Pillaging Millenials
Published in the Boulder Daily Camera 5/11/17
I spend a lot of energy on these pages taking my baby boomer generation to task for our narcissistic tendencies. Sure, there's still enough of us left that we get to run the world for a few more years. But, the next generations are slowly taking over, and we will soon be at their mercy. We boomers should start playing nice.
Last week, the U.S. House of Representatives began the process of unwinding one of the cleverest jobs of inter-generational plundering we baby boomers have pulled off since we stopped saving for Social Security knowing our kids would pick up the tab. This scheme to transfer wealth from young to old Americans is embedded in a centerpiece of Obamacare that regulates health insurance pricing. The law requires insurance companies to use a "community rating," meaning that policies are priced more equally across society regardless of the actual costs of providing health insurance coverage to any particular demographic group.
Obamacare's way of forcing health insurance price equity was to prohibit insurance companies from charging more than three times as much for their most expensive policy than they charged for their cheapest policy. So, if they offered someone a policy for $200 a month, they could not charge anyone more than $600 a month for a policy with the same coverage.
In principle, that sounds all nice and sweet and smells a lot like social justice. Don't buy it. "Community rating" was never more than a thinly disguised scheme to make sure that you young people, who tend to be much healthier and cheap to insure, would see your premiums skyrocket so that we older Americans — stinking old wrecks in endless need of patching and repair — could pay less for insurance than we cost to insure. Simply stated, Obamacare legislates that younger Americans overpay for their health insurance to subsidize the health insurance premiums of older Americans.
Now, if we old baby boomers were a generally poor lot, that might make some moral sense, but we are not poor. Last July, Bloomberg described baby boomers as the "Richest Generation in U.S. History" that is now retiring with affluence never before seen. Nothing in the data on American wealth distribution suggests that boomers are generally poorer than the generations that have followed. If anything, the evidence suggests the opposite.
Besides, if Obamacare just wanted to make insurance more affordable for poor people, including older ones, there are more efficient ways to do it. Like, we could just subsidize the insurance purchased by low-income individuals. Wait ... Obamacare does that, too, and quite generously with 1) income-based subsidies through the health care exchanges, and 2) allowing the poorest among us to use Medicaid.
Nope, this community rating scheme was not about helping the poor at all. It was nothing more than a sneaky way to get younger Americans to pay more for insurance so baby boomers could pay less.
As it turns out, this community rating scheme is also the primary reason Obamacare is now on financial life support and in danger of collapsing. You millennials surprised us boomers by not being as economically foolish as we were counting on. Many of you looked at the price of health insurance being offered to you and said, "Nah, too expensive. I'll ignore the law, pay the Obamacare fine, and hope that I stay healthy." The net result has been that not enough young healthy Americans signed up for insurance leaving the exchanges full of us stinking old wrecks not paying our fair share. The rational economic behavior of millennials is now crushing the health care insurance system under Obamacare by making insurance more expensive for everyone and unavailable to many.
The House version of the health care bill passed last week seeks to reverse this damage by allowing insurance companies to charge up to five times more for their most expensive policies. The effects of this change in the law are completely predictable; 1) insurance rates for younger adults would go down, 2) rates for older adults would go up reflecting the higher cost of insuring them, and 3) more young Americans would purchase the lower-cost health insurance.
Predictably, the health care bill barely got out the House of Representatives' door before senators from both parties started talking about how the bill would increase health insurance costs for seniors. Perish the thought. I guess much of our baby boomer-led government thinks it better to let millennials eat cake as long as they keep subsidizing baby boomers' insurance.
Sounds like something millennials might want to resist.
I spend a lot of energy on these pages taking my baby boomer generation to task for our narcissistic tendencies. Sure, there's still enough of us left that we get to run the world for a few more years. But, the next generations are slowly taking over, and we will soon be at their mercy. We boomers should start playing nice.
Last week, the U.S. House of Representatives began the process of unwinding one of the cleverest jobs of inter-generational plundering we baby boomers have pulled off since we stopped saving for Social Security knowing our kids would pick up the tab. This scheme to transfer wealth from young to old Americans is embedded in a centerpiece of Obamacare that regulates health insurance pricing. The law requires insurance companies to use a "community rating," meaning that policies are priced more equally across society regardless of the actual costs of providing health insurance coverage to any particular demographic group.
Obamacare's way of forcing health insurance price equity was to prohibit insurance companies from charging more than three times as much for their most expensive policy than they charged for their cheapest policy. So, if they offered someone a policy for $200 a month, they could not charge anyone more than $600 a month for a policy with the same coverage.
In principle, that sounds all nice and sweet and smells a lot like social justice. Don't buy it. "Community rating" was never more than a thinly disguised scheme to make sure that you young people, who tend to be much healthier and cheap to insure, would see your premiums skyrocket so that we older Americans — stinking old wrecks in endless need of patching and repair — could pay less for insurance than we cost to insure. Simply stated, Obamacare legislates that younger Americans overpay for their health insurance to subsidize the health insurance premiums of older Americans.
Now, if we old baby boomers were a generally poor lot, that might make some moral sense, but we are not poor. Last July, Bloomberg described baby boomers as the "Richest Generation in U.S. History" that is now retiring with affluence never before seen. Nothing in the data on American wealth distribution suggests that boomers are generally poorer than the generations that have followed. If anything, the evidence suggests the opposite.
Besides, if Obamacare just wanted to make insurance more affordable for poor people, including older ones, there are more efficient ways to do it. Like, we could just subsidize the insurance purchased by low-income individuals. Wait ... Obamacare does that, too, and quite generously with 1) income-based subsidies through the health care exchanges, and 2) allowing the poorest among us to use Medicaid.
Nope, this community rating scheme was not about helping the poor at all. It was nothing more than a sneaky way to get younger Americans to pay more for insurance so baby boomers could pay less.
As it turns out, this community rating scheme is also the primary reason Obamacare is now on financial life support and in danger of collapsing. You millennials surprised us boomers by not being as economically foolish as we were counting on. Many of you looked at the price of health insurance being offered to you and said, "Nah, too expensive. I'll ignore the law, pay the Obamacare fine, and hope that I stay healthy." The net result has been that not enough young healthy Americans signed up for insurance leaving the exchanges full of us stinking old wrecks not paying our fair share. The rational economic behavior of millennials is now crushing the health care insurance system under Obamacare by making insurance more expensive for everyone and unavailable to many.
The House version of the health care bill passed last week seeks to reverse this damage by allowing insurance companies to charge up to five times more for their most expensive policies. The effects of this change in the law are completely predictable; 1) insurance rates for younger adults would go down, 2) rates for older adults would go up reflecting the higher cost of insuring them, and 3) more young Americans would purchase the lower-cost health insurance.
Predictably, the health care bill barely got out the House of Representatives' door before senators from both parties started talking about how the bill would increase health insurance costs for seniors. Perish the thought. I guess much of our baby boomer-led government thinks it better to let millennials eat cake as long as they keep subsidizing baby boomers' insurance.
Sounds like something millennials might want to resist.
