It's clear that millennials will be hammered by Obamacare, but most of the analyses wending their way through the media understate the negative impact the law will have on the cost and quality of health insurance for these 20- and 30-somethings. The problem is that Obamacare, also known as the Affordable Care Act, takes money from a variety of pockets, and many or most of the flurry of analyses focus on insurance premiums in isolation.
Millennials' life prospects have already suffered under the weight of the Great Recession and its aftermath. Their job markets are shaky and their student loans large. Now, large health insurance premiums and other costs hidden in the ACA will further dim those prospects.
Choosing a state at random, the Manhattan Institute reports that before the ACA, the average 27-year-old male in Arkansas could buy a health insurance policy for roughly $54 a month. According to the White House website, on the ACA exchange, the average lowest-priced plan will be three times more expensive, costing him around $181 a month – a 235 percent increase. If he were to purchase a stripped-down catastrophic plan, it would cost roughly $135 per month, two-and-a-half times more than his current insurance.
From the same sources, before the ACA, the average 27-year old woman in Arkansas could get health insurance for around $81 per month. On the ACA exchange she will pay roughly $181 for the average lowest-priced plan, more than doubling her cost of health insurance. If she were to get the $135 per month catastrophic insurance coverage – the cheapest insurance offered on the exchange – it will still cost 66 percent more than her current insurance.
These increases reflect one big ACA truth – younger, healthier Americans are required under Obamacare to overpay for their insurance so that older, sicker, and (by and large) wealthier Americans can underpay for their insurance.
Then there are the costs that don't show up in the side-by-side premium comparisons. The Department of Health and Human Services looked at a hypothetical 27-year-old Texan earning $25,000 per year. This person, HHS noted, would pay $145 for the second-cheapest silver plan and $83 for a bronze plan. But InsureBlog.com noted that such plans would likely come with a $5,000 deductible and a $6,350 out-of-pocket maximum. For a young person with serious health issues, the ACA's "affordable" coverage will consume 30 percent of his income.
But even this ignores the fact that the ACA shifts part of the cost of coverage onto the federal government, which must pay for individual subsidies and for Medicaid's expansion. Because of these federal obligations, one of three things must happen:
1. Americans, including these 27-year-olds, will pay higher taxes now.
2. The federal government will have to borrow more money to cover these hidden ACA costs; the 27-year-olds will then pay taxes over the rest of their working lives to pay for the subsidies paid out to their elders in 2014.
3. The federal government will have to cut other programs – roads, education, environment, energy, homeland security, national defense and so forth – to pay for the 2014 subsidies. And to be clear, this means fewer jobs and opportunities in infrastructure, education, etc. (Lots more quality time in mom and dad's basement, however.)
The true comparison then is not 2013's premiums versus 2014's premiums (the most common comparison in the news). Rather, it is 2013's premiums versus 2014's premiums plus extra deductibles and co-payments, higher future taxes and cuts in other government services.
David Goldhill's splendid book, "Catastrophic Care: How American Health Care Killed My Father and How We Can Fix It," examines a young, low-level employee in his firm and finds she will spend more than 50 percent of her lifetime earnings on health care. And because that spending is divided across so many pockets, she may never realize this fact.
One final note. For all of the extra financial burden that millennials and others will bear under Obamacare, many will discover that their new insurance plans buy them a great deal less than their old plans did. Many exchange plans will offer narrow networks – fewer doctors, fewer hospitals.
Younger Americans are already staring into a bleaker economic future than the one their parents anticipated 30 to 40 years ago, and Obamacare will significantly worsen their prospects. By comparing only pre-2014 premiums with post-2014 premiums, ACA friends and foes alike are grossly understating just how much the millennials' prospects will dim on January 1.
When the ball drops in Times Square this year, it drops on the millennials.
Robert F. Graboyes is a senior research fellow at the Mercatus Center at George Mason University.