The Edmond Sun

Opinion

October 1, 2013

The Affordable Care Act’s youth problem

MILWAUKEE — Young Americans soon may experience “sticker shock” when shopping for health insurance. A new survey of insurers estimates that premiums will almost triple for a hypothetical 27-year-old man next year, once all the federal health reform law’s rules take effect.

That could be problematic for its efforts to cover young people. More than a quarter of the 67 million Americans between the ages of 19 and 34 are uninsured. They may well stay that way if insurance becomes unaffordable.

That doesn’t have to be the case. Lawmakers can make health coverage more affordable by relaxing restrictions on what insurers can charge young adults -- thus allowing them to offer lower premiums.

The Patient Protection and Affordable Care Act regulates the health insurance market in three main ways. First, all Americans — with a few exceptions — must secure health coverage.

Second, because everyone must carry coverage, the law requires insurers to sell policies to whomever wants to buy them. They can’t deny coverage because of health status or history — a reform called “guaranteed issue.”

Third, in an attempt to control the cost of coverage, the law prevents insurers from charging older individuals more than three times what they charge younger beneficiaries — a rule called “community rating.”

The community rating rules were created to ensure that insurance companies don’t exclude sick people or those with pre-existing conditions by only offering them policies with sky-high premiums. They were also designed to ensure that coverage for older Americans not yet eligible for Medicare would be affordable.

The problem is a matter of facts. It costs six times as much to insure a 64-year-old as it does an 18-year-old. While we might like to think that we can cap a 64-year-old’s costs at three times the level of an 18-year-old’s, the math just doesn’t work. In the end, younger, healthier people will subsidize insurance for those who are older and sicker.

Even with federal subsidies, those higher premiums will be unaffordable for most young Americans, who are more likely to have lower incomes.

According to a five-city survey conducted by the American Action Forum, community rating will contribute to a 190-percent rate increase for younger, healthier people living in Milwaukee. Across all five cities, the average premium hike for young people will reach 169 percent.

To make matters worse, community rating-fueled premium hikes won’t just affect young people — by 2014, small businesses with up to 50 workers will face them, too. And by 2016, the hikes will hit all companies with less than 100 workers.

This will represent a dramatic rating shift for small employers in the 42 states where rates are based on a number of factors including broad age differentials.

In 49 states, employers with between 50 and 100 employees don’t have to shop in the small-group market but rather in a mid-market akin to the way larger groups purchase coverage. That grants them greater choice of health plans and more rate flexibility.

Lumping all these firms together may seem like a good idea because it will increase the size of the health insurance pool. But it will drive premiums up for everyone by moving more employers into the the mandatory modified community rating structure.

If premiums spiral upward, millions of young people will choose not to buy coverage — whether on their own or through their employers — and instead pay fines the law prescribes for being uninsured. If there aren’t enough young people paying into the insurance pool to subsidize coverage for older Americans, premiums will shoot up even further.

This process can repeat itself again and again, resulting in what actuaries call a “death spiral” of higher and higher premiums — and lower and lower coverage rates.

For evidence, look to the eight states that adopted community rating and guaranteed issue rules in the 1990s. According to a study from Milliman, a consultancy, the insurance markets in all eight experienced death spirals to some degree. Two states ultimately abandoned their reforms.

Three others, however, took a different approach. They chose to relax their community rating rules. And their insurance markets have survived.

Federal lawmakers should learn from these state experiments and relax PPACA’s community-rating requirements, too.

Lawmakers must do everything they can to ensure that the “Affordable Care Act” actually makes insurance more affordable. Revising the community-rating rules is an effective way to do so.

JANET TRAUTWEIN is CEO of the National Association of Health Underwriters.

1
Text Only
Opinion
  • Is English getting dissed?

    Is the English language being massacred by the young, the linguistically untidy and anyone who uses the Internet? Absolutely.
    Is that anything new? Hardly.
    Many words and expressions in common parlance today would have raised the hackles of language scolds in the not-so-distant past. For evidence, let’s look at some examples from recent newspaper articles.

