Obamacare's Success Depends on Young Buyers

Friday, 26 Jul 2013 08:08 AM

By Michelle Smith

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The success of Obamacare is largely hinged on whether young people decide it's worthwhile to buy health insurance. And skeptics say the outlook isn't encouraging.

For the system to operate as planned, millions of healthy 20- and 30-somethings will need to sacrifice a chunk of their disposable income to purchase insurance plans from new marketplaces in each state known as exchanges.

Young people are not expected to rack up a lot of medical bills. Therefore, if they readily purchase coverage, their premiums should offset the costs for older Americans and for sicker people.

Editor's Note:
Should ObamaCare Be Repealed? Vote in Urgent National Poll

But of young buyers don't flock to the healthcare market, prices across the United States could spike, The Wall Street Journal warns.

According to interviews with young people, The Journal says insurance plans could be a hard sell. Many young people rarely seek medical treatment and they tend to view healthcare coverage as a luxury, not a necessity.

There are over 19 million uninsured Americans between the ages of 18 to 35, according to Census data cited by the Fiscal Times.

About 6 million qualify for Medicaid and another 9 million, having incomes below $45,960, are expected to be eligible for subsidies to help cover their healthcare insurance costs. That leaves exchanges with a prime target group of approximately 4 million young people to subsidize the masses.

The Obama administration must convince about 67.5 percent of that group to buy a healthcare plan, according to the Times.

The government has scrounged up $1.25 billion to market Obamacare, the Times notes. But still skeptics say the numbers aren't encouraging.

Insurers are required to offer three levels of coverage, from bare-bones plans to those with more extensive coverage. The idea is to increase appeal with variety, but that strategy might not work. With young people, the most important factor is likely to be price.

Actuaries at consulting firm Oliver Wyman projected that a young adult earning $33,510 would currently pay about $2,400 in premiums for health insurance, says the Times. That cost is expected to jump under an Obamacare exchange to $3,183 a year, about 9.5 percent of their income.

In addition to the premiums, some plans can have deductibles of more than $5,000, says The Journal.

In January, the federal government will start penalizing those who don't buy insurance. But with penalties starting at just about $95, many expect young people to prefer paying that relatively small fee.

"For healthy young people, I believe that these new rates are not likely to be attractive enough," compared with the no-coverage penalty, John Rowe, former chief executive of Aetna and health policy professor at Columbia University, told The Journal.

Editor's Note: Should ObamaCare Be Repealed? Vote in Urgent National Poll

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