The insurance industry and its allies warn that health reform’s limit on how much more insurers can charge older people than younger people for coverage will make individual insurance much more expensive for young adults. But a new Urban Institute analysis finds that this claim of “rate shock” is “unfounded.”
Starting in 2014, insurers in the individual and small-group insurance markets will be able to charge older people no more than three times what they charge younger people. This is narrower than the five-to-one differential that is typical today, meaning that (all other things being equal) premiums should rise somewhat for younger people buying coverage in the individual market.
But, as the Urban Institute paper points out, the large majority of young people affected by this will also become eligible for premium subsidies to help buy coverage in the new exchanges that health reform will create, or for Medicaid (if they live in a state that adopts health reform’s Medicaid expansion). As a result, the age-rating change “would have very little impact on out-of-pocket rates paid by the youngest nongroup purchasers.”
Specifically, the study found:
92 percent of people ages 21 to 27 projected to buy an individual plan in an exchange in 2017 are expected to have incomes less than 300 percent of the poverty line, so they would be eligible either for Medicaid (if their state expands it) or for substantial subsidies to help pay premiums in the exchange.
Similarly, 88 percent of 18- to 20-year-olds projected to buy a plan in the exchange are expected to be eligible for premium subsidies or Medicaid.
The study also notes that among the estimated 951,000 young adults ages 21 to 27 who now buy coverage in the individual market and have incomes too high to qualify for premium subsidies or Medicaid, two-thirds are age 26 or younger and in families with access to employer coverage. That means they could get coverage under health reform’s requirement that insurers allow parents to add children up to age 26 to their job-based plans.