Every law creates winners and losers. Unfortunately, Obamacare creates more losers than winners—and the losers are disproportionately young. Here are four ways the law hurts millennials.
Cross-subsidies
Obamacare creates state-level insurance exchanges where individuals can purchase insurance. A lot of people who had individual insurance before this year—including older people—have seen their premiums and deductibles rise because of Obamacare regulations that require insurance plans to cover procedures and services that some old plans didn’t cover. But millennials have been especially hard hit, because of a feature of the insurance exchanges called “community rating.”
The community rating provision prevents insurers from charging older, sicker people more than three times what they charge younger, healthier people. But older people are much more than three times as expensive to insure. So, to avoid losing money, insurers have to charge young people much more than the cost of insuring them. This is one of the big differences between the new health insurance markets and normal insurance markets.
The auto insurance market, for example, is a normal insurance market. Auto insurers charge people based on the expected cost of insuring them. So if you’re a 25-year-old male, the auto insurer will look at the average cost of insuring a 25-year-old male (a function of the cost of a car crash and the likelihood that you’ll get into a car crash). If the average cost of insuring a 25-year-old male driver is $30 a month, the insurer will offer a policy for, say, $35 a month ($30 plus administrative costs).
That is not how the new health insurance markets work. A 25-year-old male who buys health insurance today will be charged the expected cost of insuring him, plus an enormous surcharge to help subsidize the cost of insuring older people. In this way, the insurers recoup the money they lose by undercharging baby boomers. So if the expected cost of insuring a 25-year-old male is $100 a month, the health insurer will charge him perhaps $200 a month. And unless his income is in a narrow range, he will not qualify for a large enough government subsidy to compensate for this added cost. Of course, if he doesn’t purchase insurance, he’ll be hit with a heavy fine.
It would be one thing if Obamacare required young people to purchase a normal insurance product—one that covered the expected costs of insuring them. It’s quite another to force young people to pay their own way and someone else’s.
The Individual Mandate
Forty percent of the uninsured adult population is between the ages of 18 and 34, but only 24% of the people who have enrolled in the exchanges so far are in that age bracket. Unless millions of uninsured young people decide to buy overpriced health insurance between now and April 1, Obamacare’s individual mandate will fall disproportionately on millennials. Which isn’t surprising: the mandate is designed to give young, healthy people an incentive to buy health insurance. This year, the mandate penalty will be 1% of a person’s income minus the tax filing threshold, but it will rise to 2.5% of income minus the tax filing threshold in 2016, or about $1,000 for someone who makes $50,000 a year.
The Employer Mandate
Obamacare requires employers with more than 50 full-time workers to provide those full-time workers with insurance or pay a fine. This means that businesses have a huge incentive to hire people part-time. The employer mandate has been delayed until next year, but many employers have already announced plans to avoid the mandate by hiring fewer full-time workers. That’s bad news, especially if you’re a recent high school or college graduate who is working in an entry-level job that can easily be eliminated or made part-time.
More Government Debt
The Congressional Budget Office describes the fiscal impact of Obamacare as “quite uncertain.” But if Obamacare is anything like other entitlement programs, it will add to the deficit. Entitlement programs tend to be more expensive than forecast—Medicare, for instance, was about nine times more expensive in 1990 than forecasters had predicted in 1965—because the tax hikes and spending cuts that are supposed to fund them end up being abandoned out of political expediency. Obamacare’s medical device tax looks particularly vulnerable. No wonder, then, that a 2010 study in the journal Health Affairs predicted that Obamacare would increase the deficit by $500 billion in its first decade and $1.5 trillion in its second decade.
Obamacare’s defenders like to point to the provision that allows young people to stay on their parents’ health insurance plans until they’re 26. This is a pretty minor provision—one that has bipartisan support—but it’s true that some millennials will benefit from it. Most, however, won’t. If your parents don’t have employer-provided insurance, you live in a different state than your parents, you’re married and/or have kids, you get cheap health insurance from your employer, your parents are over 65, or your parents’ employer charges high premiums for dependent coverage, staying on your parents’ plan is probably either impossible or a bad idea.
My generation has had a rough few years. We’ve fought wars in Iraq and Afghanistan, suffered through a severe recession and then a jobless recovery, paid billions into retirement programs that won’t be around in their current forms when we retire, and watched as politicians doubled the national debt in less than a decade—debt that we will someday have to repay.
Now, politicians in their 50s and 60s are saying that we should subsidize the insurance of people their age. I say we have sacrificed enough already.
Peter Tucci is the former opinion editor of The Daily Caller.
