Just 10.4 percent of Americans went without health insurance last year, according to the latest research from the Census Bureau. That’s nearly 3 percentage points lower than the year before.
The Obama administration was quick to take credit for the drop. Just a few days after the Census Bureau’s announcement, the Department of Health and Human Services reported that 17.6 million Americans had gained coverage because of the Affordable Care Act.
Good news, on the surface. But these numbers mask some dispiriting trends in the health insurance marketplace. A close look at the data reveal that many young, healthy Americans are refusing to comply with Obamacare’s mandate that they acquire coverage. That trend threatens to drive up insurance costs for patients of all ages.
The administration was less than keen to highlight some other findings from the HHS report. Fully 10.5 million uninsured Americans were eligible for coverage through Obamacare’s online insurance exchanges but declined to sign up. Of these individuals, half were between 18 and 34 years old.
These younger Americans are supposed to play an essential role in paying for Obamacare’s insurance-market reforms, particularly “guaranteed issue” and “community rating” regulations. Taken together, these two rules force insurance companies to cover all individuals, regardless of their health status or history, and forbid them from charging older patients any more than three times what they charge younger ones.
Complying with these reforms is expensive. The only way insurers can do so is if younger, healthier Americans enroll in droves. After all, they’re less likely to actually consume health services. So their premiums can subsidize care for the older folks in the risk pool, whose premiums are unlikely to cover their higher costs of care — especially because community rating limits what they can be charged.
The individual mandate — which imposes a tax penalty on those who don’t secure coverage — was supposed to turn this theory into practice. Obamacare’s proponents predicted that younger Americans would flock into the insurance market in order to avoid the fine.
But insurance in the exchanges is so expensive that the fine — which will rise from $325 or 2 percent of income this year to $695 or 2.5 percent of income next year whichever is greater — is a deal relative to the cost of health insurance. A typical mid-level plan can cost a 21-year-old about $250 a month. Even a bare-bones, catastrophic plan runs nearly $2,000 a year — or almost three times the cost of the standard individual-mandate penalty.
So it’s no surprise that young people aren’t signing up for insurance at high rates. Indeed, Secretary of Health and Human Services Sylvia Matthews Burwell recently admitted that one of the biggest reasons uninsured Americans were foregoing coverage is that they were “worried about fitting premiums into their budgets.”
The administration has begun a national effort to entice more uninsured Americans into the exchanges. But it’s going to be a tough sell. Premiums for exchange policies are set to skyrocket in 2016. By one estimate, insurers have requested double-digit rate increases on more than 231 policies in the coming year.
If the combination of tax penalties, federal subsidies, and an online marketplace didn’t coax young people into buying insurance in 2015, these substantial price hikes aren’t likely to change their minds. Fewer healthy enrollees will translate into even higher premiums for everyone who does end up buying coverage.
And if premiums continue their upward march, the Census may have to report next year that the uninsured rate has headed up in lockstep with them.