Last summer, as the Supreme Court prepared to consider (and uphold) the constitutionality of the Affordable Care Act, Richard Florida showed us the geography of America's uninsured. He found a strong link between those uninsured belts and lower well-being, as well as shorter life expectancies. For a lot of Americans, in other words, expanded health care coverage should bring great benefits.
For relatively young and healthy people, however, the cost of health care may soon be on the rise. Under the terms of the new law, providers can no longer reject people with preexisting conditions, or charge much higher rates to older customers, or offer really skimpy coverage plans. As a result, the Washington Post reported late last week, insurers are preparing the public for a so-called "rate shock" when premiums are unveiled this spring.
Earlier this month, people in five major cities — Chicago, Phoenix, Atlanta, Austin, and Milwaukee — got a sneak peek at their premiums courtesy of Douglas Holtz-Eakin at the American Action Forum. Promising non-disclosure, Holtz-Eakin got some big providers to reveal their likely rate hikes [PDF]. While older, less healthy individuals can expect to pay 22 percent less, young and healthy people will pay an average of 169 percent more:
Let's take a closer look at Chicago. In the Windy City, the average premium for a 27-year-old male non-smoker with a bronze-level health plan, currently $63 a month, is set to rise to $189 — a jump of 202 percent. A similar spike is found in Milwaukee, where young policyholders now paying $58 can expect to pay $175 under the new law. For all five cities, premiums for the younger market will increase 189 percent.
The flipside, of course, is a rate decrease for the elderly. In Chicago, a 55-year-old female smoker with a gold-level plan, currently $1,167, will pay $997 under the Affordable Care Act — a drop of 16 percent. There's a 40 percent dip awaiting the same woman in Austin, Texas, who will pay $815 instead of $978. All told, older, less healthy individuals in the cities will pay 18 percent less.
The study doesn't really attempt to hide its bias against the law, and it's saddled by some problems of its own. For starters, comparing bronze to gold policies isn't quite apples-to-apples; as Politico recently pointed out, the survey doesn't consider subsidies for low-income policyholders, nor does it emphasize that people will get better coverage for their money.
Having said that, premiums for many young residents of these cities — and others around the country — are clearly set to rise. In general, geography stands to play a much bigger role in shaping health care rates under the Affordable Care Act, since region is one of the few remaining ways for insurers to shape premiums.
Take the case of California. According to the Associated Press, the new state health care exchange is set to have 19 regions, as opposed to the 9 regions that have been used by providers in the past. Places with poor air quality could be subject to higher premiums, and the same metro area may even be split up to increase costs on higher-risk populations. For all the benefits of the new law, there may be a rocky transition just ahead.