Fears abound that health insurance premium increases because of the Affordable Care Act (ACA) will discourage young, healthy people from participating in the Health Insurance Exchanges. But most young people are likely to be eligible for exchange subsidies, softening the sting of so-called premium shock and attracting healthier people to the exchanges. Conservatives and actuaries predict that Obamacare will increase health care costs for millions of Americans and that at least ten million people with lose their private health coverage. Liberals counter that the ACA will reduce the uninsured and add new federally-mandated covered services, and that many of those with higher costs or who lose private coverage because of ACA can apply for taxpayer subsidies. As it happens, both sides are correct.
Premium Increases Under the ACA:
Health Insurance Exchanges (HIX) are scheduled to start enrollment on Oct. 1, 2013. Yet there is little agreement among researchers about the exchange population’s profile. The Affordable Care Act (ACA) changes are unprecedented, so there are several different models and assumptions researchers use to guess morbidity rates, provider service use, take-up rates, and levels of crowd-out from employers dropping employer-sponsored insurance (ESI).
Premiums are likely to increase for young men, at least, thanks to health reform law requirements limiting how much more health plans can charge expensive enrollees, such as women, older people, and sicker people. Unlike today, health plans will not be able to charge higher premiums for the sick or women, even though their average health care costs are much higher. Also, insurers will be limited in how much more than may charge older enrollees. As a result, the ACA mandates a massive shift in costs, with men, the young, and the healthy significantly economically subsidizing women, the old, and the unhealthy. But projections vary widely on how much health insurance premiums will increase for different populations and markets.
A study from the Society of Actuaries, for example, predicted a 32 percent per-member per-month (PMPM) cost increase in the national non-group (individual) health insurance market, after the ACA insurance regulations take effect in 2014. An American Action Forum report estimated premiums for young people would increase as much as 169 percent. Milliman and other consultancies have done premium impact estimates for specific states, such as this one in Indiana. Another recent analysis from the Urban Institute predicted that cost increases for young people with exchange coverage would be limited.
If young people and healthy people choose not to participate in the Health Insurance Exchanges, health plans will face adverse selection, meaning the most risky people to cover are those most likely to enroll. Adverse selection would further raise premiums and jeopardize the success of Qualified Health Plans (QHP) on the exchanges.
Majority of Young People Could be Subsidy Eligible:
Premium shock and adverse selection might be mitigated if taxpayer subsidies for exchange coverage encourage young, healthy people to participate. The ACA includes premium and cost-sharing subsidies for people earning 133 percent to 400 percent of the federal poverty level.
A recent report from Avalere Health estimates that two thirds adults ages 30 and younger would be eligible for federal subsidies. Here is an overview of the one-page brief:
Two-thirds of people ages 30 or younger have incomes low enough to make them eligible for premium subsidies.
46 percent of people currently insured in the non-group market will be eligible for subsidies.
Outreach and marketing will be crucial to attract young, healthy people to the exchanges.
You can read the Avalere brief here.