Today's Managing Health Care Costs Number is 3.49
Word has leaked out of the Trump White House that the Administration is considering reinterpreting the requirement that the maximum difference between premiums for youngest and oldest on the ACA exchanges. The language requires a maximum of 3:1 ratio; the administration is considering allowing policies sold to older Americans to be 3.49 times higher than those sold to younger Americans.
This is one of the tradeoffs I mentioned in Tuesday's post. Having a low ratio means that young beneficiaries are subsidizing older beneficiaries. But this can make insurance expensive enough that fewer young people will purchase exchange-based insurance. They could opt to go without insurance -- many are, after all, the "young invincibles". They could purchase inexpensive non-qualified insurance - which would be cheaper- but could require underwriting. Young healthy people would qualify -leaving the exchange with a disproportionate share of those at high risk.
Insurance pools are only sustainable if they are able to attract a fair share of healthy people - who pay premiums out of proportion to their likely covered medical claims. Insurers lost money in the early years of the exchanges because there were fewer young enrollees - and making insurance more affordable for young people could help make the individual market sustainable.
Older Exchange enrollees are more likely to have preexisting expensive illnesses - and are unlikely to be able to purchase meaningful insurance outside of the community-rated exchange. But making their costs too high could decrease insurance coverage in the group most likely to face financial (and physical) ruin from a major medical illness.
If there is a change - and the executive branch does have substantial latitude in interpreting the legislation - there are smart ways to frame such a change.
Any change in this ratio should be framed as a "discount" for young people purchasing insurance - and not a surcharge for older people. Even if the economic implications are the same - surcharges would decrease ACA enrollment in the population which gains the most benefit from health insurance.
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