January 1, 2014 and people are flocking to the health exchanges to find cheap health coverage because the Affordable Care Act (ACA) has promised "Affordable Health Care". According to the ACA, affordable means the cost will be no more than 9.5% of income. If it is higher than 9.5% there will be tax credits and/or subsidies given to make it affordable.
Interestingly, the cost of a person who is 64 years old cannot be any higher than 3 times the cost of a 20 year old. In other words, the cost for older people, who use on average 5 times the amount of health care than a 20 year old, would pay less while the 20 year old will pay more, than in our current market. In addition, if you are a smoker, your premium can be up to 50% more than a non-smoker at the same age level. The question is, if I am a smoker and paying 50% more than a non-smoker making it unaffordable for me, will I get a subsidy even though if I wasn't a smoker it would be affordable? Since the smoking surcharge is considered a penalty, the answer seems to be no.
Since coverage in the exchanges will be guaranteed issue, it seems that younger, healthier people will find cheaper coverage elsewhere while older, sicker people will flock to it. If this happens it won't be long before the exchanges implode and/or we are taxed even more to supplement the deficit.
