Affordable Care Act's Effects on Premiums

According to the ACA, price competition among health plans in the marketplaces is supposed to drive down premiums, lower the number of insureds, and result in substantial government savings over the next decade. What might happen to premiums for the young and for small businesses? I believe that premiums charged to the young will increase. The premiums charged to small businesses, however, will increase for many but decrease for some, depending on their workforce and what they were offering prior to the ACA.

Before the ACA’s Marketplace, young enrollees could buy coverage that closely reflected their expected actuarial costs based on age, and their coverage was pooled with other similar risk classes in accordance with standard actuarial principle. In regards to non-grandfathered policies in the individual and small group insurance markets, the ACA’s “adjusted community rating” (ACR) prevents the use of actual or expected health status to set group premiums, and health insurance issuers may only vary premium rates based on “family size (individual or family), geography (rating area), age (within a ratio of 3:1 for adults), and tobacco use (within a ratio of 1.5:1)” (UHC’s “Adjusted Community Rating: FAQs”). By enrolling a larger number of young, healthy Americans into one common insurance pool, the ACR would decrease premiums for older enrollees, but drive them up for young enrollees. Some might argue that these premium increases might be mitigated by premium assistance; however, a recent study from Oliver Wyman found “that young, single adults aged 21 to 29 and with incomes beginning at about 225 percent of the federal poverty level, or roughly $25,000, can expect to see higher premiums than would be the case absent the ACA, even after accounting for the presence of the premium assistance” (Giesa and Carison 32).

According to the ACA, small business owners historically faced several obstacles to offering insurance to their employees, including, but not...