Will health insurance premia rise for young males?

by on February 6, 2013 at 10:23 am in Economics, Law, Medicine | Permalink

I suspect the analysis cited in this article is an exaggeration, but it is even more than I thought the exaggeration would be:

The survey, fielded by the conservative American Action Forum and made available to POLITICO, found that if the law’s insurance rules were in force, the premium for a relatively bare-bones policy for a 27-year-old male nonsmoker on the individual market would be nearly 190 percent higher.

…Insurers have been reluctant to share their premium projections for a variety of reasons, but Holtz-Eakin, through a lawyer intermediary, was able to get aggregated, anonymous data under a nondisclosure agreement. On average, premiums for individual policies for young and healthy people and small businesses that employ them would jump 169 percent, the survey found.

Note that subsidies would cushion such price shocks for lower-income individuals and that the premia for older and less healthy people would fall, by twenty-two percent according to a comparable estimate (do not forget that a smaller percentage figure is being applied to a larger absolute number).  From a distance, it is difficult to judge how realistic these projections are.

Still, I would think that the chance of younger individuals refusing to adhere to the mandate is higher than Massachusetts-linked projections have been indicating.

I would say that in recent times there has been a string of bad news about ACA and few new reported items of good news.

Addendum, from the comments, from Carl the Econ Guy:

The whole survey is here:

http://americanactionforum.org/sites/default/files/AAF_Premiums_and_ACA_Survey.pdf

Look at Table 1– where it says that the average premium for young healthy males will go from $2,000 to a little over $5,000. Yikes.

dearieme February 6, 2013 at 10:31 am

“would be nearly 190 percent higher”: in the US, does that mean that the premium will equal 2.9 x the old premium i.e. that the insurance will cost almost three times as much?

DocMerlin February 6, 2013 at 10:40 am

@dearieme: usually yes.
The IRS was estimating that a family policy will run about 20 grand (unsubsidized).

dearieme February 6, 2013 at 12:11 pm

thanks

john personna February 6, 2013 at 10:41 am

I think I’d have included the actual prices in the above: “The insurers estimated that a healthy 27-year-old man in Austin, Texas, who pays $54 a month for insurance this year would have a $153 premium if Obamacare’s market regulations were in effect.” Could be better. It could have been $25 kicked to $75, but it could certainly we worse.

But really I’d worry about the young man’s life cycle health care costs, and look if “young Bob” is doing good for “old Bob.”

Yancey Ward February 6, 2013 at 10:48 am

Because everyone has an extra 1200 dollars to spend every year.

DocMerlin February 6, 2013 at 10:50 am

I’m 30, in Carrollton, Texas, self employed, and I pay 140 bucks a month for a very deductible plan with no cap. If I am forced to pay 450 bucks a month, I’d just pay the 750 dollar penalty.

Jan February 6, 2013 at 11:08 am

Yeah, you could do that, but if your premium rises in 2014 and you refuse to buy even the lowest cost plan then you won’t be insured and you will still be paying the tax penalty.

The other factor is that many grandfathered plans will not have to meet the same standards as new plans in 2014. This survey probably doesn’t reflect the real premium increase your plan will undergo.

Thom February 6, 2013 at 11:12 am

But insurance companies won’t be able to refuse you based on pre-existing conditions. Get sick, buy insurance. Remain healthy, pay the penalty.

David H. February 6, 2013 at 11:34 am

Interesting. If this becomes feasible, it seems like it will defeat the whole point of what insurance is. My bet is that the penalties will quickly grow if people start gaming the system like this.

bluto February 6, 2013 at 11:35 am

That seemed like the whole point of the bill. Bankrupt the insurance companies so the federal government is the only isurer left standing. It was always the long con.

Jan February 6, 2013 at 1:12 pm

States are allowed to limit enrollment to certain times of the year, say twice, if they want to. That will limit insuring on an ad hoc basis. One trip to the hospital can cost $15,000, and that wouldn’t be retroactively covered, so it is still a gamble. But yes, some people will game the system.

Hazel Meade February 6, 2013 at 3:25 pm

If this becomes feasible, it seems like it will defeat the whole point of what insurance is.

Community rating and guarenteed issue defeat the whole point of what insurance is. We passed that bridge some time ago.

Mike Hess February 7, 2013 at 12:07 am

What person, diagnosed with an expensive medical malady, would have any incentive to forego medical insurance in the short or long term?

Hazel Meade February 7, 2013 at 9:29 am

@Mike Hess

Yes, we get the fact that nobody who has an expensive medical condition is going to forgo insurance.
The problem is all the people who DON’T have no incentive buy it until AFTER they have an expensive medical condition.

