Obamacare’s Failure To Enroll the Young Gets Health Insurers Downgraded by Moody’s

The viability of the Affordable Care
Act—Obamacare—is premised on getting young, healthy people to pay
way too much for their health care in order to subsidize coverage
for older, sicker people. Unfortunately for the scheme, young,
healthy people have turned out to be less gullible than
anticipated. They’re enrolling in underwhelming numbers after
discovering that it’s
cheaper to pay a penalty than to get milked by the government.
The likely result is financial woes for health insurers tasked with
making Obamacare’s impossible numbers work—which has led to a
credit downgrade by Moody’s.

According to a Moody’s
press release:

Uncertainty over the demographics of those enrolling in
individual products through the exchanges is a key factor in
Moody’s outlook change, says the rating agency. Enrollment
statistics show that only 24% of enrollees so far are aged 18-34, a
critical group in ensuring that lower claim costs subsidize the
higher claim costs of less healthy, older individuals. This is well
short of the original 40% target based on the proportion of
eligible people in this cohort, says Moody’s.

The ratings agency also cited regulatory uncertainty and tax
issues among the reasons it “changed the outlook for US health
insurers to negative from stable.” The overall effect is a vote of
no confidence in the economic sustainability of the Affordable Care
Act, and in the industry which once thought it hit the jackpot with
a law that ordered Americans to buy its products, but now discovers
(as so many have before) that government is an unreliable business
partner.

Earlier this week, the conservative American Action Forum
released a
report which found “that after accounting for subsidies and
cost-sharing, 6 out of 7 uninsured, young adult households will
find it financially advantageous to forego health coverage, and
instead pay the mandate penalty and cover their own health care
costs. As the penalty increases, that number will drop from 86
percent in 2014 to 71 percent in 2015 and 62 percent in 2016,
before ticking back up to 66 percent in 2019.”

Economic incentives. So politically inconvenient.