Young college graduates saddled with student loan debt may find it difficult to comply with new Obamacare mandates.
The success of Obamacare depends on young people buying health insurance.
Experts say that young, healthy people must enroll in ObamaCare’s health exchanges to cover the cost of insuring sicker, older people. It’s a simple math equation: Charge everyone roughly the same rate for access to basically the same product. The people who use it less will subsidize the people who use it more.
It may be hard to convince young adults to buy insurance, as illustrated by the example of Ron Geibel, a young college graduate recently profiled by LoHud.com. Geibel is considering his options among the New York state health plan marketplace created as part f the Affordable Care Act..
Profile: Ron Geibel is a 28 year-old artist living in White Plains, New York.
- Currently has no insurance
- Income is less than $25,000 a year
- In good health
- Student loan has been deferred, but requirement to start paying will soon kick in
Geibel can choose from among seven plans with varying options.
Cost: A bronze plan from Health Republic is $307 a month ($3,000 deductible, pays 60 percent), but Geibel would pay $55. A silver plan from the same company is $387 a month ($2,000 deductible, pays 70 percent); Geibel would pay $135. A catastrophic plan would cost $186 to $418 a month, with a $6,350 deductible. The maximum out-of-pocket he would pay per year is $6,350 for the bronze or catastrophic plan; $5,500 for the silver.
Assuming a student loan balance of $26,600, the average for 2011 graduates, Geibel’s monthly payments would be $306*. Here’s a hypothetical illustrations of his overall monthly income and expenses if he were to choose the silver plan.
The illustration shows a very tight budget, with little room for “extras” like health insurance. Here’s how this young college graduate puts it.
“So for me if I have to prioritize right now it’s feeding myself and living as opposed to worrying about the health insurance.”
Like many young people, he thinks his odds are good enough to run the risk of foregoing health insurance. The ACA penalty in this case would be $250, so his annual net savings for not buying insurance would be $1370 if he does not get sick.
New York is one of five states where health insurance premiums for millennials are not expected rise, so Geibel might be considered lucky in that respect. For residents of the other 45 states and for many who do not want the type of coverage mandated by the ACA, it remains to be seen if enough young people will sign up for the new policies.
* Payments will be less if borrower qualifies for the IBR.
Related: It’s not always possible to avoid college debt, but try anyway (Cost of College)