Pushing back against those who warn that low levels of younger subscribers could threaten coverage sold under the health law, analysts for the Kaiser Family Foundation say enrollment of young adults “is not as important as conventional wisdom suggests.”
Even if insurance pools contain only 25 percent young adults rather than the hoped-for 40 percent, medical claims and other costs would exceed premium revenue by only about 2.4 percent, they estimate. That’s far below the kind of loss that would lead to an unsustainable spiral of huge premium increases and fewer and fewer subscribers, they say. (Kaiser Health News is an editorially independent program of the foundation.)
“Premiums are not as sensitive to the mix of enrollment as fears about a ‘death spiral’ suggest, particularly with respect to age,” wrote KFF’s Larry Levitt and colleagues. More important, they add, is that insurers recruit a balanced mix of the healthy and the sick of all ages.
Many deem enrolling “young invincibles” to subsidize older, sicker members as essential to the policies sold through healthcare.gov and other portals created by the Affordable Care Act. That goal has gained attention as some states have disclosed the ages of early enrollees. In California, for example, 21 percent of those signing up in October and November were aged 18 to 34.
But under ACA guidelines, insurers charge young adults as little as one-third what they charge a 64-year-old. (Younger adults are still paying more than their expected average medical costs, however.) That limits subsidies from the young and means that the importance of enrolling them might be overestimated, the KFF analysts suggested. In other words, younger folks who stay uninsured deprive insurers of less revenue than an equal number of uninsured older adults would.
“My numbers aren’t immensely different from the Kaiser numbers,” said Seth Chandler, a law professor and insurance specialist at the University of Houston. “Kaiser is a little more upbeat in the way they’re thinking about it than I am.”
Chandler estimated that lower levels of young-adult enrollment could generate losses as high as 10 percent, a figure he said “is not wildly different” from the one produced by the KFF model and one that wouldn’t necessarily doom Obamacare.
The key, both KFF and Chandler say, is to recruit enough healthy members no matter what their age.
“It is important to attract the ‘young invincibles,’ but maybe with a greater focus on the ‘invincible’ part,” the KFF study said.
Many worry that consumers with expensive illness will be the first to sign up and healthy folks, who don’t think they need immediate coverage, will be inclined to stay away — especially given the sign-up portals’ computer problems.
The KFF analysts expect young-adult enrollment to increase with the approach of the March 31 signup deadline to avoid penalties for lacking coverage. Even if some carriers experience sicker-than-average members and high medical claims, the ACA includes risk-sharing mechanisms to reduce carriers’ exposure and potential need to raise premiums, many have noted.
Chandler, whose blog is entitled “ACA Death Spiral,” is less confident it will all work out.
President Obama’s decision to let insurers renew 2013 plans for existing policyholders will tend to keep healthy people out of plans falling under the health law, which could drive up average costs, he said. He thinks risk-sharing mechanisms might need hundreds of millions of dollars more to do their job of stabilizing the market.
In any event, what’s most important is not enrollees’ birthdays but how sick they are. Nobody will know that for months.
“People have focused on age because that is the only data we have,” Chandler said. “But the real issue is the health status of the people we enroll.”