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Home Publications Blogs Beat the Press The Young Uns Won't Send Obamacare Into a Death Spiral

The Young Uns Won't Send Obamacare Into a Death Spiral

Wednesday, 18 December 2013 05:43

If you didn't hear about a new report from the Kaiser Family Foundation making this point, then you should be upset about a news outlet near you. There have been numerous reports about the need to get young healthy people into the insurance pools in order to keep costs down. The argument was that if too few young people signed up for insurance, then costs would rise. Insurers would then be forced to raise their premiums to maintain profit margins. This would then lead more people to opt out of buying insurance, which then lead to further premium hikes. Eventually only very sick people would end up in the pools and would have to pay very high prices for insurance.

The Kaiser report shows that even if young people sign up at just 50 percent of the rate of the population as a whole, it would only raise costs by 2.4 percent. This is not enough to lead to the sort of death spiral that has been hyped in the media. The report concludes that Obamacare has much more to fear from a skewing of enrollees by health condition than by age, as has been frequently noted here in the friendly confines of Beat the Press.

Anyhow, given the hype that the death spiral stories have received, we should be reading about this new Kaiser report everywhere. Huffington Post picked up a Reuters report on the topic. Michelle Singletary, the WaPo's personal finance columnist, was also on top of the issue. Let's see how long it takes the rest to follow.

Comments (4)Add Comment
written by skeptonomist, December 18, 2013 9:51
The problem is not that the rate of enrollment of healthy people will decrease over time, it is that it is likely to be low at first and only build up gradually. The penalty is trivial at first for most people and it may be a rational decision to postpone enrollment. Many may not even realize that they will be subject to a penalty until it is assessed by the IRS. The importance of health insurance may not be clear to people until they actually get sick (the younger they are, the more likely this is). Enrollment is not going to be maximized in the first months or even the first year or two. Probably premiums will increase somewhat even if enrollment increases - given that a new market is opening up insurance companies will compete intensely for customers and may take a loss initially, planning to raise rates later. All these things should be made clear by promoters of the ACA.
Kaiser Post On Why Health Is the Critical Demographic for ACA
written by Robert Salzberg, December 18, 2013 8:45
written by watermelonpunch, December 18, 2013 9:41
I love how they use the early numbers about youths as well. That alone sounds a bit flawed to me.
If they're going to use early sign up numbers as signs of anything, they should be accompanied with data from studies about who's most likely to procrastinate. LOL
I don't know but my money would be on young healthy people waiting til the last moment, with older healthy people perhaps being a little more on top of it.

The thing is... You have until the 23rd to sign up for coverage on Jan 1st. Whether you signed up October 15th or you sign up this week - your coverage still doesn't start until Jan 1st.

Early sign-ups... I mean what is this a video game or a movie in the cinema? We're going to really talk seriously about first weekend numbers?
Oh good. If we can take from enough poor devils with union jobs, the ACA might work
written by Rachel, December 19, 2013 9:35

There are, after all, quite large numbers of people who are already compelled to pay for health insurance. They may being getting health care that is far from adequate, but that's irrelevant. They are forced to pay. In fact, under these circumstances the health system may become even less responsive to their needs. But that's irrelevant too. If we can exploit enough of them (and many of the elderly into the bargain), this regressive ACA may work.

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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.