Over 2.1 Million Young Adults May Not Qualify for ObamaCare Exchange Subsidies
by David Almasi
Washington, DC - Data on premiums in the federal exchange released by the Department of Health and Human Service shows that younger, healthier people will be less likely to receive subsidies says a new article for the National Center for Public Policy Research's blog entitled, "'Young Invincibles' Still Won't Get Subsidies On ObamaCare Exchange."
The article was written for the National Center for Public Policy Research by David Hogberg, Ph.D., senior fellow for health care policy at the National Center.
The federal data confirms finding in a recent National Center study, "ObamaCare Exchanges: Just Because You Are Eligible For a Subsidy Doesn't Mean You Will Qualify for One."
Officially, the ObamaCare exchanges are supposed to give a subsidy to everyone making 400 percent of the federal poverty level (FPL) or below, but that study found that in 11 of 15 exchanges, the subsidies disappeared for people age 18-34 even before 300 percent FPL or $34,470 annually.
The data released today shows that same pattern," said Dr. Hogberg, "HHS released data on 36 federal exchanges, and in 23 of them the subsidies disappear before 300 percent FPL for the Young Invincibles. That's going to be a problem because young people are being told they'll be getting subsidies up to the 400 percent level. When some find out they won't get one, they will be less likely to sign up for the exchanges."
The study examined the premium data of the exchange of 14 states and Washington, D.C. In ten of the exchanges, subsidies disappeared for everyone age 18-34 before they reached the 300 percent federal poverty level (FPL), about $34,470 annually for a single person.
"This is critical information because it tells us that a population that is crucial to the proper functioning of the ObamaCare exchanges, those 18-34, will be paying full price for their premiums," said Dr. Hogberg. "This will give them considerable incentive to forego insurance and just pay the individual mandate fine."
This will likely lead to a "death spiral" on the exchange, which occurs when younger and healthier people needed to stabilize the risk pool don't sign up for insurance. Premiums for those who do purchase insurance will climb. The higher premiums encourage even more young and healthy people to drop insurance as premiums become less affordable. This eventually leads to a rising number of uninsured while those who remain insured are only the sickest, with the highest healthcare costs.
However, just like the previous study, the federal data reveals a much better subsidy picture for older people. The study found that in 12 of the 15 exchanges, subsidies extended to 400 percent FPL for every person age 52 and older.
"The federal data shows that subsidies will reach that 400 percent level for people 52 and older in 27 exchanges," said Hogberg. "In four other exchanges, that age is 53. In short, the subsidies will make the exchanges look much more attractive to people with higher medical claims, the older and sicker."
Hogberg continued, "An health insurance system like the ObamaCare exchanges that discourages the younger and healthier but attracts the older and sicker is headed for disaster."
Finally, the article extended the analysis of the 36 exchanges to the nation as a whole and found that about 1,304,817 18-34-year-olds who are single, childless and under 400 percent FPL will not qualify for an exchange subsidy. When those 18-34-year-olds whose incomes exceed 400 percent FPL are included in the analysis, about 2,132,299 will not receive subsidies.
The article is available online here.
Suggested Discussion Topics:
1. Why does it matter that exchange subsides favor the older and sicker over the younger and healthier? What effect will that have?
2. When you talk of this leading to a "death spiral," what do you mean and what are the likely consequences?
3. How does the formula for subsidies on the exchanges work, and why does it lead to many younger people under 400 percent of the federal poverty level not receiving subsidies?
4. In your last study you noted that about 6 million of those 18-34 who are single and childless would be eligible for the ObamaCare exchanges. If at most 1.9 million opt out because they have to pay full price for insurance because they get no subsidy, doesn't that still leave enough to make the ObamaCare exchanges work?
In Dr. Hogberg's most recent prior study, August 2013's "Why The 'Young Invincibles' Won't Participate In The ObamaCare Exchanges and Why It Matters," he found that, despite both the subsidies and individual mandate, about 3.7 million 18-34-year-olds would save at least $500 by forgoing insurance and paying the fine. Of that group, about 3 million would save at least $1,000.
David Hogberg, Ph.D., is a health care policy analyst for the National Center for Public Policy Research. Previously, Dr. Hogberg was a Washington Correspondent for Investor's Business Daily, specializing in health care and Medicare. Prior to his employment at IBD, he worked as a policy analyst studying health care and other issues for various think-tanks, including the National Center for Public Policy Research, and for the office of U.S. Representative Jeff Fortenberry. Dr. Hogberg holds a Ph.D. in political science from the University of Iowa. He is currently working on a book entitled "Medicare's Victims: How The U.S. Government's Largest Health Care System Harms Patients And Impairs Physicians."