ObamaCare Math for the 20 Something Insured
ObamaCare Insurance…NOT ME!
The mandate for buying insurance will be weakly enforced. Like my grumpy old grandpa used to say, “The trouble with young people….”.
For those that do their due diligence and do the math, they will find a path to prosperity hidden in the Affordable Care Act. There are three important factors at play here:
- Community Pricing
- Mandatory Coverage for existing conditions
- Weak Mandate
First of all, community pricing is defined as insurance companies charging the same rate for insurance for each person no matter what their race, religion or age. This sounds great in theory but it has the effect of spreading the cost older Americans to younger Americans. Older people have tended to use the medical system more than younger people. This has the effect of lowering premiums for the elderly but increase the cost of insurance for young adults.
As part of the law, all Americans can buy coverage without regard to pre-existing conditions. The intent was to take care of situations in which a person had a bad medical condition but then lost their coverage through no fault of their own. That person no longer would be able to get coverage that included the malady for which they were being treated. This was a tragedy from the insured persons standpoint but somewhat understandable from the Insurance point of view.
The thought was that if all insurance companies had to insure those pre-existing condition people then the exposure would be spread across all the companies. Additionally there are some provisions to help offset those costs through taxes.
Finally the mandate that all people buy insurance or pay a penalty (the supreme court calls it a tax) is not sufficient to deter people from avoid paying the penalty. For 2014 the penalty will be $95. It will incrementally raise to $695 over the course of a few years.
Let’s Do the Math
According to the Kaiser Family Foundation, the cost for individual health care coverage in 2012 was $5668. The individual can pay this amount as in the past and have full coverage.
The alternative is that the individual can forgo paying for that coverage. If the person decides not to take the coverage in 2014, they will be hit with a tax of $95. Additionally, they will be without insurance…..until they need it. Remember, a company is required to cover an individual regardless of pre-existing conditions. So if a serious malady happens to the individual, all they will need to do is get insurance when they need it.
An individual without coverage is not going to buy coverage for little things like going to their local immediate care to take care of bronchitis. Let’s assume they have 3 of those visits a year at $100 each. Additionally, the person will need to pay the $95 tax penalty.
On most years, this will be the extent of coverage needed for a 20-something. They are covered under catastrophic care as long as they can sign an insurance form when they need major medical coverage.
So the person can save $5668 – $395 = $5273 (Five Thousand Two Hundred Seventy Three Dollars) by not buying coverage.
What About a Car Accident
The argument against doing this the fear that a catastrophic accident would occur that may prevent a person from getting a policy to cover them. In the case of a cancer diagnosis, an individual can still go online and get insurance. In the case of a car accident, the person may be immobile and cannot get coverage. Many people not getting insurance now will continue that process. My suspicion is that a insurance product will emerge to cover those situations. Buy a $200-$500 policy a year to cover those possibilities and now that person has complete coverage.