It Does Not Pay to be Young and Single (for Insurance)

Oct. 2, 2013
Young single individuals who have to pay for their own health insurance will be at a significant disadvantage in 2014. As a group, healthy singles can expect their premiums to at least double compared to what they are today.

According to the U.S. Census Bureau, the median income of a single male and female (never married) between the ages of 25 and 34 is $31,489 and $26,233, respectively. The wage discrepancy based on sex is a subject for another day. The take home pay would be reasonably estimated at $27,163 annually for men and $21,021 for woman. This assumes a W-4 filing of single, zero allowances, and only federal taxes are withheld. The addition of state, county, and local income taxes obviously exacerbate the situation. It is important to note that income levels over $25,000/year will generally eliminate the potential for government subsidies in the new insurance exchanges.

The new healthcare exchanges are set to open on October 1 with the promise of affordable healthcare for lower income wage earners. Applicants can choose between bronze, silver, and gold plans depending on the desired level of coverage.

We have been saying in our presentations that young healthy singles can expect to pay higher premiums in the years ahead. Nationally, the bronze premium will be about $163/month. A bare-bones policy now costs $41 or more a month based on an internet search. Let's be generous and bump that up to $67/month. That is a 243.3% increase, or $1,152 a year. That is a significant reduction in disposable personal income when your take home pay is $27,163 to $21,021 depending on your gender.

Some cities will be hit worse than others. 27 year-old singles in the following cities can expect to see their premiums increase as follows:

  Current Monthly Bronze Monthly Monthly Increase $ Increase % Annual Increase
Nashville $41 $114 $73 178.0% $876
Philadelphia $73 $195 $122 167.1% $1,464
Cheyenne $82 $271 $189 230.5% $2,268

The government will offer a catastrophic care package, similar to what a lot of young healthy individuals currently purchase, but the government estimates the cost to be only slightly less than the bronze premiums and will not be eligible for subsidy. It is also interesting to note that while some states will offer two or more potential insurance carries, others will offer a single choice.

This raises the question of why would these young people opt into this system? They are much better off financially if they pay the $95 fine and keep their current insurance, even if they must pay for that insurance entirely out-of-pocket. This is the concern of the administration and Affordable Healthcare advocates. Will enough young healthy people sign up to offset the cost of the mandatory expansion in benefits (thus costs) and the mandated all-inclusiveness of the Act (no one can be denied)? I don't see why enough young people would. The bottom line is that premiums are going to have to go up, and that impacts employers and employees alike. This is not good news for the economy's rate of growth in 2014.

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