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.