(SOURCE) The success of the health insurance mandate hinges largely on the enrollment of young (and presumably healthy) individuals, and early sign-up numbers show this demographic isn’t flocking to the exchanges.
The individual mandate portion of President Obama’s Affordable Care Act requires all Americans to have insurance coverage in April 2014 or face a fine of $95 a year for the first year or 1% of their income, whichever is higher. The penalty continues to increase exponentially as a person continues to skip coverage and hits 2.5% of annual income by 2016.
The administration has said they are aiming to have 2.7 million young and healthy enrollees get coverage of a total seven million enrollees on the exchanges in year one in order to balance out the pool of policyholders and keep a lid on premium costs.
But if recent numbers out of Kentucky’s state-run exchange are any indication, young people aren’t eager to get coverage, meaning the pool of policyholders are older, less healthy, and more expensive to insure. This trend could potentially increase premiums across the board, experts say, as the law continues its troubled rollout.
Morningstar insurance analyst Vishnu Lekraj says premiums will likely increase over the next several years due to “adverse selection issues.”
“If young people do not sign up for these plans, premiums will have to go up because the risk pool becomes more risky,” Lekraj says. “But because of the way the ACA is written, there is a cap in place by the government on what percent of household income can be spent on premiums. If a household goes over those limits, that is where subsidies kick in.”
Subsidies are currently available for those making up to 400% of the federal poverty level, about $45,000 for an individual and $94,000 for a family of four.