Thom February 7, 2013 at 10:23 am

From the left, I think there is going to be two conflicting sets of priorities. On the one hand they will demand obedience (“we passed a law as we demand that you follow it”) while on the other hand they would love to see the whole scheme fail and lead to single payer.

It would be nice if the opposition could use this confusion to their advantage to unwind all of this nonsense.

Urso February 6, 2013 at 11:12 am

Yes, Ruth Bader Ginsburg’s “in the fullness of time” argument. I found it implausible to the point of incredible to think that the current version of the ACA will still be in effect when 30 year old Bob becomes 70 year old Bob. The much more likely scenario is that today’s 30 year olds will pay for today’s 70 year olds, then have the rug pulled out from underneath them when they get old. But hey, that’s not Ginsburg’s problem.

(Disclosure: I’m about 30).

prior_approval February 6, 2013 at 11:37 am

‘The much more likely scenario is that today’s 30 year olds will pay for today’s 70 year olds’

As if that isn’t what is happening today – you have heard of this program called Medicare, right?

Urso February 6, 2013 at 11:52 am

This is right of course. I should have referred to the 50-65 year olds, who are old enough to have high medical costs but not old enough to be covered by Medicare. Those are the real beneficiaries of the ACA.

They’re also the age group who holds the reins in Congress (and basically every other meaningful institution in the country). Totally coincidental I’m sure.

Hazel Meade February 6, 2013 at 3:32 pm

This is a point I’m always trying to make to progressives who think resource disributions should be determined through “the democratic process”.
The democratic process is not some sort of universal arbiter of fairness. It is a war of competing interests. It is might makes right, just without the physical violence (that comes later).

Baby boomers have more votes, baby boomers get to screw over other generations.

Yancey Ward February 6, 2013 at 11:54 am

So, now they get to pay twice. Nice.

celestus February 6, 2013 at 12:16 pm

Yes and we should be cutting it, not expanding it.

john personna February 6, 2013 at 11:47 am

I guess the bottom line is that there are “Bobs” both short of money and just short of retirement plans. Given a universal mandated insurance approach, there is probably some price curve (by age) that will maximize coverage, some price structure where “minimum Bobs” go without.

I do consider that a poor second to a single payer, voucher based, system for basic (not “Cadillac”) health care. It’s better though than sending thousands of those older Bobs silently into lack of coverage, etc.

Miley Cyrax February 6, 2013 at 10:49 am

“Insurance” is often a euphemism nowadays for the subsidization of politically poular groups by unpopular groups.

Apparently individuals paying premia commensurate with their expected expenses is unacceptable.

Insurance should be the transfer of variance of outcomes from the protection buyer to the protection seller. Not the subsidization of EV from one protection buyer to another.

DocMerlin February 6, 2013 at 10:51 am

Old people are politically powerful, young people are not.

prior_approval February 6, 2013 at 10:59 am

‘Apparently individuals paying premia commensurate with their expected expenses is unacceptable.’

So, young healthy males will never actually become older, no longer healthy males.

America – so exceptional it hurts.

Miley Cyrax February 6, 2013 at 11:05 am

And company risk profiles and CDS spreads never change, right? Oh wait, do’h.

Tsk tsk.

If we would like young people to subsidize old people, then let’s call a spade a spade and tackle the issue as an aged-based subsidy.

prior_approval February 6, 2013 at 11:39 am

Let me repeat myself – ‘As if that isn’t what is happening today – you have heard of this program called Medicare, right?’

Cliff February 6, 2013 at 12:11 pm

It’s hardly an argument to say that before the ACA the same thing went on but on a much smaller scale. So what?

Brian_2 February 6, 2013 at 10:44 pm

“you have heard of this program called Medicare, right?”

Yes, that would be the program most responsible for the impending fiscal train wreck. Not exactly the ideal model on which to base a new entitlement.

Brian Donohue February 6, 2013 at 11:07 am

When they become older and less healthy, their premiums go up. Just like life insurance.

Auto insurance is different. It starts high, goes down, then goes back up.

Resistance to the idea of a single actuarial pool, this is the American exceptionalism you’re going on about?

What are you trying to obscure with your big pool? The fact that much of Europe is slowly, genteelly, going broke due to unaffordable promises? I know, everything’s great today, and Eurogeddon is American right-wing agitprop, and the guy who jumps off a skyscraper feels great for most of the fall.

prior_approval February 6, 2013 at 11:42 am

I’m curious – which country has by far and away the highest cost health care system, the one with costs that seemingly cannot be contained? A country where any attempt at improving this situation seems doomed to failure (in my honest opinion, ACA is moronic, and only another example of how exceptional the U.S. is, considering the vast variety of other models which have existed for generations to pick from).

