ObamaCare's Rude Awakening For The Young

Amid rising premiums, the disincentives to sign up are becoming clear.

President Barack Obama won PolitiFact's 2013 "Lie of The Year" for claiming, that "if you like your health care plan, you can keep it." Instead of being ashamed, members of his administration appear to have been inspired by the award.

Take the statement by Department of Health and Human Services' National Press Secretary for Health Care, Joanne Peters. On Jan. 2, the Journal quoted her as saying ObamaCare "is making health insurance more affordable for young adults."

That assertion is farcical for most young adults forced to buy insurance through the Affordable Care Act's exchanges. For example, a friend of mine in her early 30s found her premiums roughly four times higher and her deductible nearly half again as large.

The reason is the ObamaCare "Adjusted Community Rating" provision. The adjusted community rating forbids anyone from being charged a premium more than three times anyone else's. This ratio is called an "age rating band." Before ObamaCare, 42 states allowed "age rating bands" of 5:1 or more.

That meant if an insurer charged a young, healthy person a $100 a month premium, it could charge an older person up to $500 a month, as actuaries took age, health, lifestyle and risk factors like smoking into consideration.

By narrowing the age rating band to 3:1, ObamaCare incentivizes insurers to raise premiums for younger, healthier people to subsidize premiums paid by older, less-healthy people. So while the insurer can charge $500 for the older person, it must charge the younger person $166 instead of $100.

ObamaCare supporters acknowledge this cross-subsidization. The Kaiser Family Foundation, one of the program's chief cheerleaders, said in a December 17 study that "on average, older adults will be paying premiums that don't fully cover their expected medical expenses, while young adults will be paying premiums that more than cover their expenses."

So how much more will younger people be paying than if the Affordable Care Act wasn't the law?

Kurt Giesa and Chris Carlson, members of the American Academy of Actuaries, provided one set of estimates in January 2013. Writing in the Academy's journal, Contingencies, these actuaries from Oliver Wyman in Milwaukee predicted that under the ACA, premiums for young, healthy adults age 21 to 29 would increase two to four times as much as premiums if they bought similar insurance before ObamaCare.

For singles between 21 to 29 who are ineligible for government subsidies because of their income, the actuaries forecast that premiums would be 42% higher than without ObamaCare. For those age 30 to 39 with similar coverage and circumstances, premiums would be 31% higher than without ObamaCare. By comparison, those age 60 to 64 with single coverage and ineligible for subsidies would see about a 1% increase in premiums over what they would be paying absent ObamaCare.

Young people don't need to make much to pay more than they would without ObamaCare. The study's "core finding" was that single young adults 21 to 29 with incomes of as little as $25,000 "can expect to see higher premiums than would be the case absent the ACA." That's after accounting for ObamaCare subsidies.

Other experts offer even grimmer predictions. Forbes's Avik Roy argues that adjusted community rating increases insurance costs for young adults by 75%. An American Action Forum report in October estimated that premiums for a single, 30-year-old male purchasing the least expensive "bronze" coverage would increase from an average of $62 a month before ObamaCare to $187 after.

The administration still refuses to admit how many people are actually enrolled—meaning that they picked a plan, paid and received their insurance card—in the federal or state-run insurance exchanges. And it won't say what share of those who have enrolled are young people.

According to the Kaiser Family Foundation, Americans age 18-34 make up 40% of the potential enrollees for the exchanges. If they decide ObamaCare is a bad deal, then they could make up less than 40% of its enrollees. That could be a disaster for ObamaCare as insurers pay out more this year than what they collect in the premiums, then raise premiums for 2015 to make up for losses. Kaiser predicts that may happen if young Americans comprise one-third of the program's enrollees, which just might be happening.

After the beating Mr. Obama sustained over his previous deceit, you would expect his administration to take pains to ensure its statements are accurate. You would be wrong. The administration's attitude seems to be that if it sounds good, say it, even if it is demonstrably false. That caught up with the president last year. The habit will get him and his administration in more difficulty this year.

A version of this article appeared January 9, 2014, in the U.S. edition of The Wall Street Journal, with the headline ObamaCare's Rude Awakening For The Young and online at WSJ.com.