In yet another example of the mainstream media acting as a mouthpiece for the Obama administration, the Associated Press recently came out with an article waxing poetic about how the Affordable Care Act, or Obamacare, will help young adults. The author notes that young adults already have the option to stay on their parents’ plan and those with low incomes will soon receive nearly free coverage under Medicaid (assuming they live in a state that chooses to expand Medicaid eligibility, which is a choice only because of the Supreme Court decision) or receive premium subsidies.
It may be smart marketing for a store to raise prices and then offer a coupon, but by expanding Medicaid and creating a new entitlement program of premium subsidies, “the coupon” is financed by taxpayer dollars. The article, like many other pieces of Obamacare propaganda, also fails to mention the aspect of the law that will have the greatest impact on twenty somethings’ health insurance costs- Community Rating.
Community Rating is an insurance reform in the law that prohibits companies from pricing insurance in the individual market based on health status or pre-existing conditions, and only allows moderate price differences based on age. Avik Roy sums up the impact on young adults best in a Forbes piece, stating, “Obamacare forces insurers to charge their eldest beneficiaries no more than 3 times what they charge their youngest ones: a policy known as ‘community rating.’ This, despite the fact that these older beneficiaries typically have six times the health expenditures that younger people face. The net effect of this “community rating” provision is the redistribution of insurance costs from the old to the young. “
It doesn’t take complicated predictive modeling to know that community rating will dramatically increase the insurance premiums of most young adults shopping for insurance in the individual market. And, while those with lower incomes will have their artificially expensive coverage subsidized via the taxpayer, young adults earning moderate and higher incomes will be left to cover significantly higher insurance costs while subsidizing the coverage of older Americans. Young adults, in particular, lose by being straddled with higher insurance costs when they are young and, inevitably, higher taxes to pay for all of this “helpful” government intervention.