Because it isn’t in Europe.

Brian Donohue February 6, 2013 at 11:59 am

You don’t get it. Funneling costs through the government allows one to just look at current cash flows.

In the private sector, companies have to be realistic about the value of promises made today, even if the cash flows don’t take place for decades.

You may have seen recent news about the US Postal Service’s financial troubles. It may interest you to know that there is nothing unique about the USPS in terms of government-provided inefficiency, but they are facing a crisis because, alone among US government entities, the USPS is forced to account for their far-flung pension and medical promises in a realistic fashion, like a private employer.

Europe is riding the same demographic wave as the US, but they’re ahead due to lower fertility and immigration. Which is great for the US, because, if Greece isn’t cautionary tale enough, other examples will be along over the next several years.

Just because something isn’t measured doesn’t mean it doesn’t exist.

And I ain’t gonna defend the US health care system, which is a mess, but I look at all the ridiculous costs and think: Hmmm, when push comes to shove, there is some real fat to cut here. Not so much in Europe.

gab February 6, 2013 at 12:34 pm

The USPS is not a good example of your point.

Jan February 6, 2013 at 2:24 pm

BD, you make a terrible point. The postal service has had to pre-fund 75 years of retiree benefits in a ten year period. And, oh yeah, Congress won’t allow USPS to raise the rates of postage.

Andrew' February 6, 2013 at 11:04 am

End aging!

Brian_2 February 6, 2013 at 10:51 pm

Yes. The humanitarian reasons should be more than enough; the economic benefits should make it a blindingly obvious imperative. But instead, the FDA refuses to approve treatments intended to prevent or repair the effects of aging: http://www.fightaging.org/archives/2007/07/the-problem-illustrated.php

IVV February 6, 2013 at 1:34 pm

You mean Boomers are powerful, Generation X is not. Because Generation X is no longer precisely “young.”

Well, unless you’re a Boomer, which is the only perspective that matters.

john personna February 6, 2013 at 12:17 pm

And “market” arguments are at their least attractive when they become “devil take the hindmost.” (We are hammering an insurance system into a health care system. We get that. The two alternatives are a true health care system, or a punt and abandonment of the goal.)

Urso February 6, 2013 at 12:42 pm

And contrary arguments are at their least attractive when they refuse to admit that sometimes, sick and old people die, that there are very hard choices to be made about how much money should be spent in an attempt to delay that result, and that saying “single payer” isn’t a magic wand that’s going to make that problem go away.

RPLong February 6, 2013 at 2:05 pm

In my experience, “single payer” makes this problem much worse. Better to blame my foregone treatment on my own dumb luck than on a health economist at the central agency determining that four additional months of life are a bad investment for the rest of the community to make.

Sometimes I think people have no connection with how grisly those choices really are.

Crocodile Chuck February 6, 2013 at 10:43 pm

What is your experience with single payer? Because I don’t believe you know what you’re talking about.

Here you go: http://brontecapital.blogspot.com.au/2009/08/health-care-reform-and-single-payer.html

RPLong February 7, 2013 at 8:40 am

Crocodile:

My experience is 9 years as a patient, 3 of which were spent working as a health economist. I don’t care whether or not you believe me. Reality does not depend on your belief.

john personna February 6, 2013 at 4:07 pm

You seriously just made an argument that national health care need not be a goal because people die anyway?

Urso February 6, 2013 at 4:52 pm

Not even close. You stated that the problem with strict market-based health care is that it allows the sickest/oldest to die for want of sufficient care. (“devil take the hindmost”). My counter is that, yes, obviously, that remains true under literally any system, and that to pretend that switching to some other system will make that problem disappear is magical thinking.

john personna February 6, 2013 at 5:07 pm

No, that was a poor interpretation of “devil take the hindmost.” It is bad enough if a 50 year-old widow with shaky finance skips breast exams for 5 years. That is devil take the hindmost whether she was cancer positive or negative in that time.

Your “counter” is that women die anyway? Good on ya.

Hazel Meade February 6, 2013 at 7:22 pm

Why is it necessary to make the breast exams free, might I ask?

Hazel Meade February 6, 2013 at 3:37 pm

Except, you know, in the course of creating your precious “health care system”, you have to make it illegal for the rest of us to get health insurance that acts like actual insurance. Some of us don’t want to participate in your “health care system” but we’re going to be forced to anyway.

john personna February 6, 2013 at 4:08 pm

Yes, “my” precious healthcare system tries to treat the poor child, the poor widow. I am sooo mean.

