What If Healthy People Don't Want to Buy Obamacare?

What If Healthy People Don't Want to Buy Obamacare?

With less than a year until the Affordable Care Act starts to really kick in, there is a growing concern the group of people who are most needed to make the plan work properly are the ones most likely opt out. 

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One of the key promises of the ACA has always been that it would lower costs for health insurance. The trick to making that happen was to get everyone to buy health care, which is why the law came with an individual mandate. In the run-up to the law's passage (and after) there was a lot of heated argument about how forcing people to buy something they don't want is un-American, but the Supreme Court upheld the mandate idea on the grounds that it's just a new kind of tax. Buy health insurance or pay the tax. Your choice.

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There is one little-discussed flaw, however, the could turn out to be the fatal one: The government doesn't really want people to pay the tax. In order for the plan to work, we need some people (especially young, healthy people) to pay more into the health care exchanges than they receive in services for the risk pool math to work. Yet, there are concerns that penalty or not, the people who can't afford or don't want to pay for health care won't be sold on the government-sponsored health exchanges which are meant to supplement more-expensive private insurance. Some are also arguing that the cost to buy insurance on the exchanges will be far greater than Obamacare supporters have predicted

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If that's the case, then the penalty just might not be high enough. In the first year, the tax is the higher of $95 or 1 percent of your income (so $400 for someone making $40,000). The rate increases each year, to a max of the greater of $695 or 2.5 percent in 2016 (or $1,000 for someone with $40,000 of income). If you're one of the few that pays very little under the current system — the young and healthy; or the uninsured, who currently pay $0 — then your costs are definitely going up. The ACA will provide subsidies to those who can't afford it, but again, most citizens are either unaware of that fact, don't know if they will eligible, or are completely confused about to apply. (Constant predictions of bureaucratic nightmares from the bill's opponents don't help matters.) It's easy to see then why their instinct is to opt out entirely.

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A recent survey claims that many as 10 percent of people are planning to skip insurance and pay the penalty. More than 60 percent think they won't be able to afford it, and most have no idea what they will do come January 1, 2014. Only 19 percent said they expect to have coverage in place by the deadline. The Los Angeles Times spoke to several young people who say they have no plans to buy insurance at all, because they think that they "never get sick." In addition, by allowing young, single people to stay on their parents health insurance until they are 26, the ACA also created a huge pool of healthy young people who won't be in the market for the exchange plans because they just don't need it yet. 

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But for those young people who are facing the penalty, why would they prefer to fork over that money to the government (and get nothing in return) as opposed to just buying health insurance? One reason is people don't know how to buy coverage. The exchanges that are being created to offer more and better alternatives to private coverage don't exist yet. They sound confusing and the costs are currently unknown or in dispute. 

At The New Republic Jonathan Cohn does a pretty good job of tearing down a lot of the predictions about inflated costs, but in the end even he is forced to admit that, yes, some healthy people will pay more for insurance than they do right now. But many more sick people (some of whom are currently young and healthy) will probably pay less. That's the bargain we're making to ensure that (as a country) we get better health coverage. Cohn elaborates:

As Aaron Carroll wrote the other day, Obamacare involves real trade-offs: Higher-income people have to pay higher taxes, the health care industry has to endure lower payments from Medicare, and—yes—some young, healthy, affluent people have to pay more for private insurance. Those of us who support the law believe that's a worthwhile price to pay to help achieve universal coverage, given the lack of politically viable alternatives.

There are other potential benefits the plan, as well, aside from just the money. But again, in order to maximize those benefits for everyone, we need everyone to play along. Even the people who won't see the benefits right away, if ever. Too many people waiting until they were old and sick to join the health insurance market is how we got into this mess in the first place. After all, almost every healthy person in the world will one day become a sick person. And the line between well and ill is a pretty thin one.