Obamacare Gives Some Young Adults Incentive to Stay Uninsured

Thursday, 31 Jul 2014 08:42 PM

By Cathy Burke

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Despite its intended goal to provide health insurance to everyone, Obamacare actually gives some young adults a strong financial incentive to stay uninsured, a new analysis shows.

The Wakely Consulting Group breakdown points out "middle- to high-income young people are the most likely to go without coverage, particularly in 2014 and 2015."

"As the [Obamacare] penalty is a percentage of income, at high income levels, the penalty will exceed the gross premiums (which do not vary based on income) and high-income individuals will likely purchase at the least the minimum required coverage," actuary Greg Fann noted in the May "white paper" analysis.

A Forbes commentary Thursday called it "puzzling that a law that both hands out subsidies to encourage coverage and imposes penalties on those who do not could possibly increase the incentive to become or remain uninsured."

But Forbes noted the Wakely analysis proved exactly that, calling it "one of the presumably unintended consequences of this misguided law."

The Wakely breakdown shows how 24-year-olds at 275 percent of the poverty level get what Forbes called "a perverse incentive to become or remain uninsured."

The analysis finds many young adults at that level won't qualify for any subsidy because the premium for the second-lowest cost plan is below the maximum dollar amount considered "affordable."

Yet a 64-year-old at the identical income level would qualify for a $462 a  month subsidy.

"Prior to Obamacare, such individuals would have been slightly better off buying a non-qualified health plan with an actuarial value of 50 percent," Forbes wrote of the young adult group. "But Obamacare gets rid of such plans, substituting plans with a higher actuarial value and more comprehensive benefits.

"So now the privilege of buying health insurance costs 44 percent more than the expected cost of remaining uninsured — and that’s after taking into account the individual mandate penalty."

The Wakely analysis confirms an earlier study by the American Action Forum in January.

The AAF report noted Obamacare's "perverse economic incentives" make "health insurance more expensive for many young adults, while at the same time making the decision to go without health coverage exponentially less risky than it previously was."

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