Why the ACA's Limits on Age-Rating Will Not Cause "Rate Shock": Distributional Implications of Limited Age Bands in Nongroup Health Insurance

Brief

Why the ACA's Limits on Age-Rating Will Not Cause "Rate Shock": Distributional Implications of Limited Age Bands in Nongroup Health Insurance

Insurers are calling attention to a potential "rate shock" that will push young adults out of the nongroup insurance market under the ACA due to limitations on premium differences by age. We compare the impact of the ACA's 3:1 rate band to a "looser" 5:1 alternative. Loosening the bands would have very little impact on out-of-pocket rates paid by the youngest purchasers once subsidies are taken into account. Also, the majority of young adults currently purchasing nongroup coverage will also be financially protected by the exchange subsidies, the ACA's Medicaid expansion, and the expansion of dependent coverage to young adults.

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