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Topics: Obamacare

Examiner Editorial: Young invincibles could mean disaster for Obamacare

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Editorial,Obamacare,President,Health and Human Services,Health Care,Federal Budget,Entitlement Reform,Analysis

There is a central irony surrounding President Obama's health care law. Obamacare seeks to provide affordable coverage for older Americans who require more frequent care by forcing insurers to cover those with pre-existing conditions and limiting the degree to which companies can vary their prices based on age and health status.

For this to work, insurers will have to attract legions of young and healthy Americans -- the "young invincibles." These young Americans require relatively little health care, yet the law's provisions make insurance much more expensive for them than it was in the past.

If too few of them sign up, insurers won't be able to offset the cost of covering older people, particularly those with pre-existing conditions. So insurers will hike premiums, prompting more young invincibles to forego coverage. And so on and so on in a process insurers call the "death spiral."

The law uses carrots to attract younger customers (subsidies for low-income people to buy insurance on Obamacare exchanges) and sticks (the penalty for not buying insurance - $95 or 1 percent of taxable income, whichever is higher, starting next year).

In a study released last week, David Hogberg of the National Center for Public Policy Research attempted to quantify the economic decision facing younger Americans under Obamacare. He found that three million 18 to 34-year-olds would save at least $1,000 annually by going without insurance, and another 3.7 million would save at least $500. A 25-year-old earning under $24,000, for example, could save $1,000 by going uninsured, Hogberg said.

Hogberg's critics claimed it would still be worthwhile for a young person with an unexpected illness or injury to buy Obamacare. But that is a separate issue from the empirical economic question of whether a sufficient number of young invincibles will decide that insurance is worth the cost and thus make the health care law sustainable. As Bloomberg has reported, roughly 40 percent of the 7 million people the administration hopes to sign up for insurance through the exchanges need to be young invincibles for Obamacare to work.

Despite this reality, Obamacare makes it a lot harder and more expensive for young Americans to purchase the type of plan that would make the most sense for them -- namely, catastrophic coverage with lower monthly premiums that wouldn't cover routine medical expenses but would protect them from financial ruin in the event of a serious accident or prolonged illness.

The Hill has reported that under Obamacare in Colorado, "a 27-year-old, non-smoker would pay $135 per month next year for the state's cheapest catastrophic plan," even though the "lowest price for a 30-year-old, non-smoker in Colorado is currently about $56 per month." After age 30, a younger American won't even have the option of purchasing a catastrophic plan through the exchange.

Democrats who passed Obamacare are caught in a Catch-22: To make the plan work, they would have had to make it less costly for younger Americans; but then it would have been too expensive for older Americans, never mind the uninsured.

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