Young adults likely will not face higher chances of being uninsured in 2014 because of limits in how insurance companies can set premiums, according to a study by the Urban Institute. The study examined “rate shock” or potential significant increases in health insurance rates related to the Patient Protection and Affordable Care Act (PPACA) (111-148) requirements that insurance premiums in 2014 for people over age 64 be no more than three times higher than premiums for people age 21. The study examined insurance industry claims that the effect of the 3:1 age bands included under PPACA would significantly increase premiums paid by young adults and leave many of them uninsured. The study compared PPACA’s 3:1 rate band to a 5:1 alternative rate band using the Urban Institute’s Health Insurance Policy Simulation Model.
The study concluded that there would be minimal differences between the 3:1 rate bands and the 5:1 rate bands in the out-of-pocket expenses paid by young adult nongroup purchasers when all PPACA rating requirements and available subsidies are considered. This conclusion applied to all likely purchasers, as well as the millions of 21-27 year olds who are currently uninsured and the 3 million who currently have nongroup coverage. The study also determined the implementation of PPACA’s reforms will significantly reduce the disparity between the premiums paid by older and younger adults for the same type of coverage. The study discredited claims by some in the insurance industry that there will be significant increases in out-of-pocket costs paid by young adults. Although the study concluded that young adults between 21 to 27 years old will have higher average premiums under the 3:1 rate band than the 5:1 rate band, it found those 57 years old and above will have lower average premiums under the same rate bands. Further, CMS’ 3:1 age gradient was a reasonable representation for the health expenses of those expected to enroll in the new nongroup marketplace, especially for individuals up to age 27, and those 42 and older.
The study determined that certain groups may be insulated from the adverse financial consequences of stricter age-rating rules including: (1) many young adults purchasing nongroup insurance today; (2) those uninsured today; and (3) and those expected to purchase nongroup coverage when PPACA is fully implemented. These financial benefits will come from federal subsidies and the expansion of the Medicaid/CHIP programs.