Will young people pay for mandated health insurance next year? Uh, probably not …

posted at 4:01 pm on August 26, 2013 by Bruce McQuain

Chris Conover takes to the pages of Forbes to discuss whether or not young people will take the plunge next year and buy health insurance as required by ObamaCare.  His conclusion?  Not if they’re smart.

recent study by the National Center for Public Policy Research shows that:

  • About 3.7 million of those ages 18-34 will be at least $500 better off if they forgo insurance and pay the penalty.
  • More than 3 million will be $1,000 better off if they go the same route.

Consequently, many more will opt to pay the extremely modest tax rather than fork over many thousands of dollars to purchase coverage that became substantially more expensive for young people thanks to the misguided pricing rules imposed by Obamacare. The risk that the law will fail in an “adverse selection death spiral” thus has gotten much larger. This claim is not in dispute. Instead, progressives argue it is too narrow. If only young people would consider the long run—when they too are old—they would discover that enrolling in Obamacare is in their self-interest.

The “long run” as articulated by Ezra Klein:

Young people grow old. Healthy people get sick. Rich people become poor. The people overpaying to keep costs low today are the people underpaying 10 or 20 years from now.

But is that true? Will it all “even out?”  Conover says heck, we can test that theory empirically using the law’s parameters and requirements:

Community rating can be shown (both theoretically and empirically) to be both inefficient and unfair. It is inefficient because it encourages low risk individuals (think young people) to remain uninsured rather than over-pay for health insurance. It is unfair because it ends up transferring resources from healthy poor people to unhealthy wealthy people. But this unfairness aspect might be undercut considerably if it turned out that from a lifetime perspective, young people who overpaid when young were more than compensated by their future savings from community rating once they got old.

So I first created a set of experience-rated premiums for every single year of age between 18-64.  I then calculated the present value of these premiums over a lifetime—which in this case meant ages 18-64 since even under Obamacare, people are assumed to enroll in Medicare at age 65. I examined 4 different groups of young adults (age 18, 22, 25, and 30) using different discount rates. I then created a parallel set of premiums that were constrained to meet the Obamacare modified community rating rules, namely, that the premiums for the oldest plan members can be no more than 3 times as high as the premiums for the youngest members. If the present value of the Obamacare premiums is lower than the comparable figure for experience-rated premiums, then one could reasonably say that the intuition of Obamacare enthusiasts is correct: young people are better off under Obamacare since they ultimately will save enough on their premiums in old age to offset whatever “excess” premiums they are forced to pay in their young adult years. But as you can plainly see, for most age categories and most discount rates, the reverse is true. The lifetime cost of Obamacare is higher than under market-driven premium rates.

Gasp!  You mean, we’ve been duped again?  Since the only way for this nonsense to be true is via a zero discount (that doesn’t exist) then yes, we’ve been fed a whopper … again.

Conover goes into interesting detail to outline why ObamaCare is a bad deal for young people.  And, just as importantly he points us to another article that points to another significant cost over the years that usually goes unmentioned – opportunity cost.  What is the cost of the opportunity the money they spend on health care in terms of what they would have done with the money if they could use it for their choice?

Rituparna Basu lays out a hypothetical case study to make the point:

Consider that 25-year-old non-smoking male in California—let’s call him Brian. Brian is a freelance web developer committed to gaining enough experience and saving up enough money to one day start his own company.

Every dollar Brian can save right now brings him one step closer to starting and growing his business. In a truly free market, Brian would be able to choose a health insurance policy that best aligns with this goal. He could, for example, buy a policy that’s priced to reflect the real risk that he’ll get sick—just as he buys car insurance priced according to his risk of meeting with an accident. Since Brian is young and healthy, his premiums would be relatively low (just as safer drivers pay lower premiums), allowing him to put more of his income toward his start-up. Brian knows that when he’s older and in a higher-risk category, health insurers may charge him higher premiums, but that’s a fact he’s willing to face.

