This week, Obamacare will have its second birthday, but there’s little reason to celebrate. Throughout the week, Obamacare advocates will be emphasizing the law’s supposed benefits for specific groups, but, as Heritage’s research over the past two years has shown, Obamacare harms Americans—even the groups showcased by the left.
Today, the focus is on the impact of Obamacare on young Americans. Advocates will tout the provision that allows young adults to stay on their parents’ health plans until age 26. But Heritage research shows that despite this provision, the overall effect of the law will be that younger Americans will face higher premiums and incentives to remain uninsured, meanwhile serving as the generation that will ultimately foot the bill for the law’s new deficit spending.
Higher Premiums. Young adults will pay higher premiums under Obamacare because of its age rating system. The law stipulates that the maximum variation allowed in adult premiums is a cost ratio of 3 to 1. But as Heritage research shows, “The natural variation by age in medical costs is about 5 to 1—meaning that the oldest group of (non-Medicare) adults normally consumes about five times as much medical care as the youngest group.” Obamacare’s “rate compression” causes insurers to charge artificially low premiums for older adults and higher premiums for younger adults. Moreover, “Actuaries estimate that the effect will be to increase premiums for those ages 18–24 by 45 percent and those ages 25–29 by 35 percent while decreasing premiums for those ages 55–59 by 12 percent and those ages 60–64 by 13 percent.”
Another study performed in Wisconsin by MIT economist Jonathan Gruber further supports this. The study finds under the health law,
[T]here will…be significant premium increases in the Individual Market with an estimated 59% of the market experiencing average premium increases of 30%, even after accounting for tax subsidies. This is primarily due to healthier members subsidizing a greater portion of the less healthy members’ premium and the younger demographics subsidizing a greater portion of the older demographic’s premium.
Incentives to Remain Uninsured. As Heritage explains, contrary to Obamacare’s goal of universal coverage, “certain provisions of the new laws will make obtaining health insurance less desirable by increasing costs, causing even more Americans to drop or lose coverage.” High premiums will discourage young and healthy individuals from purchasing coverage, and the penalty associated with the individual mandate will not be effective at coercing people to purchase insurance, since it will be less expensive than insurance. As the young forgo coverage, adverse selection—that is, the increase of older and sick people in the insurance pool—will cause premiums to increase even more, further discouraging the enrollment of younger, healthier people. Obamacare’s several other premium-increasing provisions will only make matters worse, encouraging young adults to wait until they need coverage to buy insurance.
The Burden of Paying for Obamacare. Younger generations will be left accountable for Obamacare’s irresponsible spending. As James Capretta writes for Heritage:
The President and congressional leaders have argued that a primary benefit from the health law will be reduced long-term budget pressure and thus a brighter future for coming generations of taxpayers. But when the cost estimate is adjusted for omissions, gimmicks, double-counting, and unrealistic assumptions, it is clear that the new health law will increase the burden, not lessen it.
The most recent estimated cost of Obamacare’s coverage provisions is $1.5 trillion over 10 years—which still fails to represent a full decade of new spending under the law, since the most costly provisions don’t kick in until 2014. To learn about reform that would truly eliminate the burden of crushing debt on future generations of taxpayers, read Heritage’s Saving the American Dream proposal.