Rodney Johnson | Thursday, August 29, 2013 >>

What a relief.

Health-insurance premiums for this year were just tallied, and they only went up by 4%. Luckily, wages went up by… oh, scratch that. Wages didn’t go up. I guess this is another reason why we need affordable care, which is how we got the Affordable Care Act (ACA).

The problem is that many people aren’t particularly happy with the ACA, and it’s not even out yet.

It’s likely that many of the problems with the law and the programs it requires, like state-run or federally-run health exchanges, will be worked out in time. But there is one part of the ACA that will not be worked out, and it’s in fact a feature… not a bug.

You see, young people are required to join a system they are not expected to use so older people can pay less. When it comes to a set of young people that are ripe for inclusion, apparently no group is better situated than Hispanics.

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The ACA drivers are hot on the trail of Hispanics, a quickly growing segment of the U.S. population that is severely under-represented when it comes to health insurance.

The reasons behind the historically low numbers are obvious – recent immigration, a root in part-time and hourly work, the language barrier, etc. – but Hispanics are quickly becoming a large force in the U.S. economy. This means they should be integrated into programs like those that come out of the ACA as quickly and fully as possible.

Along with their newfound place of prominence in the U.S. economy is another attribute that makes them attractive: They’re young!

Latin Americans in the U.S. have a median age of 28, whereas the overall U.S. population has a median age of 37. If you removed Latin Americans from the overall U.S. number, then the remaining U.S. median age would be even higher.

Now, as noted above, the authors of the ACA clearly put together a scheme where young, healthy people must pay into a system they’re not expected to use… at least not to the extent of their payments.

If everyone paid at the rate they used health care, then young people would pay practically nothing while older Americans and those with chronic conditions would be saddled with exceptionally high prices.

There is no question that the ACA is a wealth-transfer program, which is why proponents are so excited to join with Univision and other media that reach the Hispanic community. They need to get all those young, healthy people signed up for care they won’t use so that costs can be contained for others.

Of course, this won’t be so easy.

Wellpoint, Inc. recently pulled together 20 uninsured Hispanics to get their input on educational materials about the ACA. One of the participants’ main questions was: “What’s health insurance?”

Getting large swaths of young Latinos on board could be a long process.

The issues surrounding the ACA and how it applies to the Hispanic community serve as a reminder about the basics of the act. The goals are noble – health care for all, at a reasonable price – and should be pursued by countries, like the U.S., that are developed and wealthy.

But the current law does not solve one of the basic problems. The current exorbitant prices for health services in the U.S. are a culmination of crazy factors, like hospitals setting exceptionally high rates because they know insurance companies will discount it. This is compounded by spreading costs from the uninsured who don’t pay, to the insured who do.

Finding a different way to extract money from consumers to keep the high-cost structure in place doesn’t address the fundamental issue. It simply perpetuates it with a legal mandate.

How do you say “Fork it over” in Spanish?


Rodney

P.S. You have just three days left to secure your $200 discount on your seat at our Irrational Economics Summit this November 6 to 9 in La Jolla, California. With all the uncertainty and fear in the markets right now, you don’t want to miss this event. Accept your discount here.

 

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Rodney Johnson
Rodney works closely with Harry to study the purchasing power of people as they move through predictable stages of life, how that purchasing power drives our economy and how readers can use this information to invest successfully in the markets. Each month Rodney Johnson works with Harry Dent to uncover the next profitable investment based on demographic and cyclical trends in their flagship newsletter Boom & Bust. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. Along with Boom & Bust, Rodney is also the executive editor of our new service, Fortune Hunter and our Dent Cornerstone Portfolio.