• 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!


    • Austin, I believe you to be absolutely correct that it is not necessary for young people to buy insurance and still have a stable market for those that want coverage. I think this is a more important point than many might realize and you seem to be astutely highlighting that fact.

      On the other side of the coin, if our goal is that everyone carry insurance, it is a good idea to promote insurance to the young because if they have it voluntarily when they are young they are more likely to carry it when they are older.

    • Is possible that the quote’s author believes that the younger population insured via Obamacare subsidize the older, or provide some subsidy at all. Disproportionately few younger people therefore would underfund the pool.

      I have no idea whether or not this is true but I did note that it was not exactly one of your 4 options (possibly #2 I grant).

    • What comprises a viable pool over the long term, is an appropriate risk of high claimants, low claimants, and no claimants.
      As far as pricing risk, our patented design , at this point, incorporates full community rating: 1 to 1 for all ages.
      This provides a discount for older people beyond the 3 to 1 community rating of the ACA.
      Younger people will pay more than the same age with other insurers. Our attraction is that by building paid-up benefits, there is less community-rated “gap coverage” to purchase, up to $50,000.
      At the $50,000 level full comunity-rating makes little difference in premiums from modified community rating.
      So, our plan can attract all types of people.
      Low and no claimants like the paid-up benefits rider, being able to increase their deductibles, and lower their premiums up to 60-80%.
      Higher claimants remain in the fully community-rated “gap, ” but are still getting a return of $4 or $5, for every dollar put in, depending on the amount of claims.
      And, young people will be encouraged to enter the Exchanges, for, typically, with ower incomes, they qualify for higher subsidies, up to 90% of the premiums.
      Don Levit

    • This may be the wrong place for this comment, but…

      One thing that fails to get mentioned with respect to the claim that the younger will pay more is that the younger are just as eligible for subsidies as everyone else is. So the only younger who will be paying more are the ones who are doing well financially. Since most folks tend to see increasing salaries as their careers progress, the only young who will be paying more are the ones doing well financially.

      So the argument that the young pay more is largely bogus.

    • Excellent point, David.
      And the larger the family, the larger the income eligible for subsidy.
      Allowable income increases about $16,000 per person (after a family of 4), up to 7 family members.
      Don Levit