How Does Obamacare Work? Millennials Foot The Bill for a Broken System


Despite the ballyhoo over the government shutdown, the Affordable Care Act exchanges opened Tuesday morning — as forewarned. In the midst of a debate over our nation's debt and profligacy, it seems only fitting to pinpoint the target of new health care expenses. Who is going to pay for the “affordability” granted by the mandates? As it turns out, the health care overhaul is dumping a significant portion of Boomers' health care expenditures on the core of the American economy: the millennials.

On the surface, the health care overhaul looks like a mixed bag for the young and vigorous. Young adults were able to snag a highly publicized benefit. Obamacare requires all insurance companies to permit the coverage of children up to 26 years old who fall under their parents' plan. This is particularly beneficial for fresh college graduates with insured parents.

Unfortunately, this is a small concession in the whole scheme of things.

The White House said that the health care program requires the help of millennials. Of the 7 million the Obama administration hopes to enroll, 2.7 million need to be between 19 and 29.

But is the new health care coverage a good investment for young adults?

The National Center for Public Policy Research analyzed overall costs and benefits in the short run and concluded that 3.7 million young adults would save $500 by paying the $95 fine and foregoing insurance in 2014. Three million young adults would save over $1,000.

In response, Obamacare advocates have been scrambling to dress up the exchange for young invincibles, weaving together a story of necessity and caution. Ezra Klein of the Washington Post wrote that in the long run, young adults will unequivocally benefit from enrolling in the new exchanges. The long-run benefits will override the short-run sacrifices. The plan is fair because the young will benefit someday.

Chris Conover argued this is not the case. The health care scholar of Forbes argued that in the long run, the results for young adults are just as bleak. This is not just because of what economists call “time preference” (the concept that people value their money and their goods at an earlier time). Conover found that millennials will pay relatively higher health insurance premiums into their elderly years unless they are “infinitely patient.”

He admits “this unfairness aspect might be undercut considerably if it turned out that from a lifetime perspective, young people who overpaid when young were more than compensated by their future savings from community rating once they got old.”

But this isn't the case. He put together this damning chart, which demonstrates the fraudulence of the established "it-will-pay-off-someday" narrative. He divided millennials into four age groups and measured each age group at four different discount rates. He compared experience-rated premiums with Obamacare premiums.

Using conservative estimates, the chart shows a near-universal hike in premiums for millennials.

And leaving the question of efficacy aside, Obamacare has performed unsatisfactorily in national public opinion polls. Real Clear Politics averaged a large range of results and found that approximately 51% of Americans oppose the program. According to the Morning Consult, only one in 10 millennials were absolutely committed to enrolling in Obamacare — two weeks before the opening of the exchanges. This could be a result of failed publicity. The Commonwealth Fund found that only 27% of young adults ages 19-to-29 were aware of the exchanges' existence.

On the other hand, uninsured young Americans are commonplace. According to this chart by the Census Bureau, the number of uninsured millennials hovers around 30% of the population, as opposed to 20% of older generations.

But besides the smaller stream of income and youthful sentiments of invincibility, there are other reasons for this gap in coverage. In a swath of cases, the costs for younger adults simply outweigh the benefits. It's not just that the youthful make irresponsible decisions based on some broadly opined claim to invincibility. As important as health insurance may be.

Millennials have been nailed to the cross of extended health care. It's a shame. Increased affordability and extended health care coverage might be noble goals. But young adults will see a hike in premiums. They will be forced to buy coverage that does not click with a cost-benefit analysis.

If Obamacare will increase costs for young adults, why is the government telling millennials to enroll in it? Because it's genuinely in millennials' best interests? Or to save the program?

Looks like the latter.