Premiums to Increase for Youth

Associated Press: Health Premiums Could Rise 17 Percent For Young Adults

Two distinct issues come to mind from this particular story. The first has to do with younger people who will, for the first time, be forced by the government to carry health insurance at all.

Under the health care overhaul, young adults who buy their own insurance will carry a heavier burden of the medical costs of older Americans — a shift expected to raise insurance premiums for young people when the plan takes full effect.

Beginning in 2014, most Americans will be required to buy insurance or pay a tax penalty. That’s when 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 analysis did not factor in tax credits to help offset the increase.

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.

First, while I applaud the AP for actually bringing this story to light, they neglect to focus on those young adults who choose not to carry health insurance at all. For those, because of the patently unconstitutional individual mandate in the bill, they will not see only a 17 percent increase in premiums, but a brand new bill to take up space on their monthly budget.

Furthermore, those who expect the penalties for ignoring the individual mandate to remain as they are now are utterly divorced with reality. Because the federal government have mandated that insurance companies must insure people with preexisting conditions, instead of carrying insurance at the cost of at least a few thousand dollars each year, more and more people are going to pay the penalties–which will start at about $95 and go up to about $700–and only enroll in an insurance plan when they finally need it, essentially on the day before they need to go to the hospital. Therefore, to serve the purpose this administration intends, those penalties will need to go up.

The second issue has to do with the insurance industry as a whole.

At issue is the insurance industry’s practice of charging more for older customers, who are the costliest to insure. The new law restricts how much insurers can raise premium costs based on age alone.

Insurers typically charge six or seven times as much to older customers as to younger ones in states with no restrictions. 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.

What is an insurance company? Anybody? Anybody?

In short, an insurance company is an organization in the business of evaluating risk. And when the government interjects itself in that risk evaluation process, mandating how private insurers can evaluate risk, the entire industry becomes unsustainable. And as the industry starts along this path, the cost of premiums for all of us will increase.  This of course is by design, as rapidly rising premiums charged by private insurers no longer allowed to evaluate risk will cause many in our entitlement society to cry out for help from the government in the form of a single-payer system.

To me, it’s the government interference which makes this new law objectionable. For example, I have no problem with an insurance exchange. It’s a marketplace. It would allow for private insurers to compete against one another in an organized fashion, across state lines, and it would ultimately drive down health insurance costs. Where this plan goes wrong, however, is that the federal government has placed itself in charge of the health insurance exchanges, and if there is anything antithetical to competition, it is the federal government. Furthermore, by mandating coverage for people with preexisting conditions and by putting into place standards for profit margins and more, the government has essentially told those insurers involved in the exchanges how they can evaluate risk and how they can do business.

If we could remove government from the exchange completely, costs would be driven down. Just like bad drivers can still obtain insurance from specialized companies and at a higher price, we could see companies which insure people with preexisting conditions but at higher premium rates — and those companies could compete with each other for business from people with preexisting conditions on a specific exchange, driving down costs for insurance for people with preexisting conditions. Similarly, we could see separate exchanges for outfits offering catastrophic care, augmented disability policies and more.

It’s not perfect, and separate “exchanges” for different types of insurers would be a far cry from the exchanges to be established by our federal government, but that’s the idea. Let’s foster a competitive marketplace for the health care and health insurance industry, and let’s allow them to compete for the sake of the people, who really do need costs to come down.

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Comments

  1. All those young people that voted for “change” are going to get it alright. Perhaps, it will be a good lesson to them, to finally learn that nothing in life is free and that no one else is responsible to pay for them. The sad thing is that by the time they realized it, their vote for “change” will have destroyed the US as we know it and it won’t be reversible. One day, when they are standing in bread lines or whetever else the government decides they can have, when they can have it, and how much – I wonder if they will reflect back to the November 2008 election and see the error of their ways.

  2. Steve Crown says:

    I totally concur with the interjection of government into traditional business areas just on general principles. Given our govenment’s poor track record makes it worse. However, given the age demographics of those who voted for the authors and those who supported this piece of c–p bill, I consider it poetic justice that they are likely to be some of the first who may notice that they have “stepped in it!”

  3. Half pipe insurance says:

    Now all you Gen-X’ers will have to insure for your skateboard and snowboard falls. Regretting that vote yet?

  4. Latte & Che says:

    This is going to cut into their Starbucks & Che T-shirt budget.

  5. Boston Blackie says:

    Since most Gen-Xers probably qualify for the earned income tax credit, I doubt they are too concerned. That is, if they are even aware of the changes coming. Current affairs are not their strong point.
    I had to do my mASSachusetts state taxes by hand this year due to Turbo Taxes calculating that I would be receiving a 2K refund(not in this state I’m not).
    The first dozen pages(colored pink)of the tax booklet were about what you must provide for proof of health insurance and the forms to complete were three pages long. Can you imagine the feds running this disaster.

  6. Tim Geithner says:

    Blackie, they will be bringing in all the let-loose Acorn employees to handle tough stuff like this. They being so intelligent and all.

  7. Boston Blackie says:

    Oh, of course, I mistakenly got the Acorn version Turbo Tax this year. How silly of me, guess I really was entitled to that 2K from the state.

  8. Vocabulary checker says:

    Blackie, what is this term ‘state’ you use? This is America, we are no longer 50 of those.

  9. Passing the torch says:

    A fine young man, that gets it!
    May God enlighten many more of the next generation.

    http://westernpac.org/blog/?p=1549

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