Hazel Meade February 6, 2013 at 7:18 pm

Explain why providing health care to windows and children entails forbidding me to purchase health insurance that is priced according to my actual health risk.

Brian_2 February 6, 2013 at 10:54 pm

We have programs to prevent poor people from starving. Somehow, we are able to do this without the government providing everyone’s food for “free”.

Hazel Meade February 6, 2013 at 3:34 pm

Apparently individuals paying premia commensurate with their expected expenses is unacceptable.

Which puts the lie to the argument that people can be forced to pay for insurance because they’ll show up at the emergency room and get free care otherwise.

They’re imposing a $1 risk on us. Let’s make them pay $20, and use the other $19 to subsidize baby boomers health care.

prior_approval February 6, 2013 at 10:57 am

So healthy young people will subsidize the health care of the less healthy and older.

And this is a surprise?

America is so exceptional it hurts sometimes. Especially considering that current, deeply inadequate American health care system costs so much more than any other health care system on the planet (try at least 33% more than the next most expensive systems in Germany and Switzerland), with results that are, to put it mildly, exceedingly mediocre, at best.

RPLong February 6, 2013 at 11:04 am

This is because the US system is able to subsidize foreign health care systems. Sort of like how Canada doesn’t have to spend much on its military, since they know the US will protect them from outside threats. If the USA suddenly enacted the kind of price controls and per-capita medical service alottments that exist outside the USA, there would no longer be sufficient money in the provision of health care to justify staying in business.

The other way of looking at this, of course, is that the US spends more on health care because we have that option.

prior_approval February 6, 2013 at 11:46 am

‘The other way of looking at this, of course, is that the US spends more on health care because we have that option.’

And obviously don’t care in the least about the results.

RPLong February 6, 2013 at 11:59 am

I assume this is an off-hand reference to life expectancy studies, which everyone knows are poor measures of specific health care practices and their benefits. If I am mistaken, please feel free to supply better evidence of comparatively poor results in US health care.

Tom West February 6, 2013 at 12:04 pm

And obviously don’t care in the least about the results.

Would you make the same claim about buying Lexus’ instead of Corollas? After all, the result is the same – you get from A to B, with perhaps a hair more safety in the car that costs twice as much.

In the American medical system, important customer-facing things like lots of testing and short wait times are better in the US than almost anywhere else. For things like over-all outcomes, the US at least matches and often slightly exceeds the rest of the world, so the customer is still happy.

It’s important to remember that customer satisfaction is the only metric that counts. The actual good or service is just one of the means to customer satisfaction.

Urso February 6, 2013 at 12:51 pm

I disagree. It’s the end result that matters. Let me explain why I think that’s true.

People want lots of testing. So you say, if you give them lots of testing, we are providing them what they want. But this misses the reason *why* they want lots of testing, which is that they think lots of testing will lead to better outcomes. If my doctors runs a lot of tests, they assume, he must be Doing Something to Make Me Better. But what if it turns out that’s wrong (as apparently it is), and the testing doesn’t lead to better outcomes? Would people still want it? No, because people aren’t actually interested in testing qua testing, they are interested in testing only as a means to an end. And they would rather have the ends than the means — if you asked 100 patients, look, you can either have a lot of expensive tests and a poor health outcome, or no tests and a good health outcome, all 100 will choose the latter.

Jan February 6, 2013 at 3:57 pm

Yeah, and health care is complex. People don’t even know what they’re getting for the dollar (or their subsidized insurance plan’s dollar). Doctors often don’t even know. Medicare is one of the worst offenders–they pay for a lot of stuff that is very expensive and isn’t helping much.

Cliff February 6, 2013 at 11:13 am

“exceedingly mediocre”? Is this like your claim about how terrible the state of U.S. manufacturing is?

prior_approval February 6, 2013 at 11:45 am

Compared to German? Why, yes – but then, what do trade surpluses/deficits in manufactured goods have to do with opinions. Obviously the same as comparing such things as life expectancy or infant mortality. And no, the excuses for the why the U.S. is so poor don’t matter.

Cliff February 6, 2013 at 12:22 pm

The U.S. dominates Germany in manufacturing output and in healthcare outcomes (i.e. the things that matter). Surely you know that U.S. neonatal care is the best in the entire world? If you care about objective reality, you have to compare outcomes of like patients, not lump everyone together in one measure that conflates healthcare, lifestyle, demographics, etc.

steve February 6, 2013 at 1:50 pm

Health care outcomes? Nope. Use mortality rates and not survival rates. We diagnose early and do a lot of not needed procedures.

