Selling health insurance to young adults is inherently hard

Among the troubling aspects of the performance of the ACA private plan marketplace to date, the age distribution looms large. HHS officials hoped that 40% of enrollees would be in the 18-34 age range; they got 28%. The overall enrollee population in the marketplace is sicker than anticipated, leading to losses for most insurers and a sharp upward adjustment in premiums.

Some observers have argued that the ACA's subsidy structure is to blame. Jed Graham, for example, in his e-book Obamacare is a Great Mess, asserts:

While bronze plans are generally more appropriate for younger adults than older ones, the ACA pricing distortions likely account for part of the reason that enrollment has been so much more robust among older adults. For moderate-income, healthy young adults who get little to no subsidies, ACA age-rating rules have made health care significantly less affordable (Locations 656-658).

A multi-part argument is embedded above. First, reducing age-rating from the former industry standard of 5-to-1 to the ACA's 3-to-1 means higher premiums for unsubsidized young buyers. Second, the fact that unsubsidized premiums are much higher for older buyers, coupled with the pegging of income-adjusted subsidies to a silver-level plan, means that the subsidy often all but wipes out the premium for a bronze plan for an older buyer, but not for a younger one. Third, for those with low income and few or no assets, bronze plans are often close to worthless in any case.

That's all true. It's also true, though, that young adults are inherently less likely to fork out for health insurance than older adults, no matter how attractive the terms.  A recent report on employer-sponsored health insurance by the ADP Research Institute highlights this fact: