By Kurt Giesa and Chris Carlson
Implementation of the Affordable Care Act will affect various generational
cohorts differently. What are the implications for young adults?
Age Band Compression Under
Health Care Reform
IN ORDER TO GRASP THE POTENTIAL EFFECT OF THE AFFORDABLE Care Act (ACA) on health care premiums, it’s important to move beyond broad averages. Averages may mask substantial differences in how market reforms will affect individual states and vari- ous populations in those states, particularly in the pricing of coverage and the pooling of risk. In an effort to assess prospective distributional differ- ences in premium rates when market reforms are fully implemented in 2014, we studied the potential impact of ACA reforms on different age cohorts in states that cur- rently allow age rating beyond a three-to-one ratio. Our particular focus was young adults ages 21 to 29. Our anal- ysis recognizes that after accounting for ACA’s provision requiring that adult children be allowed to remain on their parents’ coverage until age 26, this age group has an unin- sured rate that is roughly twice the uninsured rate for the nonelderly population as a whole.
In our study, we found that if premiums in the nongroup
market were to increase on average by 10 percent to 20
percent because of changes required by the ACA (as some
estimates have predicted), premiums for younger, healthier
individuals could increase by more than 40 percent. On the
individual level this affects affordability. At the health system
level, it may cause an imbalance in risk pools between those
with immediate health care needs and those seeking protection against unforeseen future risks.
It’s important to note that the results we show here
look only at changes in out-of-pocket costs for premiums.
Generally, coverage in the individual market in 2014 and
later will be more generous than it is now because of minimum actuarial values and the inclusion of essential health
benefits—including prescription drugs and maternity coverage—that often are not covered by individual policies in
today’s market. In addition, individuals with incomes below
250 percent of the federal poverty level (FPL) will qualify
30 CONTINGENCIES JAN | FEB. 13