In the next few months, news on the Affordable Healthcare Act will begin to increase as we approach Open Enrollment in October. Most Americans have no idea what it means or how it will affect them. Some people think they won’t bother and just take the penalty. What we know as of now, is that baby boomers are going to need 20 year olds to buy individual insurance and not take that penalty, which will be $95 or 1% of your income, for a single person. That penalty increases over time. At year 3 of not enrolling, the penalty will be 2.5% of your income.
If younger, healthy Americans aren’t in the market, the risk pool will be made up of older, and presumably sicker people. That is one major factor that will drive up costs for everyone. 11.2 million people between the ages of 20 and 29 are uninsured. There will surely be a huge push in advertisement to the younger crowd to get them on board. No one wants adverse selection. The older and sicker Americans need those healthy whippersnappers to offset the balance.
Pre-retirees will probably be the biggest benefactors of the AHCA. Roughly 5.5 million people aged 55 to 64 were uninsured as of 2010. Americans who have not yet reached 65 and aren’t covered under a group work plan usually have trouble finding individual policies based on their age and pre-existing conditions. Starting next year, insurance companies will not be able to deny coverage or rate up based on pre-existing conditions or gender. And, the amount insurance companies charge based on age will change as well. Currently the ratio is 5-to-1 on a 21-year-old male and a 64-year-old male. The new law will change that ratio to 3-to-1.