Young Americans may soon experience “sticker shock” when shopping for health insurance. A new survey of insurers estimates that premiums will almost triple for a hypothetical 27-year-old man next year, once all the federal health reform law’s rules take effect.
That could be problematic for its efforts to cover young people. More than a quarter of the 67 million Americans between the ages of 19 and 34 are uninsured. They may well stay that way if insurance becomes unaffordable.
That doesn’t have to be the case. Lawmakers can make health coverage more affordable by relaxing restrictions on what insurers can charge young adults -- thus allowing them to offer lower premiums.
The Patient Protection and Affordable Care Act (PPACA) regulates the health insurance market in three main ways. First, all Americans -- with a few exceptions -- must secure health coverage.
Second, because everyone must carry coverage, the law requires insurers to sell policies to whomever wants to buy them. They can’t deny coverage because of health status or history – a reform called “guaranteed issue.”
Third, in an attempt to control the cost of coverage, the law prevents insurers from charging older individuals more than three times what they charge younger beneficiaries -- a rule called “community rating.”.
The community rating rules were created to ensure that insurance companies don’t exclude sick people or those with pre-existing conditions by only offering them policies with sky-high premiums. They were also designed to ensure that coverage for older Americans not yet eligible for Medicare would be affordable.
The problem is a matter of facts. It costs six times as much to insure a 64-year-old as it does an 18-year-old. While we might like to think that we can cap a 64-year-old’s costs at three times the level of an 18-year-old’s, the math just doesn’t work. In the end, younger, healthier people will subsidize insurance for those who are older and sicker.