Obamacare

Under the Obamacare plan, signed into law on March 23, students seem to be getting a pretty good deal.

We get to stay on our parents’ health insurance until age 26. That means we get covered without having to comply with the mandate to buy health insurance on our own or waiting to get a job that provides it for us. Sound awesome? Think again.

It may seem like we’re getting something for nothing, but there is no such thing as a free lunch; the money must be coming from somewhere. In the short term, it’s coming from our parents’ paychecks in the form of higher health insurance costs. In the long run, as the price of care rises, those costs will be passed onto us when we are required to purchase separate coverage.

Insurance is supposed to be for emergencies, not for routine costs. Think of your car insurance: you use it for when you get into an accident, not for when you fill up your gas tank. Health insurance should be the same way, particularly for young people. Our demographic tends to be healthier, and needs less of the kind of care insurance is most useful for. It should come as no surprise, then, that according to the Census Bureau, 35% of 18-30 year-olds are uninsured. It doesn’t seem worth it, so many people in our age group don’t purchase it when given the choice!

But if we can get insurance for free from our parents, why not take it? As the RAND health insurance experiment showed, increased coverage led only to higher costs, not improved health outcomes. Being insured insulates you from your costs, so you’re more likely to consume medical care. Got a cough? You’re way more likely to head to the doctor if all you’ve got to shell out for your co-pay rather than the entire doctor’s fee. In the long run, this increased demand without much direct responsibility for payment leads to higher and higher health care costs.

These rising costs will be largely borne by young adults. Under the new law, insurance companies must use “community rating.” That means that they can’t charge their sickest customers more than about three times their healthiest. When we are no longer covered by our parents’ plans, we will be required to subsidize the cost of the sickest patients out of our earnings. As the Cato Institute explained, “community rating and guaranteed issue create a price control scheme where healthy 25-year-olds pay the same premiums as 55-year-old smokers.” Why should we be penalized for the unhealthy choices of others?

The AP has reported that starting in 2014, “premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average.” When you thought you’d be getting a free ride, you should have thought, again. When the time comes to choose, paying the penalty fee is starting to look like a much better deal than signing yourself onto runaway health insurance premiums and more expensive care for all.