While ObamaCare exchange websites have suffered widespread problems so far, the health law's success or failure hinges on whether young and healthy people sign up. But several of the law's provisions make it likely that enrollees will be older and sicker than expected, pushing premiums higher and jeopardizing affordability.
As the promotional campaign ramps up to get young and healthy people to enroll, many businesses — facing employer mandate fines for each full-time employee who gets ObamaCare exchange subsidies — will be working at cross-purposes.
That's not to say employers will come right out and tell their workers to steer clear of the exchanges. Rather, many will offer a deal that may look, by comparison to ObamaCare, too good to pass up.
Covered California, the state's new exchange, has said the cheapest bronze plan, on average, will cost $137 per month after subsidies for a 21-year-old earning 250% of the poverty level ($28,725 in 2014).
The Skinny Option
Yet such a plan will come with a $5,000 deductible. By comparison, companies can offer a so-called skinny plan for close to $50 a month that includes several visits to the doctor.
Workers offered a skinny plan might have this choice: Pay $600 a year for a plan that provides immediate benefits or nearly three times for a plan that has a $5,000 deductible.
While skinny plans don't come close to matching the comprehensive protections offered by exchange plans — hospitalization and surgery wouldn't be covered — they will allow employers and employees to dodge ObamaCare's tax penalties.
Employers who don't offer coverage will face automatic fines under ObamaCare of $2,000 for every full-time-equivalent worker (minus 30 workers). But those who do offer coverage — even of the skinny kind — will only face fines of $3,000 per worker who receives ObamaCare subsidies.
While it's far from clear how broad skinny-plan adoption will be, the plans may be attractive to large employers in the retail, restaurant and accommodation industries. Such primarily modest-wage sectors in the past offered hourly wage employees mini-med plans, which don't comply with ObamaCare regulations because they put a cap on benefits.
The good news is that skinny plans may mean employers cut fewer workers to part-time status to reduce ObamaCare fines than they would otherwise.
The bad news for workers is that they won't have real insurance in an emergency. The bad news for ObamaCare is that many young and healthy people will opt out.
But even apart from the employer mandate and skinny alternative, there are design flaws that will deter the young and healthy from signing up.
Catastrophic coverage is an option for people up to age 30 — but it comes without subsidies. That could be the difference between a policy just barely in reach and one that puts too big of a squeeze on household budgets.
Details released by Covered California this spring showed that a 21-year-old individual earning 250% of the poverty level would pay just as much for catastrophic coverage as for the lowest-priced bronze plan.
The individual mandate tax penalty, which will rise from 1% of income in 2014 to 2.5% in 2016, is designed to reward risk-taking and encourage short-term thinking.
Young and healthy individuals (who will have to pay $6,640 for the cheapest bronze plan before benefits kick in) might see little risk in opting out. If they remain healthy, they could tuck away an extra $5,000 or so over five years, even after the penalty.
An alternative to the punitive mandate would have been to use the perk of tax credits. If future tax credits were dependent upon maintaining health insurance, the risk-taking might no longer be rewarded.
One more ObamaCare aspect that doles out big subsidies to some in an arbitrary fashion also may be a negative for the overall health of exchanges' population.
ObamaCare's family penalty means that if one spouse is offered coverage via an employer that the law deems affordable (meaning it costs no more than 9.5% of household income), the other spouse can't access exchange subsidies. It only stands to reason that workers with an ill spouse will gravitate to jobs that don't offer coverage (unless spousal benefits are available).