Wednesday, March 15, 2017

The Dustin Plan: a very easy and very stupid way to reduce average premiums

There is a very easy and very stupid way to dramatically reduce premiums in the non-group market. I call it the Dustin Plan. If you make it illegal for anyone to buy individual insurance except for people named Dustin who are under the age of 30, average premiums in the non-group market would be cut by roughly 70%. Young people named Dustin are very healthy, so very cheap to insure. Of course, this is terrible for millions of people not named Dustin.

While not as dramatic, the House Republican health care plan basically includes a version of the Dustin Plan. The Republicans are trying to highlight this one piece of "good news" in their otherwise terrible CBO score, but it is not good news.
First, the mix of people enrolled in coverage obtained in the nongroup market is anticipated to be younger, on average, than the mix under current law. Second, premiums, on average, are estimated to fall because of the elimination of actuarial value requirements, which would result in plans that cover a lower share of health care costs, on average. Third, reinsurance programs supported by the Patient and State Stability Fund are estimated to reduce premiums. If those funds were devoted to other purposes, then premium reductions would be smaller. By 2026, average premiums for single policyholders in the nongroup market under the legislation would be roughly 10 percent lower than the estimates under current law.
The Republican plan will bring average premiums down by making insurance so expensive for many older Americans in the individual market that they would be forced to go uninsured, leaving behind only young people in the risk pool. It would, in fact, improve life for thousands of young Dustins, but by making insurance out of reach for millions of people who really need care.

It is a reminder that the focus placed on many metrics in the health care debate, such as average premiums or even total number of people with "insurance," is often misguided or misleading. The real question is how many people are able to get care when they need it and be able to afford it.

1 comment:

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