• Flipping the “young invincibles” rate shock narrative

    Thought “rate shock” was just a plight of the young? Think again. Recent survey findings from Deft Research suggest that the uninsured cohort least likely to buy insurance on the exchanges is the oldest one, those aged 50-64. In an interesting narrative twist, the youngest individuals surveyed (ages 18 to 35) actually seem most likely to buy.

    oldsterrateshock

    Deft’s research shows that the least likely buyer is older and wealthier than the most likely buyer. By being wealthier, their health insurance subsidies will be smaller. Because they are older, they will see higher cost health insurance […] Deft’s study found that many older uninsured persons will find even their subsidized premiums to be too expensive. They will take a tax penalty rather than purchase health insurance – at least in the first year of reform.

    The survey tells a story consistent with the Bloomberg column Austin and I coauthored last week. Rate shock is a real thing: premiums for the healthy are going to rise. But it’s not a cross-subsidy from the young to the old, as some critics contend. It’s tied to health status—the healthy are subsidizing the sick, at all ages.

    Adrianna (@onceuponA)

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    • Keep in mind that because premiums for older people are more, they’re going to be more likely to trip the 8% threshold that exempts them from having to pay the tax penalty for being uninsured. A married couple age 55, no kids earning $65k (which isn’t exactly lighting-$20-cigars-with-$100-bills rich) will get no subsidy, in Rhode Island they’re premium for the least expensive Bronze plan will be $8800 or so. The catastrophic plan they could be wouldn’t be that much less, about $8,000 annually.

      Also, given that the survey contradicts the revealed preferences in place today (younger/poorer don’t buy insurance, older/wealthier do), it’s probably worth considering that things might not play out quite the way this survey suggests.

    • To continue riding my hobby horse, ACA includes a subsidy from older insureds to younger insureds, not the other way. If one accepts the premise that health status should not determine the premium, then there’s no justification for charging older insureds three times as much as younger insureds. While it’s true that older insureds are more likely to need health care, not nearly as much as a younger insured with, for example, leukemia.

      • Excellent point.
        It is actual health status, not age, that is key.
        That is why our design is fully community-rated, 1 TO 1 – Everyone pays the same premium.
        For a nominal cost, the entire family builds equal paid-up benefits.
        These paid-up benefits lead to lower premiums, per person, as they now can assume more risk due to the underlying paid-up coverage.
        Those incurring claims, and spending most or all of their individual paid-up benefits, can have the same premium as their healthy family members. It is just they have more exposure, due to the lower underlying paid-up coverage.
        Don Levit

    • I love the Kaiser survey mentioned in the Bloomberg article – and how it supposedly documents that: “Guaranteed issue is supported by two-thirds of Americans, including a majority of both Democrats and Republicans.”

      This is one of a number of questions Kaiser asked about – whether you “feel favorable” about certain aspects of the law:
      Tax credits to small business – 88% favorable
      Close Medicare donut hole – 81%
      Create Health Insurance exchanges – 80% –
      Extension of Dependent Coverage – 76%
      Subsidy assistance to individuals – 76%
      Medicaid expansion – 71%
      Guaranteed Issue – 66%
      Medical Loss Ratio – 65%
      Increase Medicare payroll tax on Upper Income – 60%
      Employer mandate – 57%
      Individual mandate – 40%

      Too bad they did not ask if you “fee” favorable about the changes – whether the results would be different if people knew the pricetags of these “enhancements”. You can see it in the results – how “favorability” changes once people get a whiff that they may have to shoulder some of the burden. Else, why would the individual mandate score as less than half the “favorability” score of others? Could it be that people recognize this is something they may have to pay – versus a cost foisted onto the other guy?

      I also love the Medicare “donut hole” question. Most of you are probably not old enough to remember the Medicare Catastrophic Coverage Act of 1988 – which was also sponsored by AARP and probably many of the organizations who issue your paychecks. It was passed by Congress signed into law by President Reagan and … only a few months later, it was prospectively revoked. Why? Oh, the beneficiaries, the retirees, found out that they themselves would shoulder the largest part of the cost to fund the new Medicare protections. Amazing how “favorability” lags when you have to pick up the tab.

      Sure, given how informed most Americans are about PPACA and the cost of their health coverage at work, why wouldn’t survey respondents “feel favorable” about those items. The Kaiser survey fails simply because it has no pricetags. How can you honestly “feel faborable” about something where you have absolutely no idea about the costs, and who will shoulder them?

      The fact is that most Americans see their paycheck decline less from the contributions they make towards their own coverage than the reduction in take home pay from:
      – Medicare Part A (FICA-Med),
      – Medicare Part B and D (general revenue/income taxes),
      – Medicaid (general revenue/federal and state income taxes)

      Yep, the impact on take home pay to fund each of those three sets of programs EACH exceeds the impact on take home pay most employees feel from contributions for their own coverage. Do they know that? Of course not.

