Obamcare’s Premium Shock

Young adults who purchase their health insurance are in for rude awakening under the Affordable Care Act. The ironically-named law will force premiums to spike in order to pad insurance companies’ pockets. Is this what ACA was designed to do? Long-time PolicyBlog readers already know the answer is yes.

Under the ACA, insurance companies can’t charge you different rates based on your age or health status (called community rating). So they have to find other ways of reducing their risk, like charging young people more—a lot more. The effect of this, along with a slew of other mandates and taxpayers subsidies, is higher insurance premiums, particularly for younger workers.

Investor’s Business Daily compared the least expensive insurance premiums for young adults today compared with the lowest rates under the ACA exchange in 8 states. The result? A hike of over 100 percent. In some states costs will be triple today’s premiums!

Investor’s Business Daily notes that in addition to community rating, guaranteed issue is also spiking costs:

Because coverage is guaranteed, people have an incentive to put off buying insurance until they get sick, thereby saving premium costs in the meantime. And the community rating rules reduce premiums for the sick, but raise them for the healthy.

The combination of the two can create a premium “death spiral.” If young, healthy people refuse to buy coverage, the insurance pool gets older and sicker, and premiums climb still higher.

ACA supporters retort young adults will pay more, but they’ll get more comprehensive coverage (and taxpayers will help them pay some of the new costs). But what if you don’t want all of those bells and whistles? The ACA gives you no choice; your only alternative is to go uninsured, and even that has a cost— the individual mandate tax.