Steve

Jan February 6, 2013 at 4:01 pm

“U.S. neonatal care is the best in the entire world” Surely you’re judging that based on a real outcome. What’s a good outcome for the quality of neonatal care is infant mortality, right? The U.S. has an atrocious infant mortality rate–more than double that of Sweden and Japan, for example. You were being sarcastic, right?

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/09/graph-of-the-day-the-united-states-has-a-really-high-infant-mortality-rate/

maguro February 6, 2013 at 5:15 pm

Looking only at outcomes without considering demographics doesn’t shed much light on the healthcare systems. What is the infant mortality rate is for Japanese-Americans and Swedish-Americans?

TMC February 6, 2013 at 7:00 pm

Also what you call a live birth. Most countries don’t count it if a baby dies within a couple of days of the birth. We count the 26 week premies no one else does.

Jan February 6, 2013 at 9:42 pm

Maguro and TMC, you’re both wrong. Even controlling for demographics, we have terrible infant mortality. Limit it to white people and take a look. The country rankings remain identical even when the rates are recalculated to exclude preterm births.

Read this post (http://theincidentaleconomist.com/wordpress/the-zombie-infant-mortality-explanation/) for a summary, and this study for details: https://download.nap.edu/catalog.php?record_id=13497

maguro February 6, 2013 at 10:20 pm

Infant mortality rates vary widely between states in the US. The latest data I could find was from the 2005 census and state rates ranged from Utah at 4.5 per thousand live births to Mississippi at 11 and the District of Columbia at 14.5.

If we were to match up those rates internationally, you could say that Utah is Denmark, Mississippi is Costa Rica and DC is Barbados or the Ukraine. A huge variance, and yet the healthcare systems in question aren’t appreciably different. It’s not like Utah has single payer and DC is a libertarian dictatorship headed by Ayn Rand. What that tells me is that healthcare policy does not drive infant mortality rates. Or life expectancy, for that matter, since you can find about the same state to state variance in life expectancy outcomes.

wrparks February 6, 2013 at 1:45 pm

You are right. The excuses for why the US does poorly on things like life expectancy and mortality don’t matter. Especially when 1) there is no standard measure of life expectancy or infant mortality that is aggregated into a single meaningful statistic used by all nations and 2) there is often not a statistically significant difference between the US and the top 25 countries in the completely arbitrary statistic that nations do report.

The excuses don’t matter because you know the entire premise of the argument is nonsense, so you must call any and all logical assessments of the data “excuses”.

Railing on the cost of the US healthcare system is reasonable. Complaining about the overall quality based on meaningless statistics is not.

steve February 6, 2013 at 1:55 pm

” there is no standard measure of life expectancy or infant mortality that is aggregated into a single meaningful statistic used by all nations”

There is. Most countries use that definition. You can also factor out for those who deviate a bit from it (there arent really enough to change our ranking). Equalizing definitions, we are still among the worst. Most of that difference comes from our high number of early births and low birth weights.

http://theincidentaleconomist.com/wordpress/the-zombie-infant-mortality-explanation/

Steve

Isaac February 6, 2013 at 11:23 am

So healthy young people will subsidize the health care of the less healthy and older.

And this is a surprise?

Counterpoint: the healthy but poorer group is subsidizing the older and less healthy but richer group.

Now, this tradeoff may be worth it, if the increased burden on the young isn’t too high, but if we’re approaching this as a social good we should at least be talking about it, and given that the 45-54 demographic has had the highest median wage, we face the possibility that in their old age their children will have to both support their parent’s (comparatively more wealthy) generation in the face of rising income inequality and stagnating wages.

Brian Donohue February 6, 2013 at 11:46 am

Just piling on here: there’s a one-time windfall to the current older population (Baby Boomers)- the same gang that hands us $16 trillion in debt as they make way for the old folks’ home.

prior_approval February 6, 2013 at 11:47 am

Let me repeat myself yet again – ‘As if that isn’t what is happening today – you have heard of this program called Medicare, right?’

Yancey Ward February 6, 2013 at 12:16 pm

And so the answer is to make the young pay even more?

MP February 7, 2013 at 12:31 pm

You keep on repeating that sentence. I do not think it means what you think it means.

Dan Weber February 6, 2013 at 11:44 am

Young people have just about one advantage in today’s economy: they are young and healthy. Why should we want to take away this one advantage they have, but not all the disadvantages (such as inexperience leading them to being lower paid, or the already existing transfer payments from young to old)?

