Dying of old age

WASHINGTON—Name just about any common problem with Obamacare and Jeremy Oosterhouse has experienced it.

Canceled healthcare coverage? Check.

Facing higher premiums? Check.

Can’t get HealthCare.gov to work? Check.

Oosterhouse, a youth pastor in Palos Heights, Ill., is losing his individual Blue Cross Blue Shield insurance plan at the end of the year—even though he likes it. In lieu of an operational government healthcare exchange website, the husband and father of two set out on his own to research the available insurance options. The news wasn’t good: A plan with similar coverage and higher premium takes the family deductible from $2,500 to $4,500, and if he wants a premium close to what he’s paying now, the deductible skyrockets to $12,500.

“When President Obama said if you like your plan you can keep it, I believed him,” Oosterhouse told me.

It’s no accident that Oosterhouse, 29, is facing higher premiums: Costs are going up for most ages, but young adults, and especially males, are being hit the hardest. In the 43 states where 2014 premiums are rising, a 27-year-old faces an average premium increase of 72 percent, compared to a 44 percent average increase for a 50-year-old, according to Heritage Foundation data. That means Americans with modest incomes, growing families, and mounds of college debt are bearing the brunt of the president’s healthcare overhaul.

The Patient Protection and Affordable Care Act (ACA) hinges on younger, healthier people enrolling to help subsidize more expensive care for older, sicklier Americans. That concept may help balance out the risk pool, but health doesn’t equate to wealth for someone like Oosterhouse, who declined his employer-sponsored insurance and purchased an individual plan to save $700 a month. He and his wife, Rachel, have always made health insurance a priority, but at a high price: They rarely go on vacations, eat at restaurants, or watch movies in the theater, and they grow their own vegetables to save on groceries. “We turn down our heat at night,” he said. “We’ve forgone savings.”

Those measures may not be enough to survive financially under the new rules—which will likely keep Oosterhouse from qualifying for a subsidy because he declines his employer-sponsored insurance option.

Three big sources of the cost increase include new taxes, mandating unnecessary coverage, and the so-called “community rating,” which prohibits insurance companies from charging older adults more than three times as much as young adults. Joe Antos, a health policy analyst at the American Enterprise Institute (AEI), told me the natural difference in health costs between older and younger people is between 6-to-1 and 8-to-1, not the artificial 3-to-1 difference mandated in the law.

Early returns indicate young people are avoiding the exchanges: Those who managed to sign up in the law’s first month skewed much older than the desired average age of about 40. The Wall Street Journal reported that in Connecticut and Kentucky—where state-run exchanges helped more than 8,000 people sign up in October—the average enrollee was 55 years old. The Obama administration said it expects young adults to wait until the last minute to sign up, but several experts told me if that doesn’t happen, it could result in a death spiral for the law.

“If it turns out the people who enroll in insurance are the people who are already really sick and the people who don’t enroll are basically healthy, then that’s going to drive up premiums and will basically unravel the entire plan,” said Daniel Sledge, a health policy professor at the University of Texas at Arlington.

Several young adults I spoke with said they gave up after trying without success to use the federal health exchange, including Melody DuVal, 30, a graphic designer in Goshen, Ind. DuVal, who hasn’t had health insurance in seven years, said she’s continued going to the doctor while she’s uninsured and is pleased with the overall care she has received. She’s had two minor surgeries this year and negotiated with her providers to cut between 30 and 83 percent from her medical bills.

DuVal had planned to use a raise this year to help cover the cost of health insurance, but the extra cash disappeared when the payroll tax increased from 4.2 percent to 6.2 percent as part of the fiscal cliff deal in January. She said she could afford a plan with a $50 to $70 monthly premium but estimates she’ll have to pay about $300—even with a subsidy.

“My take-home is a little over $2,000 a month, so $300 out of that is a huge chunk,” DuVal said, noting she can’t stop paying for her car, housing, or school loans, so she may have to find ways to cut down on her grocery bill. “[It’s] frustrating when you’re talking about giving up healthier food so you can have mandatory health insurance. Fruits and vegetables are more expensive than processed cheese and bread.”

Some analysts have attributed young adults’ low enrollment numbers to the faulty website or youthful optimism that they won’t need insurance. Brian Mueller, 28, an adjunct music professor in Ohio, said the problem is having to pay for coverage he doesn’t need and can’t afford. “I know that I probably won’t need my health insurance, but I still like to have it,” he said. “I feel like they’re trying to sell me a luxury car when all I need is a commuter car to get me from point A to point B.”

Mueller’s job, which continues on a per-semester basis, doesn’t include insurance, but it has given him the financial flexibility to buy an individual policy. Blue Cross Blue Shield notified him that his policy will be canceled next year—and he found out his doctor will no longer take his insurance—so he’s contemplating the fine. “If the penalty is only $95 a year, I’d have to consider it,” Mueller said. “I may not have an option.”

Many people are considering paying the fine in 2014, but few will dish out only $95. The law calls for a $95 penalty or 1 percent of household income, whichever is greater—meaning the fine becomes $650 for a household income of $65,000. The fines will sharply increase in 2015 and 2016 (see graphic).

While Washington is in an uproar over the unworkable website, viable ideas to improve the law are scarce. Several health policy experts told me there is a shortage of long-term, creative thinking, because both sides have been gridlocked in the political battle over the law’s existence. Yet even if Republicans were to win control of the Senate next year, Obama doesn’t leave office until January 2017, so the law is likely here to stay.

Don Taylor, a public policy professor at Duke University, told me at some point Republicans “will say, ‘Gosh, even if we’re against the ACA, we’ve got to address this.’” Taylor cited, among other things, the provision that allows 26-year-olds to stay on their parents’ plans as something that will likely have to change. “In the long term, it doesn’t make that much sense to call a 25-year-old a kid,” he said. “That redefined young adults as potential dependents.”

AEI’s Joe Antos believes a needed change is the 15 to 20 percent cap on administrative costs for insurance companies (a few states have already received waivers). Since coordinating and managing care is considered an administrative cost, he said the law encourages insurers to cut corners where it hurts patients most.

Two other possible ideas: lower the coverage requirements and allow the community rating to be 6-to-1—or whatever the market dictates. Permitting young adults to sign up for only catastrophic coverage would encourage more participation, and allowing appropriate premium disparity would shift the burden of cost away from young people with typically lower incomes and toward those with established careers.

Antos predicted Obama will allow tweaks before the 2014 elections—perhaps waiving the fine for not having insurance—but major changes may have to wait until 2017. He said the next administration, regardless of which party wins the White House, will be forced to deal with the issues.

For now, those whom the law was intended to help, such as Melody DuVal, see Obamacare doing more harm than good: “It’s not helping me, [and] it’s not helping any of my friends.”

The week after I spoke with Jeremy Oosterhouse in early November, he emailed to say he and his wife are seriously considering Medi-Share, one of the three main medical bill-sharing groups that have been growing in a loophole of the ACA. Oosterhouse said even if he qualified for a subsidy, he could save $125 per month ($300 without a subsidy) for a plan with a deductible that is $2,000 lower than what he can get through the exchange.

“As Christians, there is something of value to supporting others with medical costs and trusting in God to provide for our needs,” he said. “That’s money we can continue to put toward retirement, [2-year-old daughter] Leah’s future Christian school costs, or even allow Rachel to continue staying at home with the kids.”