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Health Care Law's Effect on Premiums for Young People Is Overstated, Analysts Say

By John Reichard, CQ HealthBeat Editor

March 6, 2013 -- Insurance industry predictions that the health care law will make coverage unaffordable for many young Americans are overstated, say analysts at the Urban Institute.

The vast majority of the 10 million 21- to 27-year-olds who are currently uninsured and the 3 million in this age group who now have individual coverage will either qualify for Medicaid, the Children's Health Insurance Program, subsidies available through insurance exchanges, or their parents' coverage, analysts Linda J. Blumberg and Matthew Buettgens say.

So while premiums will rise for the young, in almost all cases out-of-pocket costs won't, the analysts say.

Congressional Republicans this week stepped up their criticism that the health care law will make insurance policies too expensive, not only for the young but for older Americans. The House Energy and Commerce Subcommittee on Health will hear testimony on the law's effect on premiums paid by the young. And committee Republicans joined with GOP leaders last week on the Senate Finance and Senate Health, Education, Labor and Pensions committees to distribute a report asserting that young adults and middle-class families will see their costs jump under the law (PL 111-148, PL 111-152).

Insurers say the law's ban on their setting premiums for older people more three times higher than those for the young should be changed. They argue for a "rating band" of 5-to-1 rather than 3-to-1 set in the law. In other words, they want to be able to charge older people premiums that are up to five times higher.

But Blumberg and Buettgens say in their analysis released earlier this week that "92 percent of adults age 21 to 27 enrolling in single plans in exchange-based coverage have incomes below 300 percent of the federal poverty line. In other words, the vast majority of young adults enrolled in these plans would not face different health care costs regardless of the rating bands chosen because of the protection afforded them by the Affordable Care Act's subsidies."

The same is true, they say, "for 88 percent of 18 to 20 year olds, 85 percent of 18 to 20 year olds, 85 percent of 28 to 44 year olds, 79 percent of 45 to 56 year olds, and 76 percent of those age 57 and older."

At the same time that many of the Americans who face rising rates would be cushioned from their effect, premiums for others, particularly among the older group, would fall. A shift to the 5-to-1 rating band would boost their costs, however. The Urban Institute analysis says research shows that "premium increases for older adults under 5:1 are approximately twice the savings experienced by younger adults." It added that evidence shows that under the 5-to-1 band, "older adults are actually overcharged, and younger adults are undercharged, based on the costs of people expected to enroll."

Overall, the analysts concluded that the claims by some in the insurance industry that the health care law as is "will have dramatic implications for the out-of-pocket costs of young adults are unfounded."

But the report distributed by House and Senate Republicans asserted otherwise. "Higher health care premiums are the last thing single young adults and working families can afford," it says, citing data "from over 30 studies and analyses" that project "massive" premium increases. Among the reports that it cites is one by the consulting firm Oliver Wyman that says "we estimate that almost 80 percent of those ages 21 to 29 with incomes greater than 138 percent of the federal poverty level who are enrolled in non group single coverage can expect to pay more out of pocket for coverage than they pay today—ever after accounting for premium assistance."

These seemingly conflicting conclusions mean confusion over the law's effects won't go away any time soon.

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