IVV February 6, 2013 at 1:37 pm

Two words: Elizabeth Bathory.

Carl the EconGuy February 6, 2013 at 11:01 am

The whole survey is here:

http://americanactionforum.org/sites/default/files/AAF_Premiums_and_ACA_Survey.pdf

Look at Table 1– where it says that the average premium for young healthy males will go from $2,000 to a little over $5,000. Yikes.

Nathaniel Graham February 6, 2013 at 11:40 am

Prices that high make it worth it to go uninsured, pay the penalty, pay out-of-pocket for any minor expenses that do occur, and buy insurance if anything major happens.

Unless of course the penalty becomes enormous, in which case political pressure will drive it down or abolish it.

Dan Weber February 6, 2013 at 11:45 am

The SCOTUS ruling finding it legal depended on the penalty being minor.

Hazel Meade February 6, 2013 at 3:39 pm

Hello “As Applied” challenge.

Nate February 6, 2013 at 12:34 pm

Young mid-20s male here; $7,500/year premiums for high-deductible plan.

Mike Hess February 6, 2013 at 7:14 pm

That’s the premium for a small business buying insurance for 20 employees.

The individual premium is expected to increase from $54 to $156 per month for healthy young males, and decrease from $1090 to $940 per month for older, less healthy females.

The sky is not falling.

maguro February 6, 2013 at 11:13 am

Unexpectedly!

Edward Burke February 6, 2013 at 11:16 am

I continue to call it the Patient Protection and Affordable Care Tax Act. My private health insurance rates have not yet budged up or down. (I’m not called “patient” for nothing.)

Chris D February 6, 2013 at 11:29 am

It’s hard to look at American Action Forum’s board (including Norm Coleman, Jeb Bush, and Elaine Chao) and their President (economist-turned-partisan hack Douglas Holtz-Eakin) and take their numbers seriously.

Perhaps somewhere there’s data from an organization not devoted to numbers tailor-made to support conservative policies?

MP February 7, 2013 at 12:30 pm

Sure. There’s plenty of other data from organisations devoted to numbers tailor-made to support liberal policies.

Seriously, everyone has an ax to grind in this discussion, which makes it really hard to know how much weight to put on any analysis you see. I’m not even (necessarily) accusing anyone of bad faith. They just control for factors unti they get a clean, relevant analysis. It’s just that the criteron of cleanness and relevance is that it agrees with their preconceived notions.

Andrew' February 6, 2013 at 11:39 am

Creating a new cohort of young people who will feel entitled when they get old. What could possibly go wrong!?!

txslr February 6, 2013 at 11:43 am

I have a 24-year old son in college in Texas. We pay for his health insurance (because he wouldn’t, of course) and his annual premium just went up 24%. At some point the combination of community rating and guaranteed issue will cause us to drop the policy.

The objective of community rating was to drive the rates up on the relatively young and healthy. Why are some acting as though it is a dirty canard that it is accomplishing what it was intended to do?

Bill February 6, 2013 at 11:49 am

Why don’t you look at the CBO and Kaiser Foundations studies which demonstrate that Tyler’s opening remark: “I suspect the analysis cited in this article is an exaggeration…” is clearly proven.

Here is the link to the Kaiser Foundation studies and the CBO material:

“How much would plans like these cost in 2014? We will focus on adults aged 27 in this example, since young adults more frequently go without insurance, and since young adults can now stay on their parents’ plans until 26. We can shop online for similar plans and get some results for comparison [2]:
•$67.26 for a $2750 deductible / 30% coinsurance plan in Atlanta for a 27 year-old male
•$98.21 for a $2750 deductible / 30% coinsurance plan in Atlanta for a 27 year-old female [3]
•$129 for a $2750 deductible / 30% coinsurance plan in Silicon Valley for 27 year-old men and women
•$73.22 and $95.07 for a $2500 deductible / 20% coinsurance plan in Chicagoland for a 27 year-old man and woman, respectively
•$95 for a $2750 deductible / 20% coinsurance plan in Houston, TX for a 27 year-old man
•$132 for a $2500 deductible / 10% coinsurance plan in Houston, TX for a 27 year-old woman
•$70.75 and $90.46 for $2500 deductible / 20% coinsurance plan in Hartford, CT for a 27 year-old man and woman, respectively”

http://truecostblog.com/tag/health-care/

Why does Tyler go to a source he identifies as likely to be exaggerated? Why didn’t he go to the Kaiser Foundation study? Or CBO?

Rich Berger February 6, 2013 at 12:26 pm

From the comments to the post you cited:

“There are a few flaws in your initial analysis that you presented.

