Despite President Obama’s re-election, Republicans haven’t given up on resisting the implementation of Obamacare. They’ve proposed all sorts of ideas for opposing the law—some sound, some less so—but they’ve ignored one of the costliest provisions of Obamacare, one that will drastically increase the price of health insurance for young people. It’s called “community rating,” and it’s possibly the aspect of Obamacare that will do the most damage to the private insurance market.
Here’s how it works. Young people are, on average, much healthier than older people, and consume less health care services. Ordinarily, therefore, young people are much cheaper to insure than older people. Under free-market conditions—what insurance pros call experience rating—the typical 18-year-old costs one-sixth what it costs to insure the typical 64-year-old.
But Obamacare, in a sop to the AARP, requires that insurers only charge three times as much to their costliest beneficiaries what they charge to their least-costly ones. As the illustration below shows, this increases the cost of insurance for the young by 75 percent, while offering only a modest 13 percent subsidy to older Americans.