ACA’s success depends on young people buying insurance. Or does it?

The success of the healthcare law “depends on reaching everyone who is uninsured, but particularly young people who may feel like they don’t need insurance,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation.

That’s from an Anna Gorman piece in the LA Times. I think we need to dig a little deeper into what we mean by statements like “the success of the healthcare law depends on young people signing up.” What do we mean by “success”? Here are some possibilities. Success means …

  1. Maximizing coverage
  2. Minimizing average premium
  3. Reducing uncompensated care
  4. Providing a set of choices that is relatively stable over time

These are all different goals. The first, maximizing coverage, implies an ambition to get young people, indeed all people, to sign up. That is the goal of some reform advocates, but they don’t always state it or say why it is a good thing in and of itself (if it is).

The second, minimizing average premium, would happen if only the healthiest person signed up and nobody else. Nobody really has this as a goal. What some may have in mind that is similar is keeping premiums low for older people who really need coverage by pulling in younger, healthier people into the risk pool. This is a cross-subsidy goal, and is the focus of much debate. (Young people are being penalized! Not fair! Etc.) Basically, this goal is about managing the risk pool, trying to draw a mix of risks, not just high risks.

Perhaps a better way to phrase the second goal is: providing universal access to affordable health insurance. In this guise, having younger people in the risk pool helps increase access to insurance among older people by lowering its price. Of course, the law’s subsidies also play that role, lowering the out-of-pocket premium in an income-sensitive way. What a pool of lower risk really does is reduce the federal government’s liability for the cost of those subsidies.

The third, reducing uncompensated care, would happen as more people who use care they can’t afford get insured. A young, healthy person who doesn’t use care can’t reduce uncompensated care by signing up for coverage. Of course, we can’t know in advance who will need care or how much they will need relative to their resources. There are other ways to address uncompensated care, though they have disadvantages too.

Finally, the fourth goal, is about establishing a market that doesn’t experience a death spiral due to risk selection that becomes more adverse over time, driving premiums ever higher as it does so. This goal is similar to number 2, but it’s about premium changes over time, not their level at any one point. But notice, you can have a stable risk pool that doesn’t include young people.  True, on average insurance will be more expensive if young people don’t buy it. But if the types of people who do buy it keep doing so — a stable risk pool — the market will not unravel over time.

I get a little uncomfortable when someone starts saying that we must get young people to buy insurance. I would like to hear a more careful and complete articulation what goal(s) they have in mind. If it is just a stable market for those who want coverage, it’s not necessary for young people to participate. Probably their goals are broader than that. Let’s hear what they are!


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