First the plan options that you found on ehealthinsurance are preferred pricing. It is not very common for people over 40 years old to get that preferred price, there are typically rate ups for weight/height, medication usage and so forth and so on.

Second, you haven’t accounted for the fact that these new metallic plans will have to include mandated benefits that are not on the individual market, such as maternity benefits.

Third, current insurance company pricing is based on underwritten products, so insurance companies currently are able to bar adverse risk.

All of those factors change starting in Jan 2014, even the Kaiser calculator shows their estimate of plan prices starting that year. I would project that a 27 year old will cost between $250 and $300 per month of an un-subsidized premium and someone at age 60 with the 3 to 1 ratio costing between $750 and $900 per month.”

Also, you may notice that the AAF survey asked insurers to estimate a number of effects of ACA, which are missing from the back of the envelope calculation you cited. I would expect the insurers to have made serious efforts to calculate the effects of the ACA on their business. They may also suspect that Obamacare is designed to kill them off, eventually.

Bill February 6, 2013 at 1:48 pm

Rich,

Funny how you didn’t include the reply that the website made to this comment.

For the audience, I am including the reply by the author of the post to this comment:

“Ron, great comment. Bear in mind that there are some offsetting factors that lower premiums vs your analysis. First, insurers (relative to current eHealthInsurance numbers) will have to pay out a higher percentage of premiums for medical benefits. This change has already started to take effect, and has in some cases (that I know of personally) resulted in a significant drop in insurance premiums in the private market. Previously some carriers were paying out as little as 60% toward claims. I’m not judging that part of the law for economic efficiency (it’s a convoluted beast as a whole), but that piece will reduce premiums somewhat.

Secondly, in my sample of rates I included states that already require insurers to provide significant benefits, in some cases beyond Obamacare requirements (think CA and NY, with their extraordinary requirements). And of course, while adverse risks will enter the market, so will many of the young invincibles who are currently uninsured. This is precisely the point of the law.

It’s a great question as to exactly where rates will fall. I attempted to make an estimate here, with the point being that the bronze plans will allow for some reasonable rates at the low end. The devil’s in the details of course, and we won’t know all of that for several months more at least. Personally, I do wish that the exchanges included high deductible plans up to the 10k deductible mark at least, and there’s still some chance of that happening if the state exchanges are granted waivers to do so – we’ll see.”

I am sure that this was an oversight as you looked through the 13 comments to the post, picked one, and then failed to post the reply.

Rich Berger February 6, 2013 at 2:27 pm

I saw that comment and did not think it was persuasive- “The devil’s in the details of course, and we won’t know all of that for several months more at least.”. The AAF estimates attempt to take 11 new effects of Obamacare into account. You will note that some of their estimates come up with lower premiums. I judge the AAF approach to be more systematic and based on estimates of companies in the business.

Bill February 6, 2013 at 2:33 pm

Rich, I saw your response to my reply “and [as you said] did not think it was persuasive-” Why not let the audience decide? You could have put in the reply but didn’t.

Rich Berger February 6, 2013 at 2:49 pm

Isn’t that always assumed? I speak only for myself and intend to persuade here. I do reserve the right to simpy be an insulting wiseass when the mood hits me.

RZ0 February 6, 2013 at 11:53 am

Just glancing through this study – it doesn’t seem to take into account the subsidies that many young single people will receive because their incomes are within 400% of the federal poverty level. Eyeballing the charts at the link, it appears the maximum a single person earning (for example) 27K could pay would be $2,180. Not cheap, but about half what the study implies.

Also have to remember that the young person’s premiums are relatively low now, but as he or she ages, they will not increase as steeply as they would have. If he lives long enough, the costs will even out. If he doesn’t live long enough, he will probably have died from an illness or injuries that required far more medical attention than his premiums paid for.

The problem here is not reverse age discrimination. The problem is we pay way, way, way too much for health care.

Here’s the link: http://en.wikipedia.org/wiki/Patient_Protection_and_Affordable_Care_Act

Cliff February 6, 2013 at 12:24 pm

I think we’ve got at least two problems…

Hazel Meade February 6, 2013 at 3:42 pm

And the fact that we pay way too much for healthcare has nothing to do with how we’ve set up a system in which nobody pays for their own health care and nobody is allowed to refuse to pay for anyone else’s healthcare?

F. Lynx Pardinus February 6, 2013 at 12:07 pm

For young, healthly single male in their early 30’s from NJ, our individual health insurance premiums are already sky-high compared to some of the numbers I’m seeing here due to NJ’s (I think) guaranteed issue, community rating with no mandate. Is my premium going to get lower or higher under the ACA?

