The Obamacare implementation team is grappling with a thorny quandary: How can the government entice young, healthy Americans to participate in the new program when, in many instances, doing so would cut against their financial interests? The Washington Examiner's Phil Klein explains why the resolution to this problem is a high stakes proposition:
Avik Roy caused a stir by writing in Forbes that some in California would see rate increases of up to 146 percent. This prompted denunciations from liberal writers Ezra Klein, Paul Krugman and Jonathan Cohn. Essentially, these liberals argue that it isn’t fair to focus on the insurance premiums for the young and healthy, because what really matters is that the health care law expands insurance to those who really need it but cannot get it now, either because it’s too expensive, or because they have pre-existing conditions and thus cannot obtain insurance at any price...The reality is the exact opposite. The success of Obamacare hinges completely on the young and healthy. The reason is that the dream of a system in which sicker individuals can obtain coverage at affordable rates is predicated on the idea that the government can corral a lot more young and healthy individuals into the insurance market to offset costs. As long as insurers are raking in profits by collecting premiums from individuals with virtually no medical costs, they can afford to take on more expensive patients. This is precisely why as president, Obama abandoned his prior opposition to the individual mandate and why his administration fought so hard to preserve it in court.
I discussed Avik Roy's important analysis here. Last night, I appeared on CNBC's The Kudlow Report, and debated the chairman of Enroll America, the private-ish Obamacare appendage tasked with helping institute the law. You may recall hearing about this organization in connection with Sec. Sebelius' ethically-suspect financial shakedown of industry she regulates. Her fundraising appeals were made on behalf of Enroll America. Ron Pollack tried to argue that the "Affordable" Care Act is a sweet deal for young people, who have every reason in the world to participate in the program. Fending off several interruptions, I dissented:
Pollack's talking points aren't persuasive. First, his "six million young people have already signed up" statistic is meaningless. He's referring to the under-26 set who are now able to remain on their parents' plan. Those aren't the young people who are setting out to buy their own insurance, which is the real issue. Second, his lengthy song and dance about narrow enrollment periods designed to avoid abusing the law's 'guaranteed issue' mandate is empty. I think I adequately dealt with exposing that loophole during the segment. Finally, he mentioned the subsidies. First of all, those subsidies are funded by taxpayers. They're the primary expense of the law. They're not magical candy -- they have to come from somewhere (including double-counted Medicare cuts). More to Pollack's point, however, they're not as sweeping and generous for the young as he lets on. Back to Klein:
The problem is, because insurance is cheaper [than for older Americans] for younger Americans, they don’t receive the same level of subsidies through Obamacare. Though the often-quoted figure is that Americans earning up to $46,000 (or 400 percent of the federal poverty level) will qualify for Obamacare subsidies, a 26-year old in California would stop receiving subsidies at $32,000. So, the other way to lure younger and healthier individuals is by punishing them for not having insurance. The problem is, in 2014, the penalty for not having insurance is either $95 or 1 percent of taxable income (roughly $213 for our hypothetical 26 year-old). Yet the cheapest policy offered on the California exchange would cost $1,944 annually.
The natural choice for many cash-strapped young people is to simply forgo insurance coverage, which would be devastating to the Obamacare funding model. That's why the Obamacare lobby is seeking to enlist celebrities and star athletes to help dazzle younger Americans into spending thousands on health insurance that they can't afford. We'll see how that goes. Elsewhere on the Obamacare docket this week, new warnings of coming doctor shortages, reduced hours, and layoffs:
Or as Nancy Pelosi would call it, "fabulous!"