Will Obamacare Make Young People Pay More for Insurance?


With the Affordable Care Act (Obamacare) set to go into effect over the next couple years, most people are still pretty unclear on what Obamacare will actually do. Like with most unknowns, the Act is being met with a lot of anxiety and fear. While the outlook going into implementation isn't completely rosy for everyone, Obamacare is an overall improvement of the old system.

The most active opponents of the Act fall into two major groups: The Republican and conservative establishment, who want above all to prove President Obama a failure, and major insurance providers, who balk at many of the provisions and regulations in the bill.

Republicans have repeatedly made it clear that their priorities lay with proving President Obama a failure. Their continued resistance against this law, therefore, has to be viewed through that lens. They've voted 34 times to repeal it now. Even for something to which they are ideologically opposed, that is getting pretty obsessive. Their credibility is a bit questionable on this topic.

The other group, the one that Democrats should be more concerned about, is the insurance companies. They have been waging a PR war against the bill recently, warning people about so-called "rate shock," or double-digit growth in premium rates. The Society of Actuaries, a nonpartisan professional association for insurance actuaries, concurred, at least in the short term.

The left corner immediately fired back. One oft-cited analysis from the Congressional Budget Office predicted that the subsidies and cost savings from the bill in 2014 will cut out-of-pocket insurance costs drastically. Some state governments, particularly Maryland, protested that the Society of Actuaries study didn't take state policy into account, and predict that their state health care policies will reduce that premium increase greatly.

The supposed cause of the rate shock is the restriction that premiums for senior citizens cannot exceed three times the rates for 21-year-olds (most states currently have only a five-to-one ratio restriction). According to the insurance companies, they'll be forced to raise premiums drastically on young people to make up for the lower rates on risky seniors. This conclusion was disputed by the Urban Institute, who claimed subsidies will offset that effect, at least for people making less than four times the Federal poverty line.

The truth, as usual, is somewhere in the middle. Rates will increase for some people in the first couple years of the law taking effect. However, that increase in the short time should be paired with a slowing of the increases in overall costs, leading to long-term cost savings.

At the same time, if increases in overall health costs fail to slow, or if young (read: healthy) people choose fees over getting insurance in large enough numbers, those savings will fail to manifest. That is because lower premiums depend on a large pool of younger healthier people with a lower rate of claims over which to spread the costs of the older customers.

Even if short-term costs increase, it will be the price of reducing the number of uninsured in our country, and attempting to begin reigning in overall health care costs. Is that not worth it?