Since September, the Koch brothers-backed group Generation Opportunity has been running an Obamacare "Opt Out" campaign, urging Millennials not to sign up for insurance on the health care exchanges created by the Affordable Care Act. It claims that paying the individual mandate's tax penalty and buying insurance that doesn't meet government coverage rules is a "better deal" for young people. GenOpp has a creepy Uncle Sam ad that's gone viral to make its case, but, as it turns out, it doesn't have the data to back this up. GenOpp's communications director David Pasch told The Atlantic Wire, "we're working on it," and added that it's "generally, anecdotally, what we've seen."
Nevertheless, here's their Opt Out pitch: "SAVE MONEY and PROTECT YOUR PRIVACY by opting out and buying insurance outside of the Obamacare exchanges." As a campaign message, it sure does go from soaring to specific action awfully quick. And given that it's the only issue in their campaign, you might think they would know the reasons they were telling people to do these very specific things they were telling people to do. During our phone call Pasch wasn't able to confirm that buying a plan on the individual market would be cheaper than buying one under Obamacare. "We're a small non-profit," Pasch explained, without the funds to do research about plans in every state. (It should be noted here the group has received over $5 million from a fund controlled by a Koch brothers' lobbying group, and told Yahoo News and The New York Times that it plans to spend $750,000 on the Opt Out campaign.)
Still the group is pretty sure of the facts on its FAQ page. GenOpp says flat out that the cost of paying the "relatively small tax" (not the individual mandate which "will be the end of the American way of life and government") and buying an insurance plan outside Obamacare would be cheaper: "almost all of them would be a better deal for young Virginians. It's like that across the country."
This is GenOpp's core pitch. In a press release on Tuesday, for example, the group says, "Generation Opportunity wants all young people to have health insurance. The goal of www.optout.org is to educate them on their options. Most young people will find it a better deal (and a lot less creepy) to opt out of Obamacare, pay the relatively small penalty, and then go buy non-Obamacare insurance on the private market." But that advice is not based on math.
"I don't have the calculations in front of me," spokesman Pasch told us. "Every state is different, and every individual is different." He said Connecticut might be one of those places, then quickly added, "Don't quote me on that."
As that press release says, GenOpp doesn't advocate going without health insurance entirely, only the plans offered under the Obamacare exchanges (and the subsidies that come with them). That rock-bottom Virginia plan GenOpp found on ehealthinsurance.com has an annual premium of $490. The penalty for not complying with Obamacare's individual mandate in 2014 will be $95 or 1 percent of your annual income, whichever is greater. No one making less than