Millions of 'young invincibles' have big incentive to avoid Obamacare

Rick Moran
This has been the biggest fear of Obamacare supporters; that few of the 18-29 year old "young invincibles" will sign up for insurance as a result of the individual mandate, thus putting enormous pressure on premiums as the sick flood the system and the bulk of healthy people avoid it.

Washington Free Beacon:

Millions of young people could save hundreds of dollars a year by avoiding Obamacare's insurance exchanges and paying the penalty, a new report examining the law's financial incentives finds.

About 3.7 million people between the 18 and 34 years old will save at least over $500 next year if they do not buy health insurance through the exchanges, according to the study by National Center for Public Policy Research health care policy analyst David Hogberg. Of those, just over 3 million will save over $1,000 per year.

While the law has put in place two primary incentives to encourage people to buy insurance--subsidies and the individual mandate--these are not enough to make the subsidies economically worthwhile for many young people, Hogberg contends.

The report highlights a weakness with the structure of the Obamacare exchanges. If the exchanges are unable to attract enough younger people, the insurance pool will shrink and the premiums will rise, setting off a "death spiral" and potentially leading to a collapse of the exchanges.

"You need enough of these [young] people in the exchanges to in effect cross-subsidize people who are older and sicker," Hogberg said in an interview with the Free Beacon.

The financial incentive to avoid the exchanges will be even greater in 2014 because the penalty for not buying insurance will be higher in subsequent years, the report said. The penalty in 2014 will be either $95 or one percent of one's income, whichever is greater. This penalty will rise to $695 or 2.5 percent by 2016.

While the "Affordable Care Act" was originally designed to make health insurance more affordable, even those close to the poverty line can save over $500 by not buying insurance in 2014, the report noted. The $500 savings for an 18 year old starts at 163 percent of the poverty line and for a 30 year old at 178 percent. In 2016 the level will rise to closer to 300 percent.

As some have suggested, Obamacare was designed for this - that its a feature, not a bug. The thinking goes that insurance will get so expensive that insurance companies - prevented from charging enough for premiums to make a profit - will flee the exchanges, thus necessitating the government to step in and create a single payer system.

It may seem to be deliberate, but the working parts of the individual mandate were negotiated in Congress so hapharzardly and, as much of the law is proving out, without relation to other aspects of the law, that it would have been nearly impossible under those circumstances to "design" a system that went bust. The sheer complexity and confusion generated by so many "requirements" have served to put in place a system that just doesn't work - despite the best intentions of its designers.


This has been the biggest fear of Obamacare supporters; that few of the 18-29 year old "young invincibles" will sign up for insurance as a result of the individual mandate, thus putting enormous pressure on premiums as the sick flood the system and the bulk of healthy people avoid it.

Washington Free Beacon:

Millions of young people could save hundreds of dollars a year by avoiding Obamacare's insurance exchanges and paying the penalty, a new report examining the law's financial incentives finds.

About 3.7 million people between the 18 and 34 years old will save at least over $500 next year if they do not buy health insurance through the exchanges, according to the study by National Center for Public Policy Research health care policy analyst David Hogberg. Of those, just over 3 million will save over $1,000 per year.

While the law has put in place two primary incentives to encourage people to buy insurance--subsidies and the individual mandate--these are not enough to make the subsidies economically worthwhile for many young people, Hogberg contends.

The report highlights a weakness with the structure of the Obamacare exchanges. If the exchanges are unable to attract enough younger people, the insurance pool will shrink and the premiums will rise, setting off a "death spiral" and potentially leading to a collapse of the exchanges.

"You need enough of these [young] people in the exchanges to in effect cross-subsidize people who are older and sicker," Hogberg said in an interview with the Free Beacon.

The financial incentive to avoid the exchanges will be even greater in 2014 because the penalty for not buying insurance will be higher in subsequent years, the report said. The penalty in 2014 will be either $95 or one percent of one's income, whichever is greater. This penalty will rise to $695 or 2.5 percent by 2016.

While the "Affordable Care Act" was originally designed to make health insurance more affordable, even those close to the poverty line can save over $500 by not buying insurance in 2014, the report noted. The $500 savings for an 18 year old starts at 163 percent of the poverty line and for a 30 year old at 178 percent. In 2016 the level will rise to closer to 300 percent.

As some have suggested, Obamacare was designed for this - that its a feature, not a bug. The thinking goes that insurance will get so expensive that insurance companies - prevented from charging enough for premiums to make a profit - will flee the exchanges, thus necessitating the government to step in and create a single payer system.

It may seem to be deliberate, but the working parts of the individual mandate were negotiated in Congress so hapharzardly and, as much of the law is proving out, without relation to other aspects of the law, that it would have been nearly impossible under those circumstances to "design" a system that went bust. The sheer complexity and confusion generated by so many "requirements" have served to put in place a system that just doesn't work - despite the best intentions of its designers.