      All the economic studies show health spend at ~17% of GDP. Using the income approach, GDP = rents + interests + profits + wages + certain statistical adjustments. So, GDP > wages. Anyone here pay 17% of pay to fund health coverage? Well, yes, but it is probably not communicated as a single line item deduction from your paycheck.

      Finally, few Americans, even after the advent of cost reporting in Box 12dd on the W-2, recognize the impact on their take home pay because of the health coverage costs shouldered by their employers. Many, perhaps most employers who sponsore a plan still pay the majority of the cost of health coverage for employees. Another Kaiser survey shows average annual increases in the cost of health coverage of almost exactly 8% over the past 13 years; while, concurrently the same survey shows, among the same surveyed population, that the average annual change in pay was almost exactly 3%. Do ya think the ever higher cost of health coverage shouldered by employers has depressed salary budgets? Do they recognize the link between the two items?

      So, sure, take the uninformed American, and ask him whether he “feels favorable” about some PPACA change where it doesn’t have a price tag attached.

      Try this, instead: Have Kaiser survey taxpayers with employer-sponsored coveage, after informing them of the burdens they already shoulder, put a price tag on these changes (in terms of the new “fees” and the anticipated cost shift from adding 15 – 20 – 30 MM or more Americans to Medicaid and Medicare in the next three years), then couple that with the reductions in employer-sponsored coverage as employers who continue to offer coverage reposition the value to a lower target to avoid the “cadillac tax”. Sure, once informed, let’s have a “favorablility” vote on PPACA..

      What you will see, once people are informed about costs, is a result much like what McKinsey got in 2011 when it asked employers, after they were informed about all the aspects of PPACA and the likely ipact on their plans, whether they would maintain or drop coverage – over 30% indicated they would drop coverage and pay the penalty tax after 2014. While all of today’s surveys still say most employers will maintain coverage after the employer mandate kicks in, expect those employers who do not drop coverage to increasingly focus/limit spend on employees and not dependents (see UPS), and to redirect spend so more employees (particularly those that need dependent coverage) can gain access to taxpayer subsidized public exchange coverage.

      Down here on the ground, it is clear that despite the delay in the employer mandate penalty tax, employers have started to act – the changes in dependent eligibility, the shift to high deductible health plans, the addition of spousal surcharges, etc.

      Let’s see how many Americans are favorably disposed to these PPACA “enhancements” once they recognize who is going to pick up the tab. .

    • Facts matter. Older folks who have to buy insurance on the Individual market now get nothing for the huge premiums they pay until the hit very high deductible. The Exchange policies will change that by paying for all care from day 1. That will make the overall cost of heathcare for an Individuals much less for the entire year.

      The proof is in the pudding. Next year I’ll save thousands of dollar on healthcare thanks to Obamacare. And because of the 80/20 rules already in place I’ve gotten hundreds of dollars in refunds. Hence I’ll never vote for anyone who wants to take away my Obamacare. They are fools.

      • Facts do matter. Exchange policies will not pay “for all care from day 1,” at least not for most people. You may be one of the relatively few people wealthy enough to purchase a Platinum plan, which will likely have a very low or no deductible and have an actuarial value of 90%, but most people can’t afford that. The projections by every insurer I’ve seen are that the overwhelming majority of people will be in Silver or Bronze plans, which look like they’ll have deductibles in the $2,500 to $5,000 range, with varying levels of co-pays and co-insurance as well.

        • April may indeed benefit from the more comprehensive coverage. And, in her particular situation, she may come out way ahead with the ACA.
          There are “winners” and” losers” in the ACA.
          Those winners and losers are not only those directly involved with the ACA, such as policyholders, insurers, and providers – but also the silent winners and losers – the taxpayers who are not directly involved with the ACA.
          All too often we focus on our own needs, desires, and wants, without realizing there is a much bigger picture.
          Don Levit

    • Austin: Thanks for the links. Kind of proves my point; namely, is it realistic to expect employers to increase employee wages (other than nominal increases) once employers shed paying for health insurance? It is hard, if not impossible, to imagine any other scenario wherein the added profits are not channeled to the stockholders and upper the highest level of management (CEP/COO for ex.).

      Look at how fast companies shed pensions and other benefits. I haven’t seen anything in the last 40 or so years to make me think otherwise. The median family income was about 12k in 1973 http://www2.census.gov/prod2/popscan/p60-093.pdf; that same number today would have to about 63k. In 2011 it was about 51k, http://www.nytimes.com/2012/09/13/us/us-incomes-dropped-last-year-census-bureau-says.html I can’t find the cite but I believe it is about 52k now; so, people have taken a huge hit.

      if 40 years of stagnating wages while the wealthiest people in America gained even more in the last 40 years doesn’t offer predictive service, I don’t know what will.