Obamacare can limit a health insurance policy’s value

Alex Adrianson documents for the Heritage Foundation’s “InsiderOnline” blog how mandates associated with the Affordable Care Act can cause significant reductions in the value of a health insurance policy.

Those who get subsidies for the health insurance ObamaCare forces them to buy aren’t necessarily better off than they were without ObamaCare. It could easily be the case, explains David Henderson, that the value of their health insurance plan is worth far less than the subsidized price a person has to pay:

Defenders of Obamacare often claim that the purpose of insurance is to pool risks so that a low-risk purchaser will pay to subsidize a high-risk purchaser. But that’s not true. Insurance works by pooling like risks. That’s why young single men pay more for auto insurance and old men pay more for life insurance.

Similarly, under Obamacare, insurers cannot legally set insurance premiums for young people that are less than a third of what they charge the elderly. This is in spite of the fact that covered expenses for the elderly are typically much more than three times the covered expenses for the young. So, just as in the case of pre-existing conditions, part of the family’s insurance premium covers expenses for a higher-risk group. And the people getting the government subsidy are likely to be disproportionately young because younger people have, on average, lower incomes than older people.

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