A dramatic spike in premiums

A study by Kurt Giesa and Chris Carlson found that the impact of the Affordable Care Act will disproportionately affect young adults and cause a dramatic spike in their cost of premiums. The study looked at the effects of the reforms on premiums for the nongroup market (individual policies). It found that premiums for people aged 21-29 with single coverage who are not eligible for premium assistance would increase by 42%. People aged 30-39 with single coverage who are not eligible for premium assistance would see an average increase in premiums of 31%. The study found that almost 4 million uninsured individuals aged 21-29 can expect to pay more out of pocket for single coverage than they otherwise would have had the Affordable Care Act not become law.

Using data from the U.S. Census Bureau and the Congressional Budget Office, the two took into account a number of the new mandates found in the Affordable Care Act, including guaranteed issue, prohibition on varying premiums based on health status, and age band compression. Age band compression seeks to redistribute the costs of health care away from those who are actually the most risky (older individuals) to those with the least amount of risk (younger individuals) in order to reduce costs for those who are using the most services. This cross-subsidization is necessary in order to ensure that the cost of health care is spread out. This will hurt young adults as they are most likely healthier and have lower expected health care costs, and often qualify for preferred rates, which lead to very low premiums as they are not risky in the eyes of an insurance company.

What the study could not account for, however, is whether or not young adults will choose to participate in purchasing health care coverage as intended under the law. As was clarified by the Supreme Court, the law requires an individual to possess coverage OR to pay a tax. The tax for not having coverage is set so low that many young adults might rather pay that amount than the high cost of premiums for health insurance coverage. If this happens in large numbers, then the insurance risk pools are going to be unbalanced. The system relies upon the premium dollars of healthy young adults who require little to no health care ‘costs’ to subsidize older individuals who are much more likely to need and use health care dollars. The exact amounts remain unknown, but it seems clear from this study and from a number of other reports that the cost of insurance will continue to rise, despite the intent of the Affordable Care Act.

Finding More Ways to Reduce Taxes

Meanwhile, here at the Capitol, House Republicans wasted no time in getting to work on behalf of Iowa taxpayers. The first week of the 2013 session, Republicans filed three bills directly aimed at stopping the over-collection of taxes. House Republicans recognize now is the time for serious, meaningful tax relief. We’re not dug in on any one idea on tax relief; we want to be able to talk about several options. While we’re still focused on property tax relief and other reductions in taxes, House File 3, reducing Iowans’ income taxes, is the focus of this week.

House File 3 basically does the following:

Gives Iowans a choice when paying their income taxes, either the current system or a 4.5 percent flat tax with zero deductions.

Raises the filing threshold so that the first $6,235 (or $12,450 for married couple) would not be taxed.

Ensures any taxpayer who took advantage of the flat tax would not be eligible for any nonrefundable or refundable credit otherwise allowed in the current system.

There is a fork in the road should the legislature take the path of spending limited one-time revenues on recurring expenses growing government or should the legislature send this money back to Iowa taxpayers? House Republicans believe any overpayment of tax dollars belongs in the pockets of Iowans, not as a pot of money for the politicians to brag about in the short term knowing full well that the funding will dry up in the long term.

With huge federal spending cuts and the impact of the drought yet to be felt, spending the overpayment sets Iowans up for cuts in the not too distant future. This type of short term thinking led to massive overspending and then across the board cuts between 2007 and 2010. We cannot allow Iowans to suffer this kind of mismanagement again.

Rep. Rob Bacon can be reached at rob.bacon@legis.iowa.gov.