Even though Brian judges this to be the best way to manage his medical expenses, under the health law, it’s illegal for insurers to offer him a policy geared to his actual risk. Instead, per government mandate, a portion of the income he earns and intends to use to build his life is channeled into the pockets of others.

As a result of this and the many other wealth redistribution provisions in the health law, Brian’s goals are impeded. Maybe it takes him much longer to start the business he’s always wanted. When he finally does, maybe his venture is stunted by a lack of cash to put back into the business. Or maybe Brian must scale back or give up entirely his life-long goal, because by the time he can finance the start-up, he has a family and decides he can’t afford to take such a big risk.

Whatever the case, when Brian is sixty, he might get a few dollars from the younger generation (if they haven’t yet awakened to the injustice of the scheme, and if the whole system hasn’t already crashed). Meanwhile, Brian will have paid a high price, having been denied throughout the course of his life the right to decide how best to use his earnings.

Is it any wonder that the health law’s redistribution schemes had to be forced on people, by law? Nobody would choose to spend their own money this way.

Of course they wouldn’t … if given the choice.  That’s sort of the reason for the mandate, isn’t it?  That’s why we’ll soon have 16,000 new IRS ObamaCare enforcement agents making sure you do your part as demanded by law.

Watch for the progressive side of the aisle to continue to try to sell this sham as a good deal for young people in all sorts of  snake-oil Ezra Kleinish ways.  Because, as Basu says, “Let’s fleece our children and grandchildren” isn’t a slogan that is likely to garner much support.

~McQ

Blogging at QandO

 


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NO – the young and the healthy will be punished – why should they pay? They will NOT!!!

Schadenfreude on August 26, 2013 at 4:04 PM

Gotta have a job that pays you before one can actually pay for anything else.

Paying for yer own health insurance, when you are on Mom and Dad’s policy (for free), is stoopid.

coldwarrior on August 26, 2013 at 4:04 PM

Let’s see, the younglings can pay a crapload now or wait until something happens and supposedly get all the medical treatment they need anyway and save the money. What, BarkyCare would turn away some poor schlub who isn’t a 1%’er, imagine the optics!

Nice hole you’ve dug for us, Barky Voters, now we’re all down inside smoothing the sides to make it pretty. Thank you, no really, THANK YOU for this.

Bishop on August 26, 2013 at 4:06 PM

His conclusion? Not if they’re smart.

AHAHAHAAHAAHAHA!

The beatings will continue until the stupid is cure.

nobar on August 26, 2013 at 4:07 PM

I think its hilarious that dems rely so much on the words smithed out by Ezra Klein. Is he thirty yet?

DanMan on August 26, 2013 at 4:10 PM

If you are young and/or healthy you will be punished the most with obama’care’. “The Affordable Care” act is neither.

If you are young/healthy just pay the ‘punishment’ for not signing up. When you get sick the law lets you get coverage anyway, unless emperor obama and Nurse Ratched/Sibelius change the rules.

Schadenfreude on August 26, 2013 at 4:11 PM

Gee, I’ve only been saying this since 2009!

One of the most outrageous aspects of this awful legislation is just how predictable it is. And the fact that the media never covered this predictableness until the 11th hour is just one more piece of gigantic evidence that the media is horribly biased and dishonest.

NotCoach on August 26, 2013 at 4:11 PM

With parttime jobs in the young’s future and rent/mortage,car payments, auto insurance,gas,clothing,food,kids in school,phone,cable,internet,and etc.etc.,there won’t be much money for the party’s,clubs,or health insurance.

docflash on August 26, 2013 at 4:11 PM

My limited understanding of the new health insurance laws are that no person can be denied health insurance for any reason, including pre existing conditions. If that statement is true, then any sane younger person would only buy a policy if they are in an ambulance on the way to a hospital after some sort of accident.

Johnnyreb on August 26, 2013 at 4:12 PM

Nice hole you’ve dug for us, Barky Voters, now we’re all down inside smoothing the sides to make it pretty. Thank you, no really, THANK YOU for this.