Vivian Darkbloom February 6, 2013 at 1:35 pm

According to Wiktionary:

“Premia is much less common than premiums, accounting for less than 1% of total usage in US (COCA) and 4% in UK (BNC).”

This just adds to the mounting evidence that we are in elite company here as I expect this usage only by pluralis maiestatis.

Eliot Clingman February 6, 2013 at 2:15 pm

A simple back of the envelope calculation show that the American Action Forum study is a hatchet job:
Table 1 shows all city average new monthly premium for younger healthier worker as $5124.
Table 2 shows all city average new monthly premium for older less healthy worker as $10,706
The ratio of the second number is only 2 to 1, even though the ACA permits a 3 to 1 age based ratio and a tobacco surcharge.

This study is political G-A-R-B-A-G-E worthy of Fox News and Murdoch. Sad and balanced.

Rich Berger February 6, 2013 at 2:46 pm

Not really – the Tables were assembled from individual responses and do not represent a single insurer. OTOH, it might be a valid criticism of how the responses were weighted.

Rich Berger February 6, 2013 at 9:03 pm

It also may matter in which order you make the adjustments. Not having read the bill or the associated regulations, I do not know if the 3:1 ratio is applied prior to the last step.

derek February 6, 2013 at 4:11 pm

I guess we had to pass it to find out what is in it after all.

I’m finding this very very funny.

Bill February 6, 2013 at 4:21 pm

You missed the death panels for 27 year olds. Oh, this is so scary.

Carl the EconGuy February 6, 2013 at 9:36 pm

I had an email exchange with a friend who is an expert in this area. He looked at the numbers from the survey and had this to say:
“Pretty startling, maybe a little too much. The survey was taken before most states had settled on the essential health benefits that must be covered, and before most of the regs governing the market came out. Rates probably assumed continuous open enrollment, but moving to a defined enrollment period (with exceptions for people changing jobs or other uncontrollable events) would knock the premiums down. Political pressure will undoubtedly lower premiums for 2014 and maybe even 2015. So this is a worst case scenario. But 30% increase is very likely, and that’s huge. The loss of medical underwriting and the compression of the rating band is most responsible for the increase. But a lot of this depends on who enrolls and how many of them enroll. Haven’t seen anything about the ability of insurers to change rates as insurers gain experience.”
He agreed that the sign-up rate for young people will be very, very low, which will then not allow the premia for older people to be reduced. In fact, one wonders why even old people would sign up. If the survey is right, they would also be better off not signing on to Obama-care.
It seems that the whole program is breaking up. Many States will not open up exchanges, which then raises the legal question of whether the subsidies are allowable in federal exchanges — the legal experts I trust don’t think so. Anyway, it doesn’t really matter — because it does not appear that anyone has any incentives to sign up at all. If no one signs up, the law will have to be rewritten. They can’t increase the fines, because that makes the whole statute unconstitutional. The only options then are either to raise taxes or to curtail benefits under the program. I don’t think raising taxes is an option, not with this Congress. And if benefits are curtailed, the public will not be happy. We’re looking at a bad situation here, I think.

Rich Berger February 7, 2013 at 8:22 am

After reading about the AAF estimates and some alternatives, I get an even worse feeling about Obamacare. An incrediby complex law was rushed through against opposition that almost stopped it, and the law requires many more regulations to implement it. How could the drafters have anticipated the interactions and incentives and disincentives that will come into play? This is going to be a disaster.

Bill February 7, 2013 at 10:34 am

Carl, You might want to have your friend look at the Kaiser and CBO material contained in my comments above. And, also, don’t forget: private insurance still remains, youth who didn’t have insurance were not paying for a good which I paid for on their behalf through my premiums (uncompensated care), a 27 year old ultiminately gets older, so if there is a rise on one side with a lower price on the other, they will gain that as well, and there is a product even the uninsured paying a tax gets: automatic coverage at later date without pre’exising conditions. By the way, what surprises me about a website that supposedly has people commenting on economics is how persons, when they compare prices, do not note that the products are different, so the price comparison has to be adjusted to reflect the differences in the product, which even your friend did not seem to do.

David Zetland February 8, 2013 at 6:44 am

Amazing (tragic). I’m a 43yo male single non smoker and my premia in Netherlands (very competitive market) is EUR87/month, i.e., $1400 year.

Thylacinus cynocephalus February 23, 2013 at 12:31 pm

Very, very good post.

John

Comments on this entry are closed.

Previous post:

Next post: