• Read the fine print before you burn your Obamacare card

    This is a guest post from Adrianna McIntyre, a graduate student studying health policy at the University of Michigan. Adrianna currently blogs at Project Millennial, tweets at @onceuponA, and will be joining TIE soon as the team’s first intern. 

    I have not had the luxury of participating in an “Obamacare draft card burning.” I mean, nothing thrills me quite like burning effigies of things that don’t actually exist, but I’ll try to contain my disappointment. Coordinated by the conservative activist organization FreedomWorks, this is the latest attempt to undermine the implementation of health reform. Sarah Kliff reports:

    FreedomWorks believes it has identified a core weakness of Obamacare: the young adults who are crucial to keeping premiums in the Affordable Care Act’s new coverage programs low, the same demographic the White House sees as crucial to the health law’s success.

    Young adults tend to have lower medical bills, which would hold down premiums for the entire insurance market. If only the sick and elderly sign up, health costs would skyrocket. FreedomWorks wants to make that happen and, in so doing, doom the law.

    Here’s what bugs me: this gimmick—and other efforts like it—aren’t owning up to the full ramifications of foregoing coverage. Sure, there’s the penalty; everyone knows about that. But there’s also the limited open enrollment issue. That’s insurer-speak for “you can only sign up for exchange plans during certain months”; despite the rhetoric, people actually can’t just buy insurance whenever they fall ill. The initial enrollment period is extended, from October 2013 through March 2014. But in subsequent years, enrollment will only last from October to December. There are special exceptions, like losing employer-based coverage during an off month, but I double-checked the regs.“I accidentally burned my Obamacare card” didn’t make the cut.

    People pushing young adults to skip the exchanges aren’t saying, “Don’t enroll now… but hey, if you get sick in a few months, we’ll understand if you have a change of heart.” They’re saying, “Don’t enroll now; pay the penalty instead. And if you fall ill, or become pregnant, or get stabbed while doing a good deed and you can’t buy a plan, well, them’s the breaks. That’s the gamble we asked of you.”

    Young adults—people of all ages—are free to take that gamble. But they ought to know they’re taking it.

    • Let’s not forget that the same right-wing loonies suggested that people who are so irresponsible as to not have health insurance could die in a gutter if they can’t afford the hospital.

    • Young people have been one of the largest segments of the population that remained uninsured before the ACA. I don’t see any reason why that will change, so I wouldn’t worry as much about FreedomWorks as I would about the content of the ACA. Since the law is in essence “taxing” the young and the premium is above what their risk would generate, I believe that the non insurance option for the young is a rational option (I am using the word rational rather than judging whether the choice is good or bad).

      • Given that by definition *most* insurance never gets used (in the sense of actually making a claim against it) then by your standard buying *any* insurance is an irrational act. For example, most people have home insurance, but most houses never burn down, get flooded, blown away, etc.

        Given that insurance companies take a profit out of premiums, it’s clear that the total amount of actual health care actually purchased will always be less than the total premiums paid. So as a whole, the population of insurance buyers would be better off not to purchase health insurance.

        That’s about as “rational” as depending upon lottery tickets for your retirement income – in that both have a chance of working out OK.

        • @Ken H.: “then by your standard buying *any* insurance is an irrational act.”

          I don’t know what you are talking about. Insurance (classical) is good for basically two reasons: 1) protection of assets from something unexpected 2) to help pay for something someone could not normally afford. Insurance is rationale for these reasons even though one knows or should know that in the sale of risk the premiums are generally greater than what is paid out in claims.

      • Respectfully I would point out that I hope you would be the first to fall in line and go uninsured to show solidarity for the young people you would encourage to go uninsured.

        The question isn’t whether young people want insurance but rather whether they can afford it on the individual market. The ACA addresses this question. Those who cannot afford it will most likely get premium tax credits to help with the premiums.

        Insurance is a good investment if you need it, or you value the peace of mind it gives knowing it is there if you need it.

        A healthy 27 year old who had a serious winter hiking accident and suffered frostbite recently said to me, “I’d be dead without insurance.” 24 hours before the accident, he was one of those healthy young people who never used insurance. And then he found himself using it regularly for more than 2 years of his life.

        You are never truly assuming the risk of being uninsured unless hospitals can say, “Ooops, you lost your gamble by willfully going uninsured. So sit on this bench and die. That’s the breaks.”

        • @Art: ” I hope you would be the first to fall in line and go uninsured to show solidarity for the young people you would encourage to go uninsured.”

          Firstly I didn’t advise young people to buy insurance or not buy insurance so I don’t know where your statement came from. Secondly, it is a matter of tradeoffs. What will the money be used for? Maybe the person feels he is better off saving the money and investing it since the risk being covered can be 3X the cost to cover that risk. If the individual buys the lowest plan, the bronze plan, he still has to expend a considerable amount of money. Should he get sick he will be responsible for 40% of the medical bills that he might not be able to afford either, so what is the deal? The bronze plan can leave one out in the cold just like no insurance.

    • You should write something about Caleb Howe, the extremely conservative blogger at redstate.com, who is currently critically ill and has no health insurance. Redstate.com has started an internet collection for his medical bills, and has been joined by Daily Kos.

      • I contributed. I hope conservatives learn from that experience.

        • You hope “conservatives will learn from that experience”? You must be joking. Conservatives don’t learn from such experiences, They usually declare their experience is unique, an outlier not reflecting reality, which allows them to continue maintaining irrational positions which even their personal experience tells them are wrong.

    • Funniest/saddest line in the entire article:

      “I like that there is still a stigma [around Medicaid]. That people want to stand on their own feet. When you need help, you should go to your neighbors and church. It’s the American way of doing charity.”

      Right. Because if I’m having a heart attack, or get cancer, or break my ankle, I’m going to call my neighbors or ask the closest priest for help. I just don’t even know where to start with how divorced from reality these people are.

      • I blame a generation of conservatives raised on 1950s Westerns which always show the townspeople rallying around to help the weak and unfortunate. Remember, in the last few years we’ve seen GOP political candidates so wedded to this fantasy that they rhapsodize about the good old days when one could pay Old Doc for medical care in chickens and garden vegetables.

        • 1927- Penicillin invented – before that 1 in 4 died from the flu. there was no healthcare.
          People are so stupid.. Why is it that for the past 30 years all I hear about is healthcare. Before that not a peep. People got sick and people died. All part of life. Ans still is. Did you know that DR and Hospitals KILL over 400,000 people a year!! Yep if these 400,000 did not go to the DR they would have lived! I am not talking about the people that re dying and then go the hospital. I am talking about people that are going to the Dr for routine flu or something and are mis-diagnosed or the med’s are crossed up or they get a staff infection and die. Look it up. Dr are the number one cause of death 10 to 1 of any other cause. Accidents being #2 at 43k/yr.

          SINCE WHEN are you or I entitled to free or reduced Medical treatment!!!! NEVER it is not a right nor a duty of anyone else to make sure you get your 78 years in come hell or high water..

          Plenty of home forgo med ins just so they can have luxuries instead. Like cable, cell phones, eating out and the latest fashions. 30 years ago this was not an issue. I do not feel that I owe anyone medical insurance. If you do not buy it you gambled and lost. No different than if I took all my money and bet it on Tonya Harding. I lost and it is no one else fault. And that is not mean it is the truth. NO society owes it anyone to make sure they get the best medical service for free or at the cost of everyone else. If you buy $5m of insurance and you sueit then great that is what you paid for. But if you did not buy the $5m in insurance you should not get the $5m of medical insurance just because you were born! Man every generation before us understood this. Heck even the Dr were mostly just there to make your death as painless as possible. Now we spend $5m to save a premi baby or $2m to save a 78 yr old from cancer. Really!!! No one is guaranteed 78 years when you are born!!!

          All of a sudden BABY BOOMER want it all and want everyone else to pay for it. I am sad to say it is our parents the BABY Boomer that have put us in this place of despair and victim hood.
          They took over and are still on the Congress and Oval office and the state congresses as well and they could not keep themselves from voting to take and take so they could be made comfortable. And when we test them on why they did and how they got the power they have nothing to say but hand their kids and their grand kids a very large bill!!! A bill to pay for their every whim that they wanted to take so they could have what they wanted without really earning it..

          Think about for minute and you will see that it is true. It is our Parents the Baby Boomers (49-70)sucking us all dry to the tune of $1T a year. They stay in their jobs since thy spent all of their money and do not let their kids move up the ladder.