Bishop on August 26, 2013 at 4:06 PM

“You stereotype all the Obama voters; we’re not all the Obamaphonelady and Jeantels” — loveofcountry

Schadenfreude on August 26, 2013 at 4:13 PM

Gasp! You mean, we’ve been duped again?

Who is this ‘we’ you’re referring to? *I*, and most here, have *not* been duped – we knew this was the case early on, thank you very much.

Midas on August 26, 2013 at 4:16 PM

Rich people become poor. The people overpaying to keep costs low today are the people underpaying 10 or 20 years from now Social Security solvent won’t have anything to show for it when they retire fifty sixty years from now.

pain train on August 26, 2013 at 4:17 PM

Let’s face it, most young people don’t even know they are mandated to buy health insurance. I am sure most of them believe ObamaCare will just give them free insurance, or free to them.

echosyst on August 26, 2013 at 4:19 PM

In a dictionary, you see these words in order:
1. sh!t
2. sympathy
3. syphilis

That is exactly where my sympathy lies, between sh!t and syphilis.. these are the same voters who voted for Schroom—- TWICE. Although I have two sons in the same age category who did not, I still blame them for not beating the truth into their peers.

hillsoftx on August 26, 2013 at 4:21 PM

Notice that even the studies done say 18 – 64 etc.
But we’re all told how absolutely wonderful it is that “young adults” can stay on their parents policies until 26.

Now go back and run the numbers without all of those 18 – 26 yr olds.

Bueller, Bueller, Bue. . .

Whadayamean it don’t work when you do that, that’s one of the big selling points.

I loathe these scumbags!

D-fusit on August 26, 2013 at 4:22 PM

The next President can appoint an HHS secretary that can make lots of changes to this program since the law was written to give that position so much power. Has anyone else considered this, or am I nuts?

bopbottle on August 26, 2013 at 4:22 PM

Ezra Klein continues to amaze with his utter lack of knowledge regarding healthcare.

Can I be paid all that money to be wrong as often as he is?

Zomcon JEM on August 26, 2013 at 4:24 PM

The “long run” as articulated by Ezra Klein:

Young people grow old. Healthy people get sick. Rich people become poor. The people overpaying to keep costs low today are the people underpaying 10 or 20 years from now.

And, here, we see why Liberals are so stupid. They completely ignore the fact that people understand the present-day value of saving money over some mystical potential to save money on 10 to 20 years. What world do these flipping idiots live in?

goflyers on August 26, 2013 at 4:28 PM

bopbottle, I like that. The next R or I President’s HHS Secratary changes the rules to read; If your a registered Democrat (verified by your voting history) your policies are now quadrupled and everyone else is free to purchase whatever policy you may or may not want.

D-fusit on August 26, 2013 at 4:28 PM

The only ones who will end up paying for O care are the very wealthy. The young and minorities get a free ride, seniors get euthanized and everyone lives happily ever after.

they lie on August 26, 2013 at 4:28 PM

How many billions will the IRS spend tracking down people that won’t buy health insurance?

docflash on August 26, 2013 at 4:30 PM

Why is it only young people that would pay the tax and forego the insurance?

If you are 40, or even a baby boomer in your mid 50s, and reasonably healthy, you can sign up after you get sick.

The same incentives seem to apply to healthy people of all ages.

MichaelGabriel on August 26, 2013 at 4:33 PM

Even if thing “evened out” at some time in the future the value of those dollars to a young person today, is more important than some benefit in the distant future.

Charlemagne on August 26, 2013 at 4:35 PM

New rule to resolve this:

No healthcare benefits under this plan shall be provided to anyone under age 28, nor above age 55.

Premiums shall be paid by all plan participants, regardless of age.

Done.

BobMbx on August 26, 2013 at 4:37 PM

The HHS Secretary ‘shall’, so there’s that.
This pos was never a law. If I recall correctly the way it got ‘passed’ required that no additional monies…. blah, blah, blah.

