The Health Care Exchanges Need Healthy People, It Doesn't Matter If They Are Young, #65,412

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Thursday, 20 March 2014 03:57

How can we stop the country's leading newspaper from repeating nonsense? To paraphrase a former president, "there they go again." A front page article on the Obama administration's efforts to sign up young people before the deadline told readers:

"And there is concern that the administration still needs a larger proportion of 18- to 34-year-olds, the young and presumably healthy people whom insurance companies need as customers in order to keep premiums reasonable for everyone."

The simple fact, as shown in this analysis by the Kaiser family Foundation, is that the potential age skewing of enrollment matters little for the cost of the program. Younger people are on average healthier than older people, but they also pay much less in premiums. The difference in premiums doesn't fully capture the difference in costs, but the gap between premiums and average cost has relatively little impact on the finances of the program. It matters much more if there is a skewing by health condition.

Most older people are also healthy. A substantial portion of people in the oldest age bracket (55-64) will have few or no claims on their insurer. Since these healthy older people pay three times as much on average for insurance as young people it matters much more whether they sign up for the exchanges than healthy young people.