Actuarial perspective on the ACA’s 3:1 age ratio

Posted by on Oct 24, 2016 in News | 0 comments

Mac McCarthy provided an actuarial point of view on problems with the Affordable Care Act’s mandatory 3:1 age ratios in a subscriber-only Inside Health Insurance Exchanges story entitled How Switching to 5:1 Age-Rating Band May Impact Rates, Enrollment, CMS Spending

“Mac McCarthy, president of McCarthy Actuarial Consulting, LLC, agrees that while moving to a 5:1 ratio is a step in the right direction, it probably is not enough to entice substantial numbers of young adults to enroll at this stage of the game. “The tepid individual mandate and enforcement, confusing and constantly changing plans, and difficult enrollment websites all work against enrolling folks that would rather not be bothered in the first place,” he says.

Consider this: A 27-year-old single healthy male earning $15,000 a year qualifies for a federal subsidy of about $220, McCarthy explains. Due to the 3:1 age curve, the premium is $245, for a silver plan with a deductible of several thousand dollars. “His cost would only be $25 a month, but his expectation is that he will get nothing out of it. Do you think he will opt to use his $25 for that, or to take his girlfriend to a movie?” he asks. Under a 5:1 band, that person’s subsidy would completely cover the premium. “Now, all you have to do is to convince him to spend the time to research plans and deal with the exchange website,” McCarthy quips.”

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