          Sorry for the ranting. But it is true and they are in charge fro another 10-15 years because of their numbers and they will be taking even more now. Listen to them talk. ALl talk about is how to get the government or some else to pay for this and that. While they sit on a pile of money and they try to make it sound sad they they have to spend their own money on medical care. Guess what I want you to spend your money on medical care not make me pay for so you can use your money to do other fun or discretionary stuff.
          thanks for the vent….Mom I love you but you know you have done this I have listened to you do it and I have told this but now it is to late. You are screwing your kids and gkid and ggkids. Just so you have it nice…You made horrible decisions and now you want us to pay for them….you are worst parents of all time…Free love free this free that do what you want… Yeah that sounds good until someone hands you the bill! Then you could not pay it and then you swiped it from your kids….

    • Thanks for the post. One thing that is interesting is that it’s not entirely clear that the young are really that critical for ACA premium affordability (you might even think HHS wants them to sign up for benevolent reasons).

      In Oregon, prior to the ACA there was age rating (ie. you get the average premium of your age group) without the 3:1 restriction. And recently, insurers have submitted their rates for the next year WITH the 3:1 restriction (http://www.oregonhealthrates.org/ ). The insurer with the lowest rate, Moda Health, shows no real systematic shift in their age factors from this restriction. (Although some insurers did have higher ratios.)

      That is, the ACA may not subsidize the old with the young by as much as people think because the 3:1 restriction is not very different than actuarial ratio. So while the young avoiding the exchanges may not doom the law, it will save the feds some money since many of the young are eligible for subsidies in the exchange. So, if FreedomWorks wants to sabotage the law, I guess they should discourage healthy old people from signing up-but they may be less impressionable.

      • “the 3:1 restriction is not very different than actuarial ratio.”

        Peter, can you explain this to me. I am not taking issue with anything that you are saying, but wouldn’t 3:1 mean they can be charged 3X as much? Wouldn’t that be looked upon as a very significant difference especially if their plan is a high deductible with/or without co-pays? The comparisons as to what could be vs what will end up happening are too distant in the future to draw firm conclusions.

        Wasn’t a large part of the reason for the mandate to transfer costs from the higher risk group to the lower risk group and keep the government’s costs down?

        I personally think that for the long run “taxing” the young is a bad way to encourage universal coverage. That they chose this means they were thinking of the short term and the use of more force than should exist in a free society.

        • Emily, the 3:1 restriction is the rule within PPACA that the most expensive age group can only be charged 3 times more than the least expensive age group. This is actually the only reason the young WOULD theoretically be subsidizing the old. Without it, the groups are just charged their average cost (plus the markup). My point is that the restriction only has an impact if the actuarial ratio (the ratio of costs without subsidization) is higher than 3:1 for those age groups now. And, when I looked at some insurers in Oregon it appeared that their actuarial ratios were pretty close to 3:1 anyway.

          For instance, let’s say before PPACA 64 year-olds cost $1,000 on average due to medical expenses and 18 year-olds cost $200. This ratio is 5:1, therefore PPACA would make the insurers charge something less for the older group and something more for younger group to obtain a 3:1 ratio. They could charge $900 for the 64 year-olds and $300 for the 18 year-olds. Thus, younger people are subsidizing older people. But, if it were the case that young people did cost $250 and older people cost $750, then the rule would not mean insurers would have subsidize.

          The point being, that the amount of subsidization is related to the change in these ratios. Does that sound right?

          • “in Oregon it appeared that their actuarial ratios were pretty close to 3:1 anyway.”

            Peter, you are only looking at Oregon and I am not sure the type of coverage you are looking at. Oregon is in part a community rating state. Therefore I think we will see variation depending upon the state being observed.

            Yes, I think I agree that the amount of subsidization is related to the change in the ratios, but my essential point remains. I think it is bad policy to tax the young in their insurance premiums.

            • Emily, the previous community rating is the reason Oregon is relevant. In other states we do not know what the age factors were for insurers prior to the ACA (or do not know them as easily). Thus, the previous age rating allows us to isolate the impact of the 3:1 restriction. Also, the age factors they submit in Oregon apply to all the plans. As an aside, your phrase about being charged 3x the risk is not accurate. The loads of the policies (amount paid above risk and inverse to the medical loss ratio) are limited to 0.2 not 3.0. The 3:1 refers to the limit on the actuarial ratio and I think you agreed that it is the change in this ratio that is the “tax” on the young but it is not 3 times their premium (in my extreme example with a 5:1 actuarial ratio, it would be 0.5 times the premium).

