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Youth Insurance Hike Forecast

The class of 2014—and other young adults—could face an additional financial burden upon leaving college due to provisions within Obamacare [1], reports [2] Carla K. Johnson for the Associated Press on March 30. More particularly, they could pay as much as $42 extra per month on health premiums, or $504 per year, if they are privately insured, according to a Rand Health analysis.

In 2014, when the individual mandate takes effect, Johnson reports, “…premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press.” The calculation is limited to insurance purchased in the individual market and does not take into account other parts of the legislation besides a mandate that the difference in premiums charged to young and old adults cannot exceed a 3 to 1 ratio.

“The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years,” reports Johnson.

(Under the health reform legislation young people can stay on their parents’ insurance plan until they are 26 years old.)

A June 2009 Employment Policies Institute [3] analysis (pdf) of the Census Bureau’s 2007 survey data found that 50.4% of Americans ages 18 to 34 were uninsured, but that 48.7% of these uninsured persons were “voluntarily”  so.  E.G., approximately 25% of Americans aged 18 to 34 were “voluntarily” uninsured.

“We define the voluntarily uninsured as those whose incomes are at or above 2.5 times the poverty threshold and find that about 43 percent of the uninsured in the 18–64 age group fall into that category,” write the authors, City University of New [4] York (CUNY) professor June E. O’Neill [5] and CUNY-affiliated researcher Dave M. O’Neill [6].

In the study, which used 2007 Current Population Survey (CPS) data, men ages 18 to 34 were more likely to be uninsured than women (52.3% versus 48.1%) and also more likely to be voluntarily uninsured (52.7% versus 42.2%). In other words, the individual mandate could disproportionately affect young males.

“Jim O’Connor, an actuary with the independent consulting firm Milliman Inc., came up with similar estimates of 10 to 30 percent increases for young males, averaging about 15 percent,” reports Johnson for the AP. “‘Young males will be hit the hardest,’ O’Connor says, because they have lower health care costs than young females and older people who go to doctors more often and use more medical services.”

“Insurers typically charge six or seven times as much to older customers as younger ones in states with no restrictions,” she reports. “The new law limits the ratio to 3-to-1, meaning a 50-year-old could be charged only three times as much as a 20-year-old.”

Bethany Stotts is a staff writer at Accuracy in Academia [7].