Over 3.7 Million Young Adults Will Be at Least $500 Better Off if They Avoid the ObamaCare Exchanges
National Center Study Shows Millions Aged 18-34 Will Have Big Financial Incentive to Pay the Individual Mandate Penalty Instead of Buying Insurance in 2014
With Minimal Participation By Young and Healthy, Exchanges Run Big Risk of a 'Death Spiral,' with Severe Consequences for ObamaCare
Washington, D.C. - The ObamaCare exchanges are headed for serious problems as millions of young people have a substantial incentive to avoid buying insurance, says a just-released study, "Why the 'Young Invincibles' Won't Participate in the ObamaCare Exchanges and Why It Matters," by David Hogberg, Ph.D., senior fellow for health care policy at the National Center for Public Policy Research.
"Millions of single, childless adults will save at least $500 by forgoing insurance and paying the fine in 2014," said Hogberg. "The problem is that to be viable the exchanges need these 'young invincibles' to participate."
The study finds that about 6 million 'young invincibles' -- those aged 18-34 who are single and childless -- will likely be eligible for the exchanges. For 3.7 million of these individuals, their out-of-pocket premium costs for a Bronze plan, after their exchange subsidies are factored in, will be $500 plus the cost of the individual mandate fine. For just over 3 million, the out-of-pocket costs will be $1,000 plus the fine.
This will give millions an incentive to merely pay the fine in 2014 -- $95 or 1% of income, whichever is higher -- and pocket the rest.
For someone age 25, spending $500 plus the fine out-of-pocket for insurance begins at an income of just over $20,000. At just over $23,800, the cost is $1,000 plus the fine, says the study.
"These are people with very modest incomes who are going to be forced to shell out a lot of money for some of the cheapest plans on the exchange," said Hogberg. "That's money they need to pay rent, buy groceries, or make a used-car payment."
The 'young invincibles' have even less incentive to buy insurance under an exchange rule known as "guaranteed issue." If they get sick, they only have to wait until the end of the year to buy insurance.
"Many of these people are already uninsured, meaning they find little value in insurance," said Hogberg. "Why are they going to pay $500 to $1,000 for exchange insurance when it's cheaper to go without and they face much less risk if they don't purchase it?"
"Without the young and healthy joining the exchanges, the insurance pools will be comprised of the older and sicker," said Hogberg. "Insurance prices will rise, more young and healthy will drop exchange coverage, and insurers that can't make a profit will drop out. All the elements of a death spiral."
The paper is available online at http://www.nationalcenter.org/NPA652.html.
Suggested Discussion Topics:
1. Why does it matter that 3.7 million people ages 18-34 have at least a $500 incentive to avoid the ObamaCare exchanges and just pay the fine?
2. If 3.7 million out of about 6 million 'young invincibles' will have a $500 incentive to not join the exchange, what about the other 2.3 million? If they join, won't that be enough to make the exchanges viable?
3. Aren't these relatively young people being at least somewhat selfish and irresponsible? Yes, many of them have small health care needs, but there is always that chance of getting really sick. Plus, joining the exchange helps other who are sicker by keeping their insurance costs down. So, isn't joining the exchange the right thing to do?
4. In your study you note that a big majority of those who are eligible for the exchange yet have a substantial incentive to not participate are men. What effect will that have?
5. When you talk of this leading to a "death spiral," what do you mean and what are the likely consequences?
David Hogberg, Ph.D., is a health care policy analyst for the National Center for Public Policy Research. Previously, Dr. Hogberg was a Washington Correspondent for Investor's Business Daily, specializing in health care and Medicare. Prior to his employment at IBD, he worked as a policy analyst studying health care and other issues for various think-tanks, including the National Center for Public Policy Research, and for the office of Representative Jeff Fortenberry. Dr. Hogberg holds a Ph.D. in political science from the University of Iowa. He is currently working on a book entitled "Medicare's Victims: How The U.S. Government's Largest Health Care System Harms Patients And Impairs Physicians."
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