Pity the Young

By Katrina Trinko

Tuesday, January 15, 2013

 

When I was a 21-year-old college graduate, my job — like plenty of the jobs people settle for in their 20s — didn’t include health insurance. Being a cautious sort, I was reluctant to forgo insurance entirely: What if I was that one unusual young adult who would face a serious, expensive health crisis? So I bought a high-deductible plan that was $60 a month (and tried not to think about how much ramen that money could have bought).

 

While I ultimately chose to go the catastrophic-coverage route, I could probably have afforded more extensive coverage. But for young adults in 2014 and beyond — when Obamacare is fully implemented — that may not be the case.

 

In fact, for young adults — the majority of whom voted for Obama and supported Obamacare — the implementation of Obamacare could result in health-insurance premiums’ rising significantly. Young, single adults who make about $25,000 a year or more will face premium hikes of 42 percent in the individual market, according to an analysis conducted by consulting firm Oliver Wyman and published in the American Academy of Actuaries’ Contingencies. That’s some reward for their loyal advocacy for Obama and his health-care policy. Single thirtysomethings who are ineligible for exchange subsidies will be affected as well, with their premiums likely to increase by 31 percent.

 

There’s one key age group that will be barely affected by Obamacare: 60- to 64-year-olds, whose premiums are expected to increase by only 1 percent.

 

That makes sense, because a key component of Obamacare is its limitation on how much more health insurers may charge one customer than another. As Avik Roy wrote in Forbes, “Under free-market conditions — what insurance pros call experience rating — the typical 18-year-old costs one-sixth what it costs to insure the typical 64-year-old. But Obamacare, in a sop to the AARP, requires that insurers only charge three times as much to their costliest beneficiaries what they charge to their least-costly ones.”

 

In other words, here’s what Obamacare “gives” young adults: a requirement to subsidize the health-care costs of their elders, who have had decades to increase their salary and save. And the pain is going to be widespread, according to analysts Kurt Giesa and Chris Carlson: “We estimate that almost 80 percent of those ages 21 to 29 with incomes greater than 138 percent of [the federal poverty level] who are enrolled in nongroup single coverage can expect to pay more out of pocket for coverage than they pay today — even after accounting for premium assistance.” In 2011, 9.9 million people bought primary or additional health coverage on the individual market, according to the Census.

 

It’s true that young adults will be permitted to stay on their parents’ plans until they are 26. But that’s cold comfort to those between 27 and 39, who are also facing steep increases, or to those without access to a parent’s plan.

 

Another possible way out for young adults will be catastrophic coverage — but that’s primarily meant for those 30 and under, with much stricter requirements for those over 30. Furthermore, there are plenty of young adults who would like to purchase a plan with more coverage, but at a rate that acknowledges the low risk they pose to the insurer. I’ve seen this myself: Catastrophic coverage was fine when I was 21, but it wouldn’t have worked out so well for me in the years immediately after. And another unintended side effect of Obamacare? Some young adults who have been buying more extensive health-insurance coverage might look at the new rates and opt out, switching to catastrophic coverage.

 

In fact, it’s likely that plenty of young adults will forgo health insurance entirely. They’ll have to pay for the privilege — the cost of avoiding the mandate will rise to 2.5 percent of a person’s income after 2016 — but the mandate penalty will be far less than the cost of insurance, according to Giesa and Carlson:

 

Consider, for example, a 25-year-old person with income at 300 percent of [the federal poverty level], or $33,510. This person currently could purchase coverage for about $2,400 per year, or 7.2 percent of his or her income. Age band compression and the other changes to the [Affordable Care Act] would result in premiums (before premium assistance) increasing by 42 percent to $3,408. . . . This person at 300 percent FPL will be required to pay 9.5 percent of his or her income, or $3,183, toward the cost of coverage. The cost of his or her actual premium would increase by $783, even with the $225 in premium assistance.

 

Ultimately, it won’t be the millionaires and billionaires who will be paying painful amounts because of Obamacare. Instead, it will be the young woman working at a Brooklyn coffee shop, the young musician struggling to cobble together a living from random gigs and busing tables, the twentysomething professional struggling to pay the bills while working during the day and attending grad school at night. They — not the Warren Buffett types — are going to really suffer as they sign yet more off to Uncle Sam.