By Daniel Weintraub
A shortage of young people willing to buy health insurance under the Affordable Care Act is not likely to undermine the finances of the program, according to a new study from experts with the Kaiser Family Foundation.
Conventional wisdom has suggested that the failure of so-called “young invincibles” to buy coverage could unravel the finances of the ACA because young, healthy people are needed in the insurance risk pool to help balance the expected cost of caring for older, sicker people who are most likely to enroll.
But the foundation’s study showed that the higher premiums the law allows insurers to charge older people will make the system largely self-correcting. Even under a worst-case scenario, insurers would need to raise prices only modestly in 2015 to make up for the revenue shortfall.
For example, if people between the ages of 18 and 34 enroll in numbers 25 percent below their proportion in the population eligible to buy policies through the ACA, that would lead to a revenue shortfall for insurance companies of less than 2 percent. And even if the younger demographic fell 50 percent short of its proportion in the potential market, the revenue loss would be less than 3 percent.
The study said that the 18 to 34 age group makes up about 40 percent of the eligible population nationwide. So far in California, that age group has accounted for about 22 percent of the enrollment in October and November through the CoveredCa.com health insurance exchange.
More important than the age of the enrollees, the Kaiser experts said, will be their health status. The finances could be skewed more dramatically if too high a percentage of the enrollees at any age are sick and in need of expensive care. The fear is that this would force a big increase in rates, which would then further discourage healthy people from enrolling, leading to a spiral that would eventually force insurers to withdraw from the program.
“If we ended up with only people who are very sick, people currently in high-risk pools, that would be problematic,” said Larry Levitt, co-director of the Program for the Study of Health Reform and Private Insurance.”I don’t think that’s likely. But enrolling healthy people is a much more important challenge than enrolling simply young people.”
But the law also includes safeguards against this scenario, with payments from other insurers and the federal government available in the first years to insurance companies that enroll a sicker, more expensive group of consumers.
The health status of early enrollees is not known because the law prohibits insurance companies from asking people about their health histories.
To see the full Kaiser report, go here.