cur-mud-geon: anyone who hates hypocrisy and pretense and has the temerity to say so; anyone with the habit of pointing out unpleasant facts in an engaging and humorous manner
The Affordable Care Act (ACA) will, of necessity, rely heavily upon the younger age group from 18 to 34. This is necessary since the younger age group is also likely to be the lower average claim group thus generating a surplus that would be used to offset the higher claims costs of the older age groups. The younger age group is often referred to as the ‘young invincible’ group since many in that group do not think they need health insurance.
The IRS has finalized penalties for not joining the program as follow:
In the first year, anyone not covered would pay a fine the greater of $95 or 1% of household income. In the second year, the penalty would rise to the greater of $325 or 2% of household income. Finally, in 2016, the penalty would rise to the greater of $695 or 2.5% of household income. The penalty would then increase by a cost-of-living formula each year thereafter.
These penalties are referred to as a ‘shared responsibility payment’.
The young invincible group is, of course, aware that there is no pre-existing condition clause in the ACA and thus know that if and when they need coverage they can enroll during any open enrollment period.
The penalty is set to take effect in 2015 since the House voted, in July, to delay the penalty for a year.
Premium rates are not yet published and will have an impact on the rate of enrollment of the invincibles since they’ll calculate the relationship of the premium cost to the penalty cost. If the rate for a 21 year old person were set at just $300 per month for a plan, then that person (or household if married) would have to earn at least $360,000 in the first year to make the penalty work (1% of $360,000 would then equal the annual premium). Even as the penalty increases, the premium cost will almost assuredly be such that the penalties would not affect behavior sufficiently to offset the problem.
This points to a program that may very possibly not be able to avoid getting to the point of what is sometimes called a ‘death spiral’ where the cost of claims rises so quickly that premiums cannot be increased fast enough to keep pace. There is a risk pool that would be used to help insurers that were on the wrong end of this deal, but that pool would potentially evaporate quickly at this rate.
As the layers of this onion are peeled back further and further, one begins to question how the ACA can ever be viable in the long term without huge government subsidies being doled out to keep it afloat.
We might quickly reach the point where the only thing left to save us all would be a single payer program which the government would run…and which the President stated was his long term goal as he campaigned in his first race for the office. Our government wouldn’t be that sneaky, would it?