Why Does the ACA need young people??

I have stayed away from the political rhetoric that has surrounded the Affordable Care Act since the inception of this blog.  Obviously, I have my opinions, but I feel that my role is to relay information, for the most part, not my own views. While I have not been overly impressed with the execution and implementation of this law, I have remained hopeful that some positive things will occur due to the exercise that we are currently enduring.  With each reactionary change, and distortion of facts that occur the less hopeful I become.

The latest news that really disturbs me is the “rap” music ad aimed at inspiring young people to enroll in the exchanges. I wish them well with that endeavor, but it just ain’t gonna happen, rap music or not.  The young people between the ages of 27 and 34 who have never had to purchase health insurance before will not see the value proposition in a Bronze level plan through an exchange with the premiums I have seen listed and the out of pocket costs associated with those particular plans.

Using the premium calculator on the Kynect website, a 30 year old person living in Jefferson County with an income of $35,000 per year would pay $182.30 per month for a Bronze Level plan. Due to the income level, they would not be eligible for a subsidy.  This means that the policy holder would be responsible for 40% of all medical spending out of their own pocket.  Conversely, under the current environment that same 30 year old, provided that they were in reasonably good health, would likely be paying a premium of around $90 per month on a plan that would cover about 80% of all medical spending for the calendar year.  The economics don’t seem to work.

The Exchanges need the young people, in fact, they must have them participate or the assumptions that were made about the financial viability of this entire plan are in jeopardy. The numbers were based on the young people signing up and paying premiums.  The government is not shy about the fact that younger healthier people will pay a little more under the ACA, in order to offset the older, less healthy individuals who may end up paying less for health insurance.  Subsidy of rates have always been a part of insurance premiums, even today, pre ACA the younger, healthier policy holders pay more premium than they should and the older, sicker people pay less than they need to in order to cover the true costs associated with being covered.  However, the spread between the lowest available rate and the highest available rate has been compressed under the ACA.  The result of that compression is that it pulls the bottom of the charts up and brings the top of the charts, from a rating perspective, down. 

Young people today are just not willing to pay $2184 per year for a health plan that could potentially cost them an additional $11,000 more in deductibles and co-insurance when the penalty is just $95 or 1% of your income, which ever is higher.  So for our 30 year old, the penalty for not having health insurance would be $350 for the year.  That is less than 2 months worth of premium payments.

I want to be clear that I am not advocating that young people refrain from purchasing health insurance.  I think that everyone should be insured, as it is the responsible thing to do.  What I am saying is that the system that has been developed and the pricing that is out in the marketplace will make this a very hard sell. 

For you small to mid size employers out there, the last thing you need to think about is dropping your employee health insurance plan.  This is your opportunity to be the hero and provide your employees with one less thing to worry about.  We can assist you in making critical decisions regarding your employee benefit programs and their effect on your bottom line.  Logan Lavelle Hunt is ready to take your calls and inquiries right now.  Contact us for a no obligation review of your plan today.

In Peace,

Steve