Where Are the ‘Young Invincibles’?

Published February 27, 2015

I’ve followed Obamacare in Rhode Island for a few years now, in large part because of my affiliation with a terrific free-market think tank there, the Rhode Island Center for Freedom & Prosperity. It also helps that their exchange, HealthSourceRI, is pretty good about releasing information.

All of which means when I want to get a snapshot of what’s happening with Obamacare’s exchanges, I often look in Rhode Island. So yesterday when HealthSourceRI released what I assume will be its final set of numbers for open enrollment, I went through it to see if there was anything interesting that I hadn’t picked up on beforehand.

Lo and behold, I found this tidbit: 27 percent of enrollees on the Rhode Island exchange are between the ages of 18 and 34.

Why is this important? Let me quote from a Politico article from early 2014:

Obama administration officials in a recent background briefing said they’re hoping 7 million people sign up in the exchanges in the first year, including 2.7 million young adults. They need those young and healthier people to balance out the risks in new insurance pools that are probably going to quickly attract a fair number of older and sicker people. Many young people starting out in the work orce [sic] will get subsidies.

In short, in order to avoid the dreaded ‘death spiral’ in insurance rates, around 40 percent of all enrollees need to be young, healthy adults willing to dramatically overpay for insurance (in relation to the benefits they’ll likely receive)  in order to subsidize older, sicker enrollees. If the percentage dips too much below 40 percent, insurers have to hike premiums significantly to make up for their risk pool being sicker, and more expensive to cover, than planned.

Currently, insurers are able to mask this shortfall somewhat because of the bailout provisions inserted into Obamacare, the so-called ‘Three Rs’ of risk adjustment, reinsurance, and risk corridors. But two of these, reinsurance and risk corridors, are expiring or have been scaled back by Congress, and the third, risk adjustment, only works if some insurers are attracting healthier-than-expected enrollees. With only 27 percent of enrollees coming from the 18-34 age group, that’s unlikely.

Obamacare was premised on, among other things, the idea that through coercion (tax for being uninsured) and bribery (subsidies) the central planners could lure enough young people into purchasing exchange-based coverage at prices higher than they had previously rejected (something like half of all uninsured were in this 18-34 age group before Obamacare). Apparently, this too seems not to have gone the way the central planners expected, and the end result will be much higher premiums in future years.