Nothing is lawful anymore. Illegitimate. Signed into law, with more provisos of ‘shall’ simply aren’t written law. Abiding them is a fool’s errand.

mickytx on August 26, 2013 at 4:37 PM

If only young people would consider the long run—when they too are old—they would discover that enrolling in Obamacare is in their self-interest.

They are really delusional enough to think this boondoggle will be around for at least the next 50 years. It will not last 5 without major changes if it survives at all. The only way to have it work is massive taxes to pay for free healthcare and abolishing health insurance. Which is the plan as far as I’m concerned. When it happens I would like to see laws in place that prevent rice people and any people for that matter seek healthcare out of country. Everyone MUST be made to suffer equally.

Dr. Frank Enstine on August 26, 2013 at 4:40 PM

Soo, I wonder what the just-in-time insurance market will look like. Brings a whole new meaning to ambulance chasers… quick, sign here before you get to the emergency room!

WitchDoctor on August 26, 2013 at 4:44 PM

Let’s face it, most young people don’t even know they are mandated to buy health insurance. I am sure most of them believe ObamaCare will just give them free insurance, or free to them.

echosyst on August 26, 2013 at 4:19 PM

Not just the young, most of the low-information population.

Many Americans also think that the subsidies that they may be eligible for will make Obamacare nearly-free. What they don’t know is that the increases in the cost of insurance due to all of the stupid Obamacare rules will be more than the subsidies.

slickwillie2001 on August 26, 2013 at 4:44 PM

And, here, we see why Liberals are so stupid. They completely ignore the fact that people understand the present-day value of saving money over some mystical potential to save money on 10 to 20 years. What world do these flipping idiots live in?

goflyers on August 26, 2013 at 4:28 PM


From my 40+ years of observation …

… if Don Corleone had Luca Brasi holding a gun to their head with one algebra problem (fuhgeddabout Present Value) they had to solve …

there would be brains on the paper in 100% of cases.

My very liberal brother, who thought I was insane in August 2008 when I predicted a “President Obama” would be the worst aspects of Carter and Nixon, retired early from teaching in June and acknowledged that my predicition of things getting worse on an accelerated basis was one of the key factors in his decision to get out in attempt to save his own sanity.

PolAgnostic on August 26, 2013 at 4:44 PM

But we’re all told how absolutely wonderful it is that “young adults” can stay on their parents policies until 26.
D-fusit on August 26, 2013 at 4:22 PM

Unles mom or dad works for UPS. Didn’t UPS just drop all coverage for any non-employees?

I will make bets that my employer will dump health coverage within the next two years. Our parent company is based in Europe so I expect that they will be glad the US has universal coverage.

Dr. Frank Enstine on August 26, 2013 at 4:46 PM

His conclusion? Not if they’re smart.

So most of them will sign up? I doubt it. The simplest answer is that most young people are unaware of what’s required, so most of them won’t sign up. And they’ll be shocked when they get the penalty notice, and many of them won’t get it (because young people move more often), or will ignore it.

hawksruleva on August 26, 2013 at 4:47 PM

Unles mom or dad works for UPS. Didn’t UPS just drop all coverage for any non-employees?

Dr. Frank Enstine on August 26, 2013 at 4:46 PM

They, and UVa, dropped coverage for spouses. I believe in both cases, it was for spouses whose workplace offered insurance. Spouses got left out of Obamacare, and a lot of businesses will take advantage of that to offset the cost of the 20-somethings they’re forced to cover.

hawksruleva on August 26, 2013 at 4:49 PM

Let’s face it, most young people don’t even know they are mandated to buy health insurance. I am sure most of them believe ObamaCare will just give them free insurance, or free to them.

echosyst on August 26, 2013 at 4:19 PM

Based on the liberals I talk to I figure most think they are getting free healthcare. Free anything they want from it including boob jobs and sex changes. They think we are entering the golden age of free healthcare that reviles anything that the wealthy can get. As one liberal moron told me back in 2008, “When Obama is made president we will all be Bill Gates.”

