Often, when one of my kids or a young person at my office asks me a question, I start the answer by saying, “Well, first let’s remember that you are an idiot…”
Now, let me explain why I do that. It’s not that my children or employees are idiots. Not at all. I do it because, when trying to explain something to young people, sometimes we have to hit them hard to show their ignorance so that they will listen to the answer more closely. Think of it as an act of mercy. I’m trying to cut out the need for them to learn something “the hard way.”
Unfortunately, when it comes to healthcare young people knew enough to make good choices. And that’s the problem. The Affordable Care Act (ACA) – a.k.a. ObamaCare – needs young people to actually be idiots in a sense. Here is a case where young people will pay the price for not being dumb enough…
You see, young workers today make rational decisions about their finances. Given the struggles of everyday life, including the difficult employment market, the low wage environment and the rising cost of living, many of our youth have chosen NOT to purchase health insurance.
And why should they?
Particularly for young men, the cost/benefit analysis clearly shows that paying for doctor’s visits for the occasional ailment is much cheaper than carrying insurance.
After all, being somewhat invincible is one of the advantages of youth. Of course, that advantage means nothing if a person is facing huge medical bills after an auto accident or severe affliction… but the chances of such an event occurring are quite small.
The decision not to carry health insurance is anathema to people like me, who are married with children. We know well the cost of broken arms, sports physicals, braces and a host of other things that come along with having a family.
Of course, that’s on top of the normal list of ailments that are part of getting older. So we – the older group of married-with-children people – typically do what we can to keep our families insured.
And there’s the problem.
Young People Have Turned Health Insurance On Its Head
The people who need insurance – typically the highest users of health services – are the ones most likely to purchase health insurance. The young, who are the least likely to use health services, are also the least likely to carry it.
If the only people who use a service are the ones who buy “insurance” against it, then it does not function like insurance at all.
The whole notion of insurance is that many people pay in but only a few make a claim. In the process, those who end up making a claim pay less for their premiums than they would have paid out of pocket for the claim.
Those who do not make a claim have, in a sense, lost as they paid money into a system they never used.
If only people who will make a claim are the ones who actually buy insurance, then it is no longer insurance… it’s simply a pre-paid system, which is much more expensive.
Our young workers today recognize this situation. They see they would potentially pay thousands into a program they would never use. So they chose not to lose.
The Supreme Court decision on July 29 to uphold President Obama’s healthcare law means that no one, including young workers, can make the choice to opt out of health insurance anymore. The reason for this requirement is not to lower the cost of healthcare, it is instead to raise a bigger pool of funds from which to pay healthcare costs… thereby serving to stem the rise of the cost of health insurance itself.
How is the pool increased? By having people who will not use the insurance buy the insurance anyway.
For those of us who are older with children, we should see our health insurance costs moderate a bit. This is done by forcibly taking money from younger people and applying it to our health insurance costs.
This is not a political conversation, nor a judgment on healthcare. This is simply an observation that a major piece of the ACA is to require people – typically young, single and male – to put money into a system they will never use so that others will benefit.
And as I noted above, this comes while the employment picture is bleak, wages are compressed and the general economy is fragile. ObamaCare is another expense stacked onto the exact group we’re hoping will borrow and spend more to lead us out of the economic wilderness.
Hmmm. Seems to me we’re shooting ourselves in the foot.
Wealth transfer programs like this are artificially changing consumer finances… and it’s one more reason we’re doubtful that a meaningful recovery is on the horizon.
That’s why we are keeping a lot of our Boom & Bust positions on the short side of the market or in income-producing assets so we can ride out the storms ahead.
Ahead of the Curve with Adam O’Dell
Obama says: “Buy!”
Major policy changes have the unique ability to unsettle whole industries. The healthcare overhaul will be no different.