In a recent article, health economist Uwe Reinhardt provided a comprehensive critique of the growing effort to depict the Affordable Care Act as a “War on the Young”. Because the ACA places limits on the ability of insurers to adjust premiums for the expected costs of a person seeking health insurance, there is a redistribution of resources from the young (who typically use less care) to the old (who use more). Younger people will pay higher premiums because their risks are pooled with older people, rather than rated and charged at their lower expected costs. It would be more accurate, of course, to say that this redistribution is from the healthy to the sick, but that’s not the way it has been presented by those who raise the issue.
While Reinhardt covers many important points, including the similar issues raised by age and gender (should women be charged more because of child bearing costs or should men share in the burden of that cost?) and the fact that this type of community rating is common in employer insurance, I want to emphasize the redistributive aspects described above.
Redistribution is a fundamental element of almost any type of insurance, and occurs in many forms. Viewed on a lifespan or lifecourse perspective, insurance redistributes income from good times to bad. Life insurance allows me to transfer income from when I’m alive to my surviving family members, if I die. Health insurance allows me to transfer income from when I’m working and healthy to periods of my life when I am sick, face higher than expected medical expenses and possibly must reduce or stop work. Insurance is, effectively and literally, redistributive.
Even without government intervention, however, insurance not only allows individuals to transfer income across their lifespan, it redistributes income from one person to another. If I die after just a few premium payments, my life insurer has to use other peoples’ premiums and the returns they’ve earned on those to pay the death benefit. If I get sick soon after purchasing health insurance, my medical costs are paid by others. All insurance, private and public, pools funds and redistributes them. Few people get back exactly what they pay in–but we all get the security that if we get sick or if we die, there will be funds available to cushion that impact.
So, my perspective is that this notion that Obamacare is a “war on the young” fails to grapple with the essential redistributive aspect of all insurance. Transferring income, not only across your own lifespan, but also across people, is the very purpose of insurance. Theologian Francois Fenelon wrote: “All wars are civil wars, because all men are brothers.” That may be more true in the health insurance “war on the young” than in any other war.
And if Obamacare is a war on the young, we might want to remember that the biggest drop in being uninsured since the law was passed has been among young consumers, as more than 3 million are estimated to have gained coverage. If this is a war on the young, it may be one that ends up saving lots of young lives.