The Unholy Trilogy For Insurance Profits: Individual Mandate, Broad Age Rating, And Hardship Exemption
A few on the left are trying to defend the individual mandate, but the individual mandate is only defensible as long as the government, in exchange, guaranties everyone access to quality, affordable health insurance. The Senate bill completely fails at this, and drafters were even forced to admit as much by including a “hardship” exemption. (If the bill confirms that it will not make insurance affordable for all Americans, it has no right to demand everyone buy insurance.) Inclusions of this hardship waiver, the individual mandate, and the broad age rating of 1:3 creates an unholy combination to maintain the profitability of health insurance companies.
The individual mandate forces Americans to buy health insurance or pay a fine. Anyone who can’t find insurance that costs less than 8% of their income can get a hardship exemption from the individual mandate. The bill also has an age rating rule that would allow an insurance company to charge older Americans three times as much as younger Americans. How these pieces all fit together is a recipe for large profits for insurance companies.
Because of the age rating rules, health insurance would be more “affordable” for younger (more profitable) Americans. Young people would even be allowed to buy special, super-junk, “catastrophic” plans only for individuals under 30. This is designed to make sure insurance companies can milk the money from the young and healthy without paying for medical treatments. The young are unlikely to get a hardship waiver from the individual mandate.
The health insurance companies will charge older (less profitable) Americans three times as much as the young. They will also have huge latitude in designing their policies to make sure they are very unappealing for older Americans. As a result, many older Americans will be priced out of the system and will choose to use the hardship waiver or just pay the individual mandate fine.
Presto! You have created a dream recipe for health insurance profits! The government forces young, healthy (and very profitable) Americans to buy junk health insurance. Yet the government will let the insurance companies charge older (less profitable) Americans much more, design their policies to not work well for older Americans, and, as a result, price them out of the system. Forcing the young to buy coverage with huge government subsidies, but having a way to price the old out of the market, is in fact the health insurance companies’ dream.