Three Obamacare Reforms to Benefit Younger Americans

Three Obamacare Reforms to Benefit Younger Americans

Obamacare is a bitter pill for many younger Americans to swallow. The Affordable Care Act has increased health care insurance premiums and created a health care straitjacket disconnected from individual needs. Yet there are reform opportunities that would make the law work better for younger Americans. Here are three.

1

Change Obamacare Age-Risk Pricing

Prior to Obamacare, insurance companies could apply a five-to-one pricing ratio in offering comparative health plans to older and younger consumers. The rationale was simple: younger consumers are less likely to need expensive care than older Americans. Unfortunately, Obamacare has capped the ratio at three-to-one. That’s a big problem. A three-to-one ratio does not accurately reflect the comparative risk of illness and treatment costs between younger and older Americans. As Diana Furchtgott-Roth, Jared Meyer and others have noted, the cost of covering an 18-year-old is effectively 20 percent of the cost of covering a 64-year-old. But without that five-to-one ratio calculation, younger must make up the difference.

Unsurprisingly, many on the Left argue that a lower ratio is a moral necessity. On “The McLaughlin Group” earlier this year, I debated Eleanor Clift on this precise issue. Clift argued that premiums for the young needed to be higher because of the social principle of “your brother’s keeper.” I get her argument, but I disagree with its premise. There’s nothing moral about taking from the young.

2

Introduce Greater Personal Responsibility

Obamacare’s fiscal foundations resemble the episode of “Star Trek: Voyager” when the ship was made of galactic quicksand. As its outward shell of stability collapses, the ship disintegrates. In the same way, with its massive expansion of demand and absent correlative increase in supply, along with its federal subsidy-shell of stability, Obamacare is built upon fiscal quicksand. Over time, demand will grow and health care spending will be even more unaffordable. But one way to reduce these costs would be to inject Obamacare with a much-needed dose of personal responsibility.

Consider that at the moment, an insurance company may only charge a smoker 150 percent above the premium of a nonsmoker. But applied to the greater risks of cancer and cardiovascular diseases that smokers incur, the 150 percent rate is obviously inadequate. A 200 percent cap — asking smokers to pay double their nonsmoker contemporaries — would be more appropriate.

That said, we shouldn’t single out smokers. Those with pre-existing conditions should also be asked to pay a more proportional rate. And here, I’m putting my money where my mouth is. I was born with a pre-existing heart condition and I’ve had open-heart surgery twice. Although I’m in excellent health now, my medical history makes me more likely than other 29 year-olds to need healthcare in the future. And the broader point here is that while an insurance-pool system serves moral interests in supporting those with pre-existing conditions, it’s not fair that I pay the same premiums as my contemporaries. Under a fairer system, I should probably be charged 200 percent of what a 29-year-old without a preexisting condition would pay.

The positive impact of this reform would be to reduce premiums — even if only by a small amount — for most young Americans. Of course, we would need to ensure that those with pre-existing conditions could afford their higher premiums. But there’s a solution. Here, we could provide federal loan guarantees for premiums, with staggered repayment matched to earnings. This approach would protect Americans unable to pay their premiums immediately.

3

End Employer Mandate and Tax Employer Provided Health Care as Income

Starting in 2016, any company with more than 50 full-time employees must provide health insurance. And while that might sound like a good thing, for younger workers the opposite is true. The young are the least-experienced members of an employer’s workforce. And by introducing an added marginal cost on each new employee, Obamacare puts the least-experienced at a distinct disadvantage to older workers. This is the same problem with the minimum wage — the least-experienced are penalized most.

In addition, as Ben Casselman has pointed out, employers are already cutting hours to ensure employees are classified as part-time. And again, young or old alike, those lost hours are imposing financial hardship.

Now consider that most employer-provided health care plans remain untaxed as fringe income benefits. This is absurd. A self-employed individual who must purchase his insurance plan via health care exchanges has a financial interest in remaining healthy and avoiding out-of-pocket costs. In contrast, many who receive employer coverage can make lifestyle and health choices more flippantly knowing that the company is picking up a large part of the tab.

This only reinforces obfuscation in cost-service relationships: a key ailment infecting our health care system. Taxing health care plans would encourage all Americans to shop around and demand reforms to Obamacare’s expensive inefficiencies. 

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Such reforms would be controversial. Nevertheless, Obamacare is hurting younger Americans. Short of replacing the law, we must seek solutions that offer greater social equity alongside individual responsibility.

Tom Rogan is a contributor for Opportunity Lives and writes for National Review. He is a panelist on The McLaughlin Group and a fellow at the Steamboat Institute. Follow him on Twitter @TomRtweets.