I’ve railed for awhile re: one of ObamaCare’s most popular benefits … forcing insurance companies to allow “adult-children” to be appended to their parents’ health insurance policies.
I wouldn’t mind if they – or more accurately, their parents – were paying for the coverage … but they typically aren’t
All other folks are being forced to pay higher premiums to cover the added costs.
Let me explain the economics and tie it to another likely ObamaCare “glitch” …
I’ve always scratched my head re: the premiums paid for my employer-subsidized health insurance.
Typically, there are only 4 premium categories:
- Employee only
- Employee plus spouse (or partner)
- Employee plus one or more children
- Family: Employee plus spouse (or partner) plus one or more children
Note that for premium categories #3 and #4 there is an arbitrage opportunity of sorts.
In essence, premiums are collected for the first child … but all additional children beyond the first ride free.
So, a family with one kid pays the same as a family with 10 kids.
That never made sense to me.
Always thought that there should be a premium attached to each kid.
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What’s that got to do with “adult-children”?
Well, adult-children up to age 26 can be added to their parents’ policies like any other child.
If the parent is already on the “family plan” – i.e. at least one other child besides the adult-child is on the policy – then the adult-child rides free.
Good deal, right?
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And, here’s the broader implication for ObamaCare.
ObamaCare is counting on a lot of healthy young Americans to buy insurance through the exchanges to subsidize the poor, the sick and the old people.
But, a large swath of that target population is removed from the exchanges’ mix because they are adult-children who get appended to their parents’ policies.
Why would anybody buy insurance via the ObamaCare exchanges when they can get free coverage by sucking up their pride and hooking to mommy & daddy’s policy?
Simple, rational economics says to hop on and ride free.
Or, why pay your part of an employer provided health insurance plan if you can ride on mommy & daddy’s policy.
Again, it’s simple, rational economics.
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It’ll be interesting to see if these free-riders were factored into the ObamaCare financial projections (I betting the under on that one) … and how much they’ll impact the program’s overall economics.
When you outboard some of the most desirable customers, it’s called “adverse selection” … and that’s a bad thing.
More on adverse selection in later posts …
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October 22, 2013 at 12:09 pm |
Children up to 26 can be carried on the parents insurance now. This change pre dates the affordable care act. I seriously doubt that an older child who as health insurance through a job will want to ride a parents policy. But that aside, young healthy people are a positive from an adverse selection process. At my last job, we added the up to 26’s and the net cost was close to zero because of he very low claim rate.