              If you are worried about the tax incidence of the ACA on the young, it would be important to compare the dollar value that the young are subsidizing the old (which may be negligible in Oregon) to the average exchange subsidy for the young. There will be heterogeneity by income level but my guess is the young are not being taken advantage of.

              And, it would be worth noting that any subsidy now, would be collected when they get older (which they will discount, but should not be discounted in the societal calculation.) That is, if in essence, the young are saving for themselves when they get old, by supporting the ACA, does that seem rational?

            • Peter, I am not sure about your numbers with regard to the 3:1 ratio.

              My understanding is that the ratio is based upon risk and that no matter how much higher the risk is (for a high risk patient) the calculations for greater premium payments cease at 3:1. Thus all the others in the pool will have to make up for the shortfall in premium. Exactly how that is done is unclear to me, but certainly that premium gap will be mostly made up by the younger and healthy members. There is no limitation to the extra premiums that need to be charged as the limitation is based upon the health and numbers of members exceeding the actuarial 3:1 ratio.

              You make a claim that the young are “not being taken advantage of”. I won’t argue that point for there are many ways of looking at things and that doesn’t matter. Perception is what matters.

              You ask about the concept based upon the young’s perception and whether it is rational or not. Since many of the young believe they may not receive social security or medicare at least in their present generous forms, IMO the idea you present may not be rational.

    • I like their pitch. Hey, why don’t you pay a penalty for the luxury of not having health coverage AND screwing someone else’s premiums so we can make a point! That point being that you are needed in any insurance pool regardless of who’s running that pool in order to keep premiums low but somehow, the “other guy” is the only one wrong for doing it!

    • There is, I believe a very viable “self-insurance” option worth exploring if one is young, healthy and making a decent amount of money. I won’t go into the details – but for many under 40 they have little or no annual health care expenses [MEPS data on this is easily available vis Google search]. I would agree that simply “going bare” is irresponsible – but “self-insuring” is different. It takes two things…
      1. A life insurance policy with a catastrophic care rider that allows one to tap into the benefits BEFORE dying. This would secure one for the early years while building up one’s net worth [and be bridge to the open enrollment period should that become necessary]
      2. A conservative investment each month equal to or greater than the amount one would have had to pay in insurance premiums. [in a perfect world this would have been an HSA – but we don’t like those anymore]

      I would not be surprised if there a number of companies out there already prepping insurance/investment products that will facilitate these…

    • The questions, which this does not address, are the likelihood that these healthy young people will need care, the cost, and whether the insurance premiums are good investments for them. It seems inescapable that, if they all were to participate, the average healthy young person would pay more in premiums than they would collect in benefits. If not, then it would be counterproductive to sign them up. Rather than foolish, refusing to sign up would be the most logical course.

      • As I’ve mentioned before, the “affordable” part of Obamacare makes this discussion somewhere between moot and nuts.

        Most people start out their career as an entry level worker, and work their way up. So many of these young folks whom the health insurance system depends on are going to be subsidized. The number of young folks for whom insurance is a bad deal is going to be quite small.

        (Of course, with the economy in the doldrums and income inequality increasing rapidly, the whole idea of middle class employment may be a thing of the past. But that still leaves most young folks subsidized.)

      • dbh, as I’ve pointed out elsewhere on TIE, nearly everyone with insurance pays more in premiums than they collect in benefits. That’s how insurance works. It doesn’t matter if its health insurance, auto, homeowners, or any other type of insurance. The many subsidize the few. It’s the business model.

    • Hypothetical scenario:

      Middle income, urban black family forgets to sign up for Obamacare during the “open enrollment” period. Child gets sick with leukemia, they cant sign up because it is outside the enrollment period, and the family has to eat the cost of the child’s healthcare, rendering them indigent.

      The author of this article seriously believes that the liberal Obamacare bureaucrat response to this family’s plight will be:

      “Tough luck. We told you about the open enrollment period and you failed to follow our advise. You are on your own.”

      I have to call BS on this. When this scenario happens, and it WILL happen, all it will take is a few sob stories like this to make news on CNN and there will quickly be a reversal of policy or a failure to enforce the open enrollment periods.

      Lets face it — telling people they are “out of luck” when it comes to benefitting from government-run programs is something REPUBLICANS DO, NOT DEMOCRATS.

