As Democrats are heavily dependent upon the youth to purchase health insurance via Obamacare in order to make the president’s signature legislation a success, they fail to recognize that these young consumers are wise shoppers and may not sign up for the high premiums offered by the Affordable Care Act.
Douglas Holtz-Eakin, president of American Action Forum and former director of the Congressional Budget Office, published an eye-opening piece in the Washington Times this week which furthers the argument that Obamacare will not be the liberal utopia dream that President Obama, Nancy Pelosi, and other Democrats sold to the American people. In fact, he argues, Obamacare will be subject to the same economic principles that govern the everyday market.
The original goal of Obamacare was to expand health insurance for an additional 30 million Americans. About 15 million of these people would purchase their insurance in “state exchanges” which can be thought of as state-based marketplaces where government-approved healthcare will be sold for individuals and small businesses to purchase. Government subsidies would assist insurance for those making under $90,000.
As the Supreme Court ruled last summer, those who do not purchase insurance will be subject to a penalty, or extra tax.
Key to the successful implementation and long-term success of Obamacare are young Americans aged 18 to 40. The law intends for this group to participate in the healthcare program in some way as they are faced with the decision of purchasing healthcare from the exchanges, or paying the tax penalty. By having the young in the insurance pools, the insurance offered in the exchanges will be more attractive and affordable to older Americans due to the younger Americans being associated with less healthcare costs.
Basically, the idea is that the young must purchase healthcare in the government pool, and because they will not be in need of much healthcare, the costs for older Americans decrease. As Holtz-Eakin puts it, “In effect, young Americans are supposed to be both key participants and the piggy banks of the expansion effort.”
What Obama, Pelosi, and Democrats have failed to account for is that consumers will approach healthcare in the exchanges just as they would with any other product.
When you are standing in the grocery store trying to decide which cereal to buy, you first go for your preference, and then you look at the price. There is a certain price at which you decide that Captain Crunch isn’t worth it, and you settle for the generic store brand.
The same will happen with younger Americans. Lacking healthcare issues and the need for immediate insurance, there will be a price point at which Americans will decide that they are better off paying the penalty instead of purchasing healthcare. Later on, if they are in a dire situation, they will purchase healthcare as needed. Empirical data provides evidence for this claim.
The American Action Forum sponsored a national poll of Americans aged 18 to 40 in March and April of this year and they were specifically interested in what effects various premium increases would have on a consumer’s willingness to purchase healthcare coverage. Respondents were those who already purchase insurance and were supplied with specific information regarding the various scenarios covered in the poll.
The results are astonishing. Only 83 percent would still purchase insurance if premiums rise 10 percent. Sixty five percent would continue to purchase if premiums rise 20 percent, and a mere 55 percent if premiums rise 30 percent.
As expected, there is a price point where consumers simply stop buying health insurance. A law intended to generate an expansion of coverage will do exactly the opposite, by reducing the number of participants in the healthcare pools, further increasing the costs for those who do buy healthcare.
As the full implementation of Obamacare nears, a greater number of politicians, pundits, and analysts are casting doubts on the program. Higher premiums are almost already guaranteed. Faced with an ever-growing cost of healthcare coverage, it is completely rational to suggest that young Americans, who the program largely is designed to depend on, will simply choose not to participate in the exchanges.
The President and Congressional Democrats continue to assure us that Obamacare will be carefully and successfully implemented, but just like Nancy Pelosi said, “We have to pass the bill so you can find out what’s in it.” We are beginning to see more and more that what’s in it doesn’t work, and the reforms it is designed to bring are not insured.
