CHICAGO – Under the health care overhaul, young adults who buy their own insurance will carry a heavier burden of the medical costs of older Americans — a shift expected to raise insurance premiums for young people when the plan takes full effect.
Beginning in 2014, most Americans will be required to buy insurance or pay a tax penalty. That's when premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press. The analysis did not factor in tax credits to help offset the increase.
The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years.
Consider 24-year-old Nils Higdon. The self-employed percussionist and part-time teacher in Chicago pays $140 each month for health insurance. But he's healthy and so far hasn't needed it.
The law relies on Higdon and other young adults to shoulder more of the financial load in new health insurance risk pools. So under the new system, Higdon could expect to pay $300 to $500 a year more. Depending on his income, he might also qualify for tax credits.
At issue is the insurance industry's practice of charging more for older customers, who are the costliest to insure. The new law restricts how much insurers can raise premium costs based on age alone.
Insurers typically charge six or seven times as much to older customers as to younger ones in states with no restrictions. The new law limits the ratio to 3-to-1, meaning a 50-year-old could be charged only three times as much as a 20-year-old.
The rest will be shouldered by young people in the form of higher premiums.
Higdon wonders how his peers, already scrambling to start careers during a recession, will react to paying more so older people can get cheaper coverage.
"I suppose it all depends on how much more people in my situation, who are already struggling for coverage, are expected to pay," Higdon says. He'd prefer a single-payer health care system and calls age-based premiums part of the "broken morality" of for-profit health care.
To be sure, there are benefits that balance some of the downsides for young people:
• In roughly six months, many young adults up to age 26 should be eligible for coverage under their parents' insurance — if their parents have insurance that provides dependent coverage.
• Tax credits will be available for individuals making up to four times the federal poverty level, $43,320 for a single person. The credits will vary based on income and premiums costs.
• Low-income singles without children will be covered for the first time by Medicaid, which some estimate will insure 9 million more young adults.
But on average, people younger than 35 who are buying their own insurance on the individual market would pay $42 a month more, according to an analysis by Rand Health, a research division of the nonpartisan Rand Corp.
The analysis, conducted for The Associated Press, examined the effect of the law's limits on age-based pricing, not other ways the legislation might affect premiums, said Elizabeth McGlynn of Rand Health.
Jim O'Connor, an actuary with the independent consulting firm Milliman Inc., came up with similar estimates of 10 to 30 percent increases for young males, averaging about 15 percent.
"Young males will be hit the hardest," O'Connor says, because they have lower health care costs than young females and older people who go to doctors more often and use more medical services.
Predicting exactly how much any individual's insurance premium would rise or fall is impossible, experts say, because so much is changing at once. But it is possible to isolate the effect of the law's limits on age-based pricing.
Some groups predict even higher increases in premiums for younger individuals — as much as 50 percent, says Landon Gibbs of ShoutAmerica, a Tennessee-based nonprofit aimed at mobilizing young people on health care issues, particularly rising costs.
Gibbs, 27, a former White House aide under President George W. Bush, founded the bipartisan group with former hospital chain executive Clayton McWhorter, now chairman of a private equity firm. McWhorter finances the organization. The group did not oppose health care reform, but stressed issues like how health care inflation threatens the future of Medicare.
"We don't want to make this a generational war, but we want to make sure young adults are informed," Gibbs says.
Young people who supported Barack Obama in 2008 may come to resent how health care reform will affect them, Gibbs and others say. Recent polls show support among young voters eroding since they helped elect Obama president.
Jim Schreiber, 24, was once an Obama supporter but now isn't so sure. The Chicagoan works in a law firm and has his own tea importing business.
He pays $120 a month for health insurance, "probably pure profit for my insurance company," he says. Without a powerhouse lobbying group, like AARP for older adults, young adults' voices have been muted, he says. He's been discouraged by the health care debate.
"It has made me disillusioned with the Democrats," he said.
Ari Matusiak, 33, a Georgetown University law student, founded Young Invincibles with other Obama campaign volunteers to rally youth support for health care overhaul.
Age rating fails as a wedge issue because the pluses of the new law outweigh the minuses for young adults, Matusiak says.
"And we're not going to be 26, 27, 33 forever," Matusiak says. "Guess what? We're going to be in a different demographic soon enough."
Nationally representative surveys for the Kaiser Family Foundation have consistently found that young adults are more likely than senior citizens to say they would be willing to pay more so that more Americans could be insured. But whether that generosity will endure isn't clear.
"The government approach of — we'll just make someone get health care and pay for someone else — definitely NOT what I want," says Melissa Kaupke, 28, who is uninsured and works from her Nashville home.
In Chicago, Higdon says he supports the principles of the health care overhaul, even if it means he will pay more as a young man to smooth out premium costs for everyone.
"Hopefully I'll be old someday, barring some catastrophic event. And the likelihood of me being old is less if I don't have a good health plan."