Michael Tanner

According to recent polls, younger Americans are increasingly disillusioned with government and cynical about the political process. Maybe they will finally realize that they are being played for patsies by the Obama administration. After all, on issue after issue, President Obama has fed younger voters a steady diet of high-minded rhetoric and then delivered policies that leave them holding the bag.

The most recent example is Obamacare.

For one, in order for the president’s health-care law to work properly, large numbers of young people will have to buy insurance. Those young and healthy individuals, with their low claims costs, are needed in the insurance pool in order to offset the expected inflow of sick people. The law prohibits insurers from denying coverage to people with “preexisting conditions,” that is, those who are already sick. Those newly enrolled sick will make the overall insurance pool more costly, and unless those costs are offset by an equal inflow of the young and healthy, we are likely to see an adverse-selection “death spiral,” in which sick people in the insurance pool drive up premiums, causing the healthiest members of the pool to drop out. The pool then becomes even sicker, leading to still higher premiums. The healthiest remaining participants drop out, and so on, until the entire market collapses.

As noxious as the individual and employer mandates are, the penalties — or taxes, according to Justice Roberts — are too low to force participation, which has the administration worried.

As Ezekiel Emanuel, the brother of Rahm, and one of the principal architects of the Affordable Care Act, wrote in the Wall Street Journal, if young people don’t participate in Obamacare in large numbers, it “could start the negative, downward spiral of exchanges full of the sick and elderly with not enough healthy people paying premiums.”

At the same time, Obamacare’s “community rating” provisions prohibit changing premiums based on health status and limit the degree to which insurers can charge based on age. Insurers cannot charge their oldest customer more than three times as much as their youngest, despite the fact that those older customers typically cost six times more in claims. Thus, premiums will rise more slowly or may even be lower for older and sicker individuals, but will shoot up for young people. In fact, a study in the American Academy of Actuaries’ magazine found that 80 percent of young adults aged 18–29 in the individual market and not eligible for Medicaid will face higher costs, even after exchange subsidies.


Michael Tanner

Michael D. Tanner is a senior fellow at the Cato Institute, heading research into a variety of domestic policies with particular emphasis on health care reform, welfare policy, and Social Security. His most recent white paper, "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law," provides a detailed examination of the Patient Protection and Affordable Care Act (Obamacare) and what it means to taxpayers, workers, physicians, and patients.

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