Thursday, January 20, 2011

Some Savings

Trying to sell their health care "reform" plan, President Obama and the Democrats touted various benefits to consumers. Among them: the option of letting families continue coverage on young adults until the age of 26.

Perhaps I'm just uninformed, but that provision struck me as a solution in search of a problem. Once upon a time, "children" became responsible for their own health care once they reached adulthood. I remember a conversation with my father, shortly after graduation from college. It was short and to the point; having finished my education and landed a job, I was being dropped from the family's health care plan, effective at the end of the month. As of that date, I was on my own.

In hindsight, there was nothing cruel or unfair about my father's actions. Why should he continue health coverage on an adult son who was gainfully employed and living on his own? Of course, I was working at a small market radio station which didn't offer health care to its employees and I couldn't afford insurance on my own.

So, for the next couple of years (before joining the military) I did the same thing as most of my peers: I paid out-of-pocket for routine treatment and prescriptions, while trying to move up the career ladder to a station that did offer health insurance, or paid enough so I could buy it on my own.

Flash forward thirty years and the Democrats have finally closed that critical gap in health insurance. Sure, it's little more than a sop to the slacker vote, but the extension of coverage to young adults was hailed as some sort of breakthrough--unless you're actually paying the bill.

You see, we're finally getting a look at how much the extended care will cost families, courtesy of the military's TRICARE health program. When Obamacare was signed into law, the Pentagon moved quickly to meet its various provisions, including the young adult option, which will go into effect later this year. But it won't be cheap, according to military columnist Tom Philpott:

This spring, though an exact date is not yet set, TRICARE coverage will be made available to young adult military dependents out to the age 26, and that extra coverage will be available retroactively to Jan. 1 this year.

But for this expansion in TRICARE coverage, by as much as three to five years, these young adult dependents will have to pay a premium set high enough to cover the entire cost of the program.

The exact charge is not yet known but unofficial estimates have ranged from $1400 to $2400 a year or about $116 to $200 a month.

The bottom line is that Congress didn't achieve for military families what was gained for other American families, at least on adult dependent coverage, through the Patient Protection and Affordable Care Act.

This is hardly surprising. Subsidizing coverage for young adults under the TRICARE program would cost an extra $300 million a year--something the Pentagon (correctly) surmised that it cannot afford. So, the cost is being passed on to military families who want to take advantage of the option, with premiums as high as $200 a month.

And TRICARE beneficiaries aren't the only ones who will pay more to cover adult dependents. As Mr. Philpott notes in his column, civilian families under "non-group" health plans will face similar premium increases. The Department of Health and Human Services estimates that at least 75,000 young adults fall into that category and their parents will pay as much as military families for coverage.

Gee...didn't Mr. Obama promise that his plan would lower a typical family's health care costs by $2,000 a year? But if you're a TRICARE beneficiary (or a civilian with non-group coverage) and you want to maintain coverage for a young adult son or daughter, get ready to pay through the nose.

For families covered by large, group plans, the cost of insuring young adults will be lower--if you believe HHS figures. By their estimates, the added coverage costs, spread over a larger risk pool, will result in annual premium increases of $62 to $149 a year.

But take those figures with a huge grain of salt. There's no reason to believe that other insurance companies won't adopt the TRICARE pricing model for this particular market segment--particularly if it will help offset some of the other, onerous burdens of Obamacare. Additionally, as the new system squeezes more companies out of the health insurance business, there will be less competition, forcing higher premiums for consumers.

Meanwhile, the free market still offers the best solution for this so-called problem, at least for now. Most insurance companies still offer affordable coverage options for young adults, with annual premiums of less than $1,000 a year (depending on your state of residency). Most have 20-30% co-pays, but these plans offer prescription drug coverage and cap out-of-pocket expenses at $4,000 a year (or less). It's the type of program that most young adults can afford, or (if necessary), their parents can foot the bill.

In a sane world, DoD (and its TRICARE contractors) would be steering young adults into that type of private plan, or into the Medicaid system for those with serious medical conditions. But, thanks to the mandates of Obamacare, DoD is compelled to offer a "young adult option" with far higher premiums than comparable private health care policies. And, we're guessing that the cost for that coverage will only increase. As more military families opt out of young adult coverage, those who remain will be stuck with an ever-increasing bill.


Paul G. said...

Nice, attack extending our children's (optional!) healthcare benefits but you neglected to mention this part of the Philpott article:

Defense Secretary Robert Gates will ask Congress one more time to approve a "modest" raise in TRICARE fees for working-age military retirees, which would be the first increase in 15 years.

(My civilian plan fees went up 20% last year alone. Who's subsidizing who?)

"He [Gates] noted that these retirees drawing "full pensions" while working in second careers and many are turning down employer-provided health insurance to use TRICARE. Meanwhile, federal civilian and private sector employees have seen health insurance costs "rise dramatically.""

Gates said his plan for health care, to be unveiled in February, would save the department nearly $7 billion over the next five years.

(also, oxymoron: slacker vote - slackers don't vote)

MarkD said...

The tooth fairy isn't paying for it. In the end there are only you and me.

There is no government money. You pay for your kids, or we all pay for your kids.

There is no big pile of money at the insurance company. They make a profit, or they go out of business. What they have they get from subscribers. If they are to pay it out, they have to take it in. there is no printing press in the basement.

I think we'd have a more rational system with less overhead if health insurance only covered catastrophic illness, and we had true price competition.

That is too grubby for something as sacred as medicine, so we have an expensive system with a lot of overhead. It sounds just like government, doesn't it?