    July 31, 2014

  • 'Too big to fail' equals 'too eager to borrow'

    Four years ago this month, President Barack Obama signed the Dodd-Frank Act into law, promising that the 848-page financial law would “put a stop to taxpayer bailouts once and for all,” he said. But recently, Massachusetts Sen. Elizabeth Warren told a Detroit crowd that “the biggest banks are even bigger than they were when they got too big to fail in 2008.”
    Who’s right?

    July 30, 2014

  • Sheltons travel for better life for family

    Some time around 1865 a mixed-race African American couple, William and Mary Shelton, made their way from Mississippi to east Texas. Nothing is known for certain of their origins in he Magnolia state, or the circumstances under which they began their new lives in Texas.

    July 29, 2014

  • Film critic Turan produces book

    Kenneth Turan, who is the film critic for National Public Radio’s “Morning Edition,” has written a book “Not to be Missed, Fifty-Four Favorites from a Life Time of Film.” His list of movies span the gamut from the beginnings of filmmaking through the present day.
    There are some surprising omissions on his list. While he includes two films, “A Touch of Evil” and Chimes at Midnight” made by Orson Welles, and one, “The Third Man,” that Welles starred in but did not direct. He did not however, include “Citizen Kane,” that was the first movie Welles made, that is  often cited by both film critics and historians as a favorite film.

    July 28, 2014

  • Logan County’s disputed zone

    Watchers of “Star Trek” may recall the episode from the original series entitled, “Day of the Dove.” In this episode, Captain Kirk and his crew are forced by a series of circumstances into a confrontation with the Klingons. The conflict eventually resolves after Kirk realizes that the circumstances have been intentionally designed by an alien force which feeds off negative emotions, especially fear and anger. Kirk and his crew communicate this fact to the Klingons and the conflict subsides. No longer feeding upon confrontation, the alien force is weakened and successfully driven away.

    July 28, 2014

  • Russell leads in Sun poll

    Polling results of an unscientific poll at www.edmondsun.com show that Steve Russell, GOP candidate for the 5th District congressional seat, is in the lead with 57 percent of the vote ahead of the Aug. 26 runoff election. Thirty readers participated in the online poll.

    July 28, 2014

  • Healthier and Wealthier? Not in Oklahoma

    Increased copays, decreased coverage, diminished health care access, reduced provider budgets and increased frustration are all the outcomes of the Legislature’s 2014 health care funding decisions. Unlike some years in the past when a languishing state economy forced legislators into making cuts, the undesirable outcomes this year could easily have been avoided.

    July 26, 2014

  • Medicaid reform a necessity

    Historically, education spending by the state of Oklahoma has been the largest budget item. This is no longer the case. In recent years, the state of Oklahoma spends more on Medicaid (operated by the Oklahoma Health Care Authority) than common education and higher education combined, according to the state’s Comprehensive Annual Financial Report.

    July 25, 2014

  • Remembering lessons from 1974

    This week marks the 40th anniversary of an important milestone in America’s constitutional history. On July 24, 1974, the Supreme Court voted 8-0 to order the Nixon White House to turn over audiotapes that would prove the president and his close aides were guilty of criminal violations. This ruling established with crystal clarity that the executive branch could not hide behind the shield of executive privilege to protect itself from the consequences of illegal behavior. It was a triumph for the continued vitality of our constitutional form of government.

    July 25, 2014

  • RedBlueAmerica: Is parenting being criminalized in America?

    Debra Harrell was arrested recently after the McDonald’s employee let her daughter spend the day playing in a nearby park while she worked her shift. The South Carolina woman says her daughter had a cell phone in case of danger, and critics say that children once were given the independence to spend a few unsupervised hours in a park.
    Is it a crime to parent “free-range” kids? Does Harrell deserve her problems? Joel Mathis and Ben Boychuk, the RedBlueAmerica columnists, debate the issue.

    July 24, 2014

Poll

The runoff race for the 5th District congressional seat is set for Aug. 26. If the voting were today, which candidate would you support?

Al McAffrey
Tom Guild
Undecided
     View Results