bronze plan would be $2862 with the subsidy. The fine would be $303. The savings from paying the fine instead of purchasing a plan would be $2559.
  • A 21-year old in Westchester, New York making $20,000 a year, the cheapest Bronze plan would be $83 with the subsidy.  The fine would be $103.  The savings from paying the fine instead of purchasing a plan would be –$ $20.
  • A 26-year old in Santa Clara, California making $40,000 a year, the cheapest Bronze plan would be $2445 (no subsidy). The fine would be $303.  The savings from paying the fine instead of purchasing a plan would be $2143.
  • A 51-year old in Santa Clara, California making $40,000 a year, the cheapest Bronze plan would be $2240 with a subsidy.  The fine would be $303.  The savings from paying the fine instead of purchasing a plan would be $1937.

As you can tell, prices and whether someone can get a subsidy varies by age, income, the price of the plan, state and region.  But any normal individual will take into consideration cost and the risk vs benefit of whether or not to purchase insurance.  The 26-year old in Santa Clara, who more than likely is very healthy, may decide to take the risk not to purchase a plan.  He saves $2143 dollars by paying the fine rather than spending approximately $204 a month for insurance.  However, the 51-year old in Santa Clara, making the same salary, gets access to a subsidy and may decide it is worth it to purchase a health plan since he is older and may have some health issues.

Anderson sums it up this way:

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."

It is precisely these kinds of risk vs benefit calculations that will cause Obamacare to fail.

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