Saturday, February 15, 2014

ACA: The Most Healthy and Least Wealthy Subsidize The Least Healthy and Most Wealthy.

Consider these excerpts from an article recently appearing in the Wall Street Journal:


‘In all, 25% of the people enrolling in private plans through the online portals since their launch in October were between the ages of 18 and 34, according to the data. Through the end of December, that proportion was 24%, according to a previous report from the federal government.

That is well short of the percentage of young people who might have registered in the exchanges. Insurers say they need strong enrollment from younger people. who are likely to be healthier, to balance out the likely higher costs racked up by older, sicker people.

Kaiser Family Foundation, a health-policy think tank, has said census data suggest that about 40% of people for whom the exchanges were intended are in the 18-34 age group.’


‘The Congressional Budget Office initially estimated that 7 million people would use exchanges in 2014; the nonpartisan agency has since revised that number downward to 6 million to take into account the technical problems that stopped many from signing up in the first weeks of the exchanges' launch.

Actuaries have warned that if the participants in the exchange end up incurring bigger medical claims than they had anticipated, insurance premiums will jump in future years. Older people and women typically have higher costs, though not always, they say.

The key question is how costs will compare to expectations," said Ross Winkelman, a fellow of the Society of Actuaries. "Age is a useful, but imperfect predictor of costs. Enrollment at the oldest ages seems to be outpacing expectations, which will clearly raise some concerns."

Administration officials declined Wednesday to discuss concerns about the balance of risk in the new insurance marketplaces.’


‘Other supporters of the law have said they are banking on getting young people in as the deadline for getting coverage this year nears.

"We are doing everything we can in the next six weeks to make sure young people know they can get free or reduced-cost coverage," said Aaron Smith, the executive director of the advocacy organization Young Invincibles.

The group has planned more than 100 events around the country for the coming Presidents Day weekend, including an enrollment event in Miami and a pub-crawl in Austin, Texas.’ - Young Remain Slow to Sign Up On New Exchanges [print edition] 02/13/2014 (appearing in the on-line edition as: Health Exchanges Hit 3.3 Million Enrollees Through January) (1)


One might want to further examine the position of Aaron Smith, executive director of the advocacy organization Young Invincibles, regarding: "We are doing everything we can in the next six weeks to make sure young people know they can get free or reduced-cost coverage."

The first concern a young person might examine is the following from the web site:

“People under 30 and people with hardship exemptions may buy a "catastrophic" health plan. This type of plan mainly protects you from very high medical costs.”

“If you buy a catastrophic plan in the Marketplace, you can’t get lower costs on your monthly premiums or lower out-of-pocket costs based on your income. Regardless of your income, you pay the standard price for the catastrophic plan.” (2)

Therefore, if you are young, age 29 or under, you can purchase a catastrophic plan but you do not qualify for a subsidy. Hence someone picked winners and losers in the subsidy game and young people wanting the lower cost catastrophic plan are the losers. Very nice indeed!

An additional concern a young person might want to examine is the price of the catastrophic plan. Similar plans were roughly 25% less expensive before 01/01/2014 and ACA pricing. The increased price is subsidizing older insured’s. Hence the young indirectly or directly subsidize non-catastrophic coverage purchasers (those over 30) yet themselves can not qualify for a catastrophic plan subsidy. The subsidizer can’t obtain a subsidy. A one-way subsidy street. Sweet! (3)


(1) Young Remain Slow to Sign Up On New Exchanges [Health Exchanges Hit 3.3 Million Enrollees Through January], WSJ, and, 02/13/2014 and 02/12/2014, respectively.

(2) Can I buy a “catastrophic” plan?,

(3) Where's The Outrage From Young Americans About Obama's Health Reforms?,, 07/31/2012











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