Is the health insurance market headed for a “death spiral” of increasing premiums, fewer beneficiaries, and less competition under ObamaCare? A recent study from the National Center for Public Policy Research answers that question in the affirmative.
The study, by healthcare policy analyst David Hogberg, finds that the individual mandate’s carrots and sticks will probably be insufficient to induce large numbers of currently uninsured “young invincibles” — healthy, childless 18- to 34-year-olds — to buy coverage. Yet these people are the ones who must enter the market en masse if the healthcare law’s mandates on insurers are not to overwhelm them with older, more sickly — and therefore much more costly — beneficiaries.
Under ObamaCare, beginning next year insurers must accept all applicants regardless of pre-existing conditions and must charge them the same rates for the same coverage. Everyone — including proponents of the law — knows that under such conditions, most of the people who have heretofore been unable to obtain insurance because of pre-existing conditions will immediately purchase policies. This will result in a sudden, steep increase in the benefits that insurers must pay without a corresponding increase in premiums, and that can only be bad news for the insurance industry.
What the industry needs, therefore, is a large pool of healthy individuals also to enter the market. These people will pay premiums but rarely draw benefits, thereby subsidizing the benefits of the newly insured sick.
But healthy people already often balk at paying the relatively low rates insurers would charge them. “Indeed,” Hogberg pointed out in a blog post, “the age group with the highest rate of uninsured is 18-34-year-olds. About 19.1 million are uninsured at any given time, according to the Census Bureau, and somewhere in the ballpark of about 11 million are uninsured for at least one year.”
While others might chide these folks for taking such a risk, given that young adults have very few healthcare expenses, they are hardly being unreasonable in choosing to forgo health insurance in favor of saving money, particularly since many of them also have low incomes. As the Washington Examiner’s Philip Klein put it, “Purchasing health insurance, in aggregate, is a bad deal for younger Americans.”
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