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Rate Shock Threatens Young Americans

Young Americans are faced with joblessness, skyrocketing school loans, and burdensome entitlement programs. Now, health care prices will be rising considerably, threatening “rate shock” on America’s consumers. Aetna is “cautioning that premiums for plans sold to individuals could rise as much as 50 percent on average and could more than double for particular groups such as the young and healthy,” according to the Washington Post’s N.C. Aizenman.

For Aizenman, the question is not whether these hikes are justified, but whether young consumers will skip health insurance entirely–and take the penalty instead.

“Most of the new rules that could push up premiums will not apply to plans sponsored by large employers, only to those sold to individuals and small businesses,” reports Aizenman. “These policies will be available on insurance marketplaces, or ‘exchanges,’ that the law sets up in each state beginning in 2014, and that are ultimately expected to serve about 26 million people.”

“The law will require insurers to offer a generous package of benefits for exchange plans, including coverage of maternity care, prescription drugs and treatment for mental illness. It also caps customers’ out-of-pocket expenses.” Other drivers for the expense, Aizenman reports, is the pre-existing conditions requirement and the fact that “insurers will be allowed to charge their oldest customers only three times as much as their youngest.”

“In most states, older customers are paying at least five times as much.” Hence, in a complete market failure, insurance companies will hereby be forced to charge the young more in order to meet a government quota rather than because the young are sicker than before.

Aizenman points to Jonathan Gruber, “an economist and key adviser to Obama during the debate over the health-care law,” as saying that in four of five states he studies, “more people will end up saving money than losing it” once you factor in tax subsidies. This MIT economist is widely known for his sunny predictions about Obamacare.

In addition, as I wrote in January 2010, Professor Gruber was “roundly criticized for promoting the Obama Administration’s health care reform efforts while receiving extensive government funding as a consultant—and not telling journalists about the connection.” The “[w]idely cited health-care economist […] accepted money from the federal government at the same time he advocated for reforms proposed by the Obama administration.” You can read more here.

“If these young and healthy people find the pinch to their wallets too painful, they could either go without insurance and pay a tax penalty or take advantage of a provision in the law that allows those younger than 30 to buy a high-deductible ‘catastrophic’ plan that will presumably be cheaper,” writes Aizenman. “Gruber doubts that either option will prove popular.”

“The $1,600 or $2,000 annual price tag many will be facing on the exchanges is still an appealing deal, [Gruber] said–especially in light of the nearly $700 minimum penalty they will have to pay for failing to get insurance by 2016.” Gruber seems to be living in an alternate universe. As a recent Harvard Institute of Politics study shows, Millennials today are 9.7% unemployed. As for the underemployed, 31.2% of Millennials currently work on a part-time basis.

While these numbers may not sound like much to a middle-aged person presently faced with much higher health care costs, these part-time employed 20-somethings are likely to feel the pinch of an extra $1,600 or $2,000, not to mention $700 as a penalty. The “Affordable Care Act” doesn’t seem quite so affordable, does it?



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