Friday, June 8, 2012

More on Under-26 Insurance Mandate

As a follow-up to Sen. DeMint’s Member Viewpoint yesterday on government mandates for health insurance policies to cover dependent children, the liberal Commonwealth Fund is out this morning with a study regarding the issue.  The study concludes that, while the under-26 coverage mandate increased the number of covered adult children by up to 2.5 million, a total of 6.6 million youths took advantage of the under-26 mandate included in the health care law to remain on their parents’ policies.  Related points from the study:

  • If accurate, the study findings would mean that 4.1 million youths, or more than 60% of those taking advantage of the under-26 mandate, likely had access to other forms of health coverage – for instance, from their own employer,* from a student health plan, or from an individually-purchased plan – yet chose instead to remain on their parents’ health insurance.
  • The benefits of the under-26 mandate have disproportionately accrued to affluent and wealthy families.  The study found that nearly seven in ten (69%) of young adults in families with incomes over four times the federal poverty level – over $92,000 for a family of four – stayed on their parents’ health insurance.  Conversely, only one-sixth (17%) of young adults in families with incomes under 133% of poverty – just over $30,000 per year for a family of four – utilized the under-26 mandate to remain on their parents’ insurance.

Some may argue that the study illustrates several perverse incentives resulting from the new federal mandate:

  1. The high number of young adults turning down other forms of coverage suggests a high rate of crowd-out – youths declining to seek their own health coverage to stay on their parents’ plans for “free.”
  2. The costs of this “free” insurance will be socialized across the health insurance system – but in a non-transparent manner.  The Administration claimed that the under-26 mandate would affect 2.37 million young adults, and raise premiums by about one percent (some studies have concluded the Administration under-estimated the cost impact).  However, if the mandate actually affected 6.6 million young adults, the premium impact would almost certainly be higher.
  3. The under-26 mandate may also be exacerbating premium increases among student health plans.  Other Obamacare mandates taking effect this fall are raising premiums, by as much as 350% in some cases.  Some news reports have indicated that, rather than pay the higher premiums for student insurance, students who have access to coverage through their parents will choose that option instead.  However, as noted above, the under-26 mandate is disproportionately helping affluent families – meaning that only students from lower-income households without access to a parental health plan may be forced to pay these higher premiums.

Finally, even the Commonwealth study admits that the poor economy is a major reason why many young people do not have insurance coverage:

The lingering softness in the U.S. economy has likely contributed to high rates of reported gaps in health insurance among young adults in the survey.  More than one of 10 (11%) 19-to-29-year-olds in the survey said they were unemployed but looking for work.  Of those, 62 percent had experienced a time without health insurance in the past year compared with 32 percent of those who were employed full time and 38 percent of those who were employed part time.

The study further found that fully 9.6 million Americans aged 19 to 29 lost their jobs between November 2009 and November 2011, and of those who lost jobs providing health insurance, more than half (52%) became uninsured.

It is this last conclusion – the devastating damage this Administration’s failed economic policies have wreaked – that should remain the focus of policy-makers going forward.  Some would argue that maintaining mandates that have encouraged millions of young Americans to drop their existing coverage to obtain “free” insurance through their parents is inconsistent with this objective.  During the SCHIP debate in 2007-08, conservatives opposed using taxpayer funds to expand a government program in a way that would allow middle-income families to drop their current insurance and obtain government-run coverage instead.  By this same logic, conservatives should be concerned about government mandates on the private sector that have had much the same effect.

 

* The law does allow so-called “grandfathered” (i.e., pre-Obamacare) employer plans to exclude young adults from their parents’ health plans through 2014, if the young adult in question has access to employer-provided health insurance himself.  However, as even the Administration’s own regulations admit that most employer plans have lost, or will soon lose, grandfathered health status, this option is not available to many employers.