Dr. Frank Enstine on August 26, 2013 at 4:50 PM

Sigh, the Dems know the young stupids won’t go for this. The goal is and always has been single payor. This Obamacare collapse has been engineered to fail so the Dems can say see we tried our best but those dasterdly Republicans and those red state governors stood in the way. Thats why they allowed the provision for states not to opt into the exchanges. The ultimate goal is for the Dems to be the only party in charge, for minorities to be given priority over whites (yep, even stupid liberal whites) and for single payor health coverage. If we had an actual second party which was on the opposite side of the Dems we could win over folks but they are too busy being Dem Lite RINOs. Even Nazi Pelousy is seeing this kind of anti-white treatment. She was drowned out by music when she showed her wrinkled white face at the MLK memorial rally this past weekend. Get it liberal white folks? You will be one of the first to lose your jobs if Valerie Jarretts stormtroopers get the power they so hungrily crave. Willing dupes

neyney on August 26, 2013 at 4:51 PM

engineered to succeed-PIMF!

neyney on August 26, 2013 at 4:51 PM

My limited understanding of the new health insurance laws are that no person can be denied health insurance for any reason, including pre existing conditions. If that statement is true, then any sane younger person would only buy a policy if they are in an ambulance on the way to a hospital after some sort of accident.

Johnnyreb on August 26, 2013 at 4:12 PM

Not just the young….all health folks – young and not-so-young will be insented to delay purchasing “insurance” and just pay for physicals and occasional doctor visits out-of-pocket. The only folks who will buy from the exchanges are those that get subsidies. Since no decint doctrs will like the re-imbursements offered under the exchange-pans, the subsidized plans will be akin to having Medicaid. Everyone will be getting treatment via the emergency rooms. It’s gonna be great!

Deafdog on August 26, 2013 at 4:57 PM

Consider that 25-year-old non-smoking male in California—let’s call him Brian.

Wait, is Brian Julia’s husband? I thought she was single.

BacaDog on August 26, 2013 at 4:59 PM

Everyone will just wait until they’re sick, to buy insurance. It doesn’t take a lot of drawn out analysis.

Which is why this was engineered to fail, from the very beginning. The fines have to be more than the cost of insurance, to have any bite.

MNHawk on August 26, 2013 at 5:04 PM

They, and UVa, dropped coverage for spouses. I believe in both cases, it was for spouses whose workplace offered insurance. Spouses got left out of Obamacare, and a lot of businesses will take advantage of that to offset the cost of the 20-somethings they’re forced to cover.

hawksruleva on August 26, 2013 at 4:49 PM

Those greedy companies, all they think about is their filthy profits and … wait, you said UVa?

slickwillie2001 on August 26, 2013 at 5:07 PM

No. Most of them are unemployed.

dogsoldier on August 26, 2013 at 5:09 PM

Wait, is Brian Julia’s husband? I thought she was single.

BacaDog on August 26, 2013 at 4:59 PM

Don’t you remember? Julia was single because that plays well to the stupid women who believe in the war on women. These are the women who tell their cats that they are unmarried by choice. Brian would be a baby daddy at best since it was the government that Julia reached out to when she needed help raising her bastard daughter.

Happy Nomad on August 26, 2013 at 5:12 PM

In the near future on all news outlets except Fox:

President Obama today blamed the Republicans for ObamaCare saying their idea was a colossal failure from the beginning. He stated that only by cleaning out the mess, specifically health insurance companies … can Americans all receive quality health care. His proposal is a single entity, the government, taking over all aspects of health care.

