October 7, 2013

Affordable Care Act Is a Raw Deal for Millennials

Robert Graboyes

Senior Research Fellow
Summary

It's clear that millennials will be hammered by Obamacare, but most of the analyses wending their way through the media understate the negative impact the law will have on the cost and quality of health insurance for these 20- and 30-somethings. The problem is that Obamacare, also known as the Affordable Care Act, takes money from a variety of pockets, and many or most of the flurry of analyses focus on insurance premiums in isolation.

It's clear that millennials will be hammered by Obamacare, but most of the analyses wending their way through the media understate the negative impact the law will have on the cost and quality of health insurance for these 20- and 30-somethings. The problem is that Obamacare, also known as the Affordable Care Act, takes money from a variety of pockets, and many or most of the flurry of analyses focus on insurance premiums in isolation.

Millennials' life prospects have already suffered under the weight of the Great Recession and its aftermath. Their job markets are shaky and their student loans large. Now, large health insurance premiums and other costs hidden in the ACA will further dim those prospects.

Choosing a state at random, the Manhattan Institute reports that before the ACA, the average 27-year-old male in Arkansas could buy a health insurance policy for roughly $54 a month. According to the White House website, on the ACA exchange, the average lowest-priced plan will be three times more expensive, costing him around $181 a month – a 235 percent increase. If he were to purchase a stripped-down catastrophic plan, it would cost roughly $135 per month, two-and-a-half times more than his current insurance.

From the same sources, before the ACA, the average 27-year old woman in Arkansas could get health insurance for around $81 per month. On the ACA exchange she will pay roughly $181 for the average lowest-priced plan, more than doubling her cost of health insurance. If she were to get the $135 per month catastrophic insurance coverage – the cheapest insurance offered on the exchange – it will still cost 66 percent more than her current insurance.

These increases reflect one big ACA truth – younger, healthier Americans are required under Obamacare to overpay for their insurance so that older, sicker, and (by and large) wealthier Americans can underpay for their insurance.

Then there are the costs that don't show up in the side-by-side premium comparisons. The Department of Health and Human Services looked at a hypothetical 27-year-old Texan earning $25,000 per year. This person, HHS noted, would pay $145 for the second-cheapest silver plan and $83 for a bronze plan. But InsureBlog.com noted that such plans would likely come with a $5,000 deductible and a $6,350 out-of-pocket maximum. For a young person with serious health issues, the ACA's "affordable" coverage will consume 30 percent of his income.  

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