Affordable Care Act does little to help young Americans
Published: Monday, September 2, 2013
Updated: Monday, September 2, 2013 23:09
The Affordable Care Act, more commonly known as “Obamacare,” is a raw deal for young Americans. It is misguided in its conception, regressive in its nature and dangerous in its function. At its best it succeeds to redistribute wealth up the economic ladder, and at its worst, threatens the ability of Americans to obtain affordable health insurance.
First, not just anything can be insured. Insurance is a product bought as a hedge against the unexpected or the unlikely. The customer pays a premium and in return they are covered in the event that something unexpected happens. Take car insurance, for example. If your car gets wrecked unexpectedly and you have insurance, then the insurance company would be expected to pay for the damages. The insurance company makes money on the fact that most people do not unexpectedly wreck their car. However, you would not expect your insurance company to pay for an oil change. Yet, every car needs multiple oil changes. The only way an insurer could pay for an oil change is by charging more than the oil change costs. Health insurance is the same. Things like birth control and preventative care, which are not needed unexpectedly, cannot be properly insured against. Unfortunately, preexisting conditions fall under this category. Like oil changes, preexisting conditions are a certainty, and can’t be insured.
Coverage of preexisting conditions is a problem that politicians, particularly Democrats, have wanted to solve. One solution that New York tried is to pass a law limiting an insurance company’s ability to charge different rates based on health, age and gender. This is called “community rating,” and it would mean that the young and the healthy would pay similar premiums to the old and the sick. Simple, right? Wrong! As the law takes effect, premiums begin to decline for the elderly and the sick, but also begin to rise for the young and the healthy. As these premiums rise, young and healthy Americans start to exit the insurance market. This exodus causes premiums to increase, and the cycle continues. This is known as a “death spiral,” or “adverse selection.”
Will the Affordable Care Act cause a similar “death spiral?” The writers of the law sought to avoid precisely this situation. To this end, they included subsidies on a sliding scale for households at up to 400 percent of the poverty level. More controversially, the individual mandate, which would make it illegal to not buy health insurance was also included. These two provisions were to act as both carrot-and-stick, respectively incentivizing the young and healthy to buy insurance. However, the Supreme Court ruled, in a bipartisan fashion, that failure to buy insurance cannot be made a crime, nor can a tax on not owning insurance be raised to a punitive level. This means that the government’s plan to sign up the young and healthy rests on federal subsidies. These subsidies, however, still leave young, healthy Americans with a strong incentive to opt out and pay the tax. According to a study conducted by the National Center for Public Policy Research, millions of currently uninsured Americans would still save between $500 and $1000 by choosing to pay the tax. It is important to remember that these people already decided for one reason or another not to buy health insurance and may be unlikely to buy health insurance under the new system This fact combined with the cost increasing measure such as, community rating, taxes on medical devices, increased preventative care (which according to the CBO does not save money), and free birth control, could be just the spark a “death spiral” would need.
Taken in pieces, this is a politically, and at some points even economically, sound law. However, in its totality, it has the potential to do more harm than good. The saving grace of the ACA, the federal subsidies, will only serve to inflate the bills already hefty price tag, up $1.76 trillion from the $900 billion promised by the President in 2009, a price tag that will likely rise after full implementation in 2013-2014. Maybe worst of all, the reductions in hours being seen across the country will disproportionally affect young people. On top of that, the CBO estimates that 30 million Americans will still be uninsured by 2022. With $16 trillion already on the balance sheet, this law carries too much risk, at too great a cost, for too little benefit, for it to possibly be good for young Americans.