Why Would the Addition of Young Healthy People Raise the Cost of Insurance?

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Wednesday, 28 May 2014 04:59

That's what Washington Post readers are asking after reading an article warning of large price increases in 2017. The piece reported the output from a simulation model developed by Stephen Parente, a University of Minnesota health economist who advised Sen. John McCain's 2008 presidential campaign.

According to the article, Parente's model predicts a large increase in the price of bronze and catastrophic plans in the exchanges in 2017. It gives the reason for this increase:

"Parente estimates between 4 million and 6 million people will see their existing individual coverage end in the next few years when either their plans lose grandfathered status or the White House's extension of non-compliant health plans runs out near the end of 2016. These holdovers from the individual market predating the ACA are expected to be younger, healthier and more sensitive to price.

"Parente's model finds these factors will have the most significant affect on 2017 premiums for less-robust plans in Obamacare's "metal tiers." These include catastrophic and bronze-level health plans, which have the cheapest premiums but the highest out-of-pocket costs. The effects will differ by state, but the national picture shows a big price jump for bronze and catastrophic plans between 2016 and 2017 — premiums for the average individual bronze plan, before subsidies, are projected to climb between $2,132 and $4,174 between those two years."

Let's see, healthy people raise the cost of insurance? Maybe we can get some older, sick people into the pool.