Young Adults and the New Health Care Law

Ray Keating

The new health care law offers a lot for everyone to worry about.

For example, taxpayers - both individual and business - should be concerned about the big increases in government spending. 

Consumers need to be concerned about the accelerating costs that come with more government regulations, mandates and spending in health care.

Businesses are already concerned about the costly play-or pay mandate, whereby firms with more than 50 employees will either have to offer health insurance coverage to workers or pay a per employee tax of $2,000 as long as one employee receives a tax credit.

Individuals, including the self-employed, are rightly apprehensive about the mandate to have health insurance coverage or pay a tax up to 2.5% of income.

Those interested in the nation's economic growth and job creation should be worried about a Medicare payroll (income) tax imposed for individuals earning more than $200,000 and couples more than $250,000 - with a total tax rate of 3.8% applied to earned and unearned income, including capital gains and dividends.

As for those favoring innovation and invention in the health care sector, they should be concerned about higher taxes on pharmaceutical and medical device manufacturers.

And on and on it goes.

But another group might be surprised about how ObamaCare promises to hit them. Younger adults reportedly voted in big numbers for Barack Obama in 2008. According to the Pew Research Center, 66% of voters under the age of 30 voted for Obama, while he won the overall vote with 53%.

According to a new report from the Associated Press, however, younger adults will get hit with large health insurance premium increases under ObamaCare. The AP analysis found:

  • Young adults will face a 17 percent increase in premiums starting in 2014, when they are forced to buy health insurance coverage or pay a penalty tax.
  • This increase of roughly $42 a month is attributable to the price controls imposed on insurers, who will face a cap on what can be charged to older individuals. As AP notes: "Insurers typically charge six or seven as much to older customers as to younger ones in states with no restrictions. The new law limits the ratio to 3-to-1, meaning a 50-year-old could be charged only three times as much as a 20-year-old. The rest will be shouldered by young people in the form of higher premiums."
  • Young males would be hit hardest, according to this analysis, as they generally have lower health care costs.

It's also important to highlight the following from the AP report: "The analysis, conducted for The Associated Press, examined the effect of the law's limits on age-based pricing, not other ways the legislation might affect premiums, said Elizabeth McGlynn of Rand Health."

In fact, other aspects of ObamaCare, as noted above, promise to push costs up still higher.

No one should be surprised by the results of this analysis. Price controls and other government mandates and regulations always come with costs. It's just a matter of how those costs are allocated. In this case, younger adults turn out to be the big losers. But they certainly are not alone. We'll all be poorer - in both dollar and quality of care terms -under ObamaCare's drastic expansion of government in health care.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Copyright 2010 Small Business & Entrepreneurship Council. All Rights Reserved.

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