Republicans were furious that President Obama called them out on their health care scheme designed to enrich insurance companies. As we all know ObamaCare was all their idea and fought valiantly by democrats.

darwin on August 26, 2013 at 5:12 PM

Those greedy companies, all they think about is their filthy profits and … wait, you said UVa?

slickwillie2001 on August 26, 2013 at 5:07 PM

You don’t think that UVA is unconcerned about profit, do you? Major universities are corporations too.

Happy Nomad on August 26, 2013 at 5:16 PM

I can tell you that my youngest certainly plans on paying the fine.

Cindy Munford on August 26, 2013 at 5:21 PM

“Obama inherited a *number I’ve pulled out of my ass* deficit!”

Yeah, and George W. Bush inherited Osama bin Laden. Know what he didn’t do?

Clone the man four or five times.

Dunedainn on August 26, 2013 at 5:28 PM

I work for a large insurance company. The regime knows the subsidies and penalties won’t be nearly enough to recoup what insurers will have to charge to stay solvent. When that happens, the Alinsky machine will try to pin it all on the evil capitalists and swoop in to save the day with single payer.

This was baked into the cake. The big insurers think they will still be standing in the end come hell or high water. Otherwise, it’ll be me and 55,000 others in my company alone out on the street.

fortcoins on August 26, 2013 at 5:30 PM

Pay for my healthcare while you fetch my Latte’ Low Information Voters…

DANEgerus on August 26, 2013 at 5:40 PM

…ObamaCare is a bad deal for young people.

Forget it. No one will be getting any kind of timely or effective health or medical care out of this combo trainwreck/planecrash/200carpileup job-cremating economy-strangling megadisaster (earthquake, volcano, tsunami to follow). ObumuhCare is a bad deal, period, for anybody and everybody.

stukinIL4now on August 26, 2013 at 6:12 PM

1) Most young people are healthy.
2) Penalties are cheaper than premiums.
3) With no pre-existing condition clause, no need to buy until you are in the ambulance going to the hospital.

Dasher on August 26, 2013 at 6:13 PM

opportunity cost.

The ghost in the system. Most people don’t ever consider opportunity costs when looking at even a rudimentary CBA.

chemman on August 26, 2013 at 6:25 PM

If we ever hear any of their stories of shock and dismay it’ll be pretty funny, but I really could care less. They deserve to hear “I told you so” for their stupidity.

txhsmom on August 26, 2013 at 6:26 PM

Johnnyreb on August 26, 2013 at 4:12 PM

Not just young but any sane person. You get knocked down by a crisis and sign up and pay the premium for a couple of months so the bills get paid. Even for an older person the out of pocket will still be less than settling a hospital bill after the fact. A couple of grand for premiums verses 150-200k for a major crisis. That’s a good deal.

chemman on August 26, 2013 at 6:29 PM

When the young finally revolt against Obamacare, who’s gonna be the first one out there campaigning against it?

Right, Obama.

Molon Labe on August 26, 2013 at 6:59 PM

chemman on August 26, 2013 at 6:29 PM

I wish. Problem is the IRS has access to your bank account. They will garnish your wages comrade.

txhsmom on August 26, 2013 at 7:04 PM

His conclusion? Not if they’re smart.

What evidence is there for that? After all, they voted for Obama.

Twice.

Socratease on August 26, 2013 at 7:17 PM

I read somewhere today that folks get a 90 day grace period to pay their premium and then if they never pay, but were treated in the 90 day period, then any payment made to a doctor or hospital for that treatment has to be clawed back from the doctor or hospital because the coverage didn’t exist. The provider is completely out of luck even if they have already spent the money. That will go over well with doctors debating retirement.

txmomof6 on August 26, 2013 at 8:13 PM

What is the cost of the opportunity the money they spend on health care in terms of what they would have done with the money if they could use it for their choice?

To be accurate, it’s the money they are spending on health insurance, not on health care per se.
It is much more efficient (and generally cheaper) to pay “maintenance” health care costs out-of-pocket and buy insurance only for catastrophic events (just like with cars and houses (duh)).

AesopFan on August 26, 2013 at 11:03 PM