Young 'Invincibles' better off without Obamacare in 2014

08/20/2013 10:20

by Judy Kent


Washington, DC - Investor's Business Daily published an article today on the findings of the National Center for Public Policy Research's new study, "Why the 'Young Invincibles' Won't Participate in the ObamaCare Exchanges and Why It Matters."

The study finds that about 6 million 'young invincibles' -- those aged 18-34 who are single and childless -- will likely be eligible for the exchanges. For 3.7 million of these individuals, their out-of-pocket premium costs for a Bronze plan, after their exchange subsidies are factored in, will be $500 plus the cost of the individual mandate fine.

For just over 3 million, the out-of-pocket costs will be $1,000 plus the fine.
  This will give millions an incentive to merely pay the fine in 2014 -- $95 or 1% of income, whichever is higher -- and pocket the rest.  For someone age 25, spending $500 plus the fine out-of-pocket for insurance begins at an income of just over $20,000. At just over $23,800, the cost is $1,000 plus the fine, says the study.

"These are people with very modest incomes who are going to be forced to shell out a lot of money for some of the cheapest plans on the exchange," said Hogberg. "That's money they need to pay rent, buy groceries, or make a used-car payment."

"Nearly 4 million young people will be much better off financially if they refuse to buy an ObamaCare insurance policy and instead pay the fine for going without coverage next year, according to a study released Thursday by the National Center for Public Policy Research," writes senior IBD writer John Merline. "These findings are troubling because they point to what could be a fatal flaw of ObamaCare if the administration can't convince enough of these "young invincibles" to buy coverage."

The 'young invincibles' have even less incentive to buy insurance under an exchange rule known as "guaranteed issue." If they get sick, they only have to wait until the end of the year to buy insurance. "Many of these people are already uninsured, meaning they find little value in insurance," said Hogberg. "Why are they going to pay $500 to $1,000 for exchange insurance when it's cheaper to go without and they face much less risk if they don't purchase it?"

"As a result, ObamaCare is likely to come up well short of the 2.7 million young people the administration figured it would need to sign up in the exchanges next year in order to make them work, the study concluded," Merline states. "The result is that the young and healthy drop out, and the insurance pool becomes increasingly older, sicker and more expensive to cover."

"Without the young and healthy joining the exchanges, the insurance pools will be comprised of the older and sicker," said Hogberg. "Insurance prices will rise, more young and healthy will drop exchange coverage, and insurers that can't make a profit will drop out. "

Hogberg concludes this phenomenon, known as an insurance "death spiral," will cause premiums to rise precipitously and insurers to drop out of the exchanges. The crafters of ObamaCare tried to avoid this with a combination of a fine for not purchasing coverage and subsidies to help with the cost of insurance, but as the National Center study shows, neither of those will be sufficient to eliminate the considerable financial incentive the "young invincibles" will have to avoid the ObamaCare exchanges.

A press release summarizing the study, released August 15, is available here.


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 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."