The final hours before Monday’s midnight deadline to sign up for health insurance under the Affordable Care Act were predictably hectic: there was a surge of people trying to enroll at the last minute, and Healthcare.gov went down twice under the pressure. This seems like good news—more than six million people have already signed up for insurance, and with daily enrollment rising over the past few days, a total of seven million (which was the original target for the program) is not out of reach. Still, the question that has obsessed everyone for weeks remains: What are the so-called “young invincibles” doing? All month, the Obama Administration has had representatives giving speeches on college campuses across the country, and state health-insurance exchanges have been running ad campaigns targeted at young Americans, in an effort to get uninsured people between the ages of eighteen and thirty-four to enroll in Obamacare. The Affordable Care Act’s critics have seized on the relatively low rate of enrollment among young people—as of last month, fewer than thirty per cent of those who had signed up for a plan were under the age of thirty-five—as evidence that the Affordable Care Act is doomed.
The obsession with the young invincibles is easy to understand. The economics of insurance depends on the pooling of risk, so for Obamacare to work on a national level you need healthy people (who will pay premiums but not rack up a lot in health-care costs) to enroll along with sicker people (whose health-care costs will more likely dwarf the premiums they pay). Since young people are typically healthier, getting them in the risk pool will help hold over-all costs down. But young people also know that they are healthier—and consider themselves invincible, even though they’re not—so they may prefer to take their chances and not pay for insurance. The fear is that if enough young people don’t enroll, the program is headed for what economists call a “death spiral”: health-care costs will be too high relative to premiums, which will force insurance companies to raise premiums, which will make young people even less likely to sign up, raising costs even more, and so on, until the whole thing implodes.
It’s a grim prospect, but there isn’t much reason to think that we’re headed for it. Getting more young people to enroll in Obamacare would be a good thing for the program (and for them—a 2011 Commonwealth Fund survey found that sixty per cent of uninsured young adults had foregone care because of costs, and half reported medical debt or trouble paying medical bills). But the fate of the law doesn’t depend on the young invincibles. As long as enough reasonably healthy people, regardless of age, sign up for health insurance, the imagined death spiral will never materialize. Everyone may be obsessed with what twenty-four-year-olds are doing, but having healthy forty-year-olds enroll in Obamacare could be just as important for the health of the program.
This is because the A.C.A., although it prohibits insurers from charging people more based on their health or preëxisting conditions, does allow insurers to charge people more based on their age. So while young people can be expected to rack up lower health-care costs, they’re also going to be paying less in premiums—ones they may consider a good bet. Middle-aged people, by contrast, may be more expensive to care for, but they’re also being charged considerably more for their policies. So healthy middle-aged people help balance out the risk pool just as younger people would.
The simple point is that the key to Obamacare’s success isn’t getting young people to sign up. It’s getting healthy people to sign up.
Young people are typically healthier as a group. But the reality is that, in any given year, most Americans are pretty healthy (at least in the sense that they don’t have a lot of medical bills). Health-care costs in the U.S. are highly concentrated: ten per cent of the population is typically responsible for about two-thirds of all health-care spending, and most of those people are over the age of fifty-five. And, as a 2005 study found, age matters much less for health-care costs than do risk factors like smoking, lack of exercise, and diabetes. People between the ages of thirty-five and fifty do, obviously, spend more on health care than people under the age of thirty-five. But the gap is not as wide as you might imagine. A December report from the Kaiser Foundation projected that, even in a worst-case scenario, in which young people make up just twenty-five per cent of enrollees, the costs of Obamacare would be just 2.4 per cent higher than premium revenues. As a result, premiums would rise in 2015 to make up the difference, but nowhere near enough to start a death spiral.
This doesn’t mean that the robustness of Obamacare is guaranteed. It’s possible, as the program’s skeptics argue, that healthy middle-aged people, as well as the young invincibles, aren’t going to sign up for insurance they don’t think they’ll use, and that, as a result, the over-all risk pool will end up including too many sick people. But past experience suggests that this is unlikely. Americans whose employers offer health insurance can decline to be covered, but the vast majority sign up for it. And in other insurance markets, low-risk people still want to be insured—studies suggest that people who have fire insurance, for instance, actually have fewer fire accidents than people who don’t. Even healthy people, in other words, want protection from risk. The question for Obamacare is how many of them are willing to pay for it.
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Above: Waiting in line at a health-insurance enrollment event in Commerce, California, on March 31, 2014. Photograph by Lucy Nicholson/Reuters.
