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Home Publications Blogs Beat the Press Obamacare Needs Invincibles, It Doesn't Matter If They Are Young

Obamacare Needs Invincibles, It Doesn't Matter If They Are Young

Thursday, 13 February 2014 17:54

The persistence of the myth that the future of Obamacare depends on young healthy people signing up shows how reporting on key policy issues can be completely removed from reality. The tiny kernel of truth in the story is that the premium structure is somewhat tilted against young people. An actuarial fare structure (meaning premiums are proportional to costs) would have the oldest age group (55-64) paying about 3.5 times as much as young people on average. However under Obamacare the ratio is just 3 to 1.

However this makes relatively little difference in the overall finances of the program as an analysis by Kaiser Family Foundation showed. Even if the sign-up is hugely skewed toward older people, it would only raise costs by 2.0 percent, hardly the sort of increase that would lead to the widely feared death spiral.

On the other hand if there is a skewing by health conditions, it will matter hugely. To think about this, consider that someone in the older age group will pay an average premium of around $6,000 a year. By comparison, the premium for younger people will be around $2,000. If both are healthy so that they make no claims on their insurers (this will be true of a large percentage of people in both groups, albeit larger among the young), then the healthy 55-64 year-old is worth three times as much as the young invincible.

Anyhow, there has been some good coverage making this point, but somehow Bloomberg still has not gotten the message. Come on folks, look at the numbers and don't just repeat gossip as news.


Thanks to Aaron Beeman for calling this one to my attention and Robert Salzberg for correcting typos.

Comments (6)Add Comment
Let's face the facts
written by ifthethunderdontgetya™³²®©, February 13, 2014 6:01
We need single-payer.

Right now, we're fighting on GOP turf (as usual):

"Romneycare is socialisms!!!"
"No it isn't, it was your idea!"
"Nanny nanny poo-poo!"

And in the end, the rich get richer, the rest of us get poorer, and all we're arguing about is the rate at which it happens.
this is what I don't get...
written by watermelonpunch, February 13, 2014 8:29

The insurance companies selling insurance on the exchange in my area at least, are companies that provide employer purchased health insurance plans, etc.

In other words... these companies are not operating in the vacuum of the individual Marketplace exchange insurance world, and are not new to this game. One assumes they priced their plans according to their own estimates about what it's going to cost and who is likely to sign up for those plans, and what they can manage.

Nobody has forced them to offer exchange insurance plans, right? It's a free country. If they couldn't afford to do it, they could've refused. They could even go out of business if they think this line of business isn't worth it anymore, right?

But they're not. They're in the exchanges peddling their wares. They must think it's worth it & going to work.

And if they don't... If these insurance companies know their business models are doomed like the media keeps saying... well then the media needs to let us know that these insurance companies are saying this, and there should be senate hearings to get to the bottom of why they've agreed to engage in a business model they believe will likely fail.

Oh, what, they don't actually mean that?

Well, you can't have it both ways, can you?
written by James, February 13, 2014 10:14
Here is the deal,

Companies can make money off the train wreck. Old insurance scam is to over promise with unsound plans. Then declare bankruptcy later.

The other scam, obviously, is that prices spiked. My plan went up over 100% or so (california blue cross). It was a double plus good kick in the teeth.

The people you are trying to cover, will take a free ride. It is all they are good at. Don't expect them to sign up.

Anybody could have bought insurance before the fiasco, existing conditions aside.

Now they have this model where my 380$ a month insurance, worked fine btw, is 800$ a month. No subsidy.

The people that didn't have insurance, still can't afford the 800$ plan with a 500$ subsidy. So, nothing but taking a chunk outta my azz.
written by urban legend, February 14, 2014 1:38
I think you are lying, James. Show us exactly what your coverage (for how many) was for $380/month, and then show us what it is for your alleged $800 per month plan. Sure it "worked fine" if you didn't have to use it.
written by watermelonpunch, February 14, 2014 6:52

@ James
What about all the people who "take a free ride" by not paying taxes on part of their income. (ie: getting employer health benefits tax free)
The ACA needs the defenseless, it doesn't matter if they are sick
written by Rachel, February 14, 2014 9:32

Do people simply believe that discrimination does not happen anymore? That all a patient has to do is find a provider of his or her identity group, or a good lawyer, and the patient is safe?

Unfortunately, medical discrimination does happen. Neglect and undertreatment do happen. It is true that some cases of medical neglect may result in expensive diseases that simply must be treated. This would be an incentive to treat adequately.

But too often, medical neglect results in a big burden on the the patient, and not very high costs to the provider. Some chemotherapy, the patient dies, and that is that.

Of course in a free market, with more rational prices, even lower-income patients could leave the provider who undertreated. If the US providers were still too expensive, patients could try Mexico or South Korea. But under the very regressive ACA, in the very unfree US medical market, many more lower-income patients may find themselves subject to undertreatment and discrimination, with no passable options.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.