      The chances of Democrats as a whole telling people that they are “out of luck” is close to zero.

      Exceptions will be made, provisions of the law will not be enforced.

    • I think young adults and the uninsured are already aware of the gamble they are taking with forgoing insurance and paying the penalty. The key is for them to realize the benefits for and costs for not signing up for new Obamacare insurance plans, which, sadly, will not be evident in the first year.

    • Another way to frame this for young people is in terms of the freedom to take risks.
      Do you like to hike? Ski? Snowboard? Mountain bike? Ride motorcycles? Or do any other outdoor activity more vigorous than a stroll to the corner store?
      Then you might get injured. Sure, the ER will patch you up, but without insurance or a whole lot of money, you won’t get physical rehab and other follow-up care.
      So your choices are: don’t do any of those things. Or risk walking with a limp for the rest of your life. Or buy the insurance.

    • The question is not whether, if you get sick, it is better to have insurance than not to have it. Of course, in that case you want it.

      But like everything else that costs money, it is possible for the cost to be greater than the value. If you are older, even if in good health, the statistics tell you that it would make sense to buy a lot of insurance. The cost would be prohibitive if not subsidized. That is why everyone pays Medicare tax, but only the elderly can receive benefits.

      If you are young and healthy, health insurance is less valuable to you because you are unlikely to need it. So you would be willing to pay a lot less than would an older person. With the minimum cost now going up for the young and healthy, more are likely to find that the coverage is too expensive for the anticipated benefit. This will be true whether or not the individual qualifies for a subsidy. Young, healthy, higher income people have even less need for coverage than young healthy people who will get subsidies.

      If it made sense as a pure individual financial decision, then there would be no point in telling people that their participation is needed to make the system work. That is only relevant when the coverage fails as a financial proposition.

      Like any other insurance, it is worth it if the likelihood of needing is high enough, the benefits are large enough, and the cost is not too high. For many young healthy people, even the minimum coverage now permitted will be too expensive to be worth it.

    • Emily,
      I believe there is about a $6300 out of pocket limit for co-pays, co-insurance,etc.

      Being saddled with $6300 in debt is far different that the $100,000 and counting my brother now has because he is under-insured. Those sums are the difference between paying off a car and going bankrupt.

      The scenario your describe sounds like a cost/benefit analysis. If you lose the risk and do not have the money to cover your catastrophe, we, the society, bear your financial burden if you use services for which you cannot pay. In other words, society cannot be partners in one’s risk-taking if one is leveraging one’s health.

      So what do we do with people who wish to take chances and leverage their health? Frankly, I don’t have a problem with it.

      But as a society we are uncomfortable letting people die because they gambled that life wouldn’t throw them any curve balls and lost.

      • Art, yes, it is, but it is extremely rare for hospitals to reach the $100,000 level. You have to remember that the bills you are seeing can be 20X (more or less) the actual payment generally received. You also have to remember that several thousand dollars a year might be paid in every year and that an incident of this nature is extremely rare. With $6,300 in extra debt per year many of the young will go bankrupt.

        When it does happen there is bankruptcy. No one likes bankruptcy, but when people become sick they frequently find that they are in bankruptcy because of credit card expenditures, car payments, homes, etc. so many are ending up in bankruptcy anyhow. Medical bills are just a part of the overall bankruptcy problem.

        Understand, I believe in insurance. I have assets so I never go without protection. When I was poor I wanted to insure my family the best of care so I still carried insurance and gave up on a TV set, eating out, and all the luxuries our young seem to enjoy while they go bare. However, if I were starting a business without children and I needed that capital I wouldn’t hesitate to go bare myself for socio economic position is far more important than the expensive health care we pay so much money for.

        Remember, my basic thoughts in this exchange of ideas is that if as a nation we desire universal coverage without preempting the rights of our citizens the way to do that is to start with the young. I don’t think that is a complex idea that requires much thought.

        P.S. I encourage travel when expenses become extraordinary. Canada is a viable option as the hospitals there are looking for cash. India is becoming a nation that treats foreigners. The latest article reveals that an American heart surgeon is opening facilities in India for CABG at an extraordinary price of $1,500 hoping to ratchet it down to $800. We should have taken over that entire market, but we played our cards badly.

    • If young people are required for ACA to work, isn’t it counter productive to allow them to stay on their parents health care plan up to age 26?