Starting in 2014, Obamacare will attempt to get almost every American to obtain health insurance. The system desperately needs healthy young people, millions of whom don’t have health insurance, to sign up because their money is needed to subsidize treatment for older, sicker Americans. But will they?
Young people will be asked to buy policies that don’t reflect the low risk they have of getting sick. Obamacare allows health insurers to vary premiums based on age, but they can charge older customers only up to three times as much as healthy young customers, while most insurers have as much as a five- or six-to-one ratio. This means lower prices for older (and wealthier) folks, but high prices for the young. “They’ll have sticker shock,” House budget chairman Paul Ryan told me.
Even if premiums don’t rise dramatically, the process of signing up for health insurance has become dramatically complicated. The online application that has become the standard for everyone seeking Obamacare subsidies for coverage runs to more than 60 pages’ worth of questions, demanding information on income, family status, details on any health insurance offered at an applicant’s workplace, and lifestyle.
Ezekiel Emanuel, a physician who is brother to former White House chief of staff Rahm Emanuel, has spent a lot of time gaming out how Obamacare will work. He frets that young people will be “bewildered,” and they may “forgo purchasing insurance and opt to pay a penalty instead.” Indeed, the penalty starts at just $95 a year, and, though it will automatically rise some, Democrats will be loath to propose increasing it to an effective level.
And whether they are slackers, students, or software engineers, young people are smart enough to figure out that they can easily wait to sign up for coverage until after they get sick. Obamacare requires every insurance company to take anyone on as a customer regardless of any pre-existing conditions.
If young people boycott Obamacare, the law of adverse selection kicks in. Too few young people in an insurance pool means fewer healthy people to subsidize the sicker people. Costs and premiums will rise more than expected, which will lead to fewer young people signing up and costs going up even more. In insurance jargon, it’s called a death spiral.
Grace-Marie Turner, head of the free-market Galen Institute, has looked at a typical young person’s decision tree on Obamacare. If someone is 27 years old, single, and making $34,000 a year, he will have to fork over more than $300 a month for a basic health-care package — that’s 50 percent more than he is likely paying now. Obamacare would send him a check for $20 a month through its subsidy program, but he or she will still wind up paying some $1,000 a year of after-tax income for basic health insurance. That’s a lot for someone with a decent job who is trying to save money for a house or to start a family.
No wonder Health and Human Services secretary Kathleen Sebelius got caught visiting with companies she regulates to try to shake them down for contributions to promote signing up for Obamacare (what the federal government calls “educational” efforts). The legally dubious slush-fund strong-arming is a sign of desperation. With young people’s support for Obamacare at or below 40 percent in many polls, the likelihood of the exchanges’ experiencing “market failure” is high. If that happens, the whole rotten edifice of Obamacare will be exposed.
When it comes to the drug of government-run health care, my advice to young people is the same as that offered by Nancy and Ronald Reagan about illegal drugs over 30 years ago: “Just Say No.” Both products may create the short-term illusion of well-being, but it doesn’t last, and the long-term complications are devastating.
— John Fund is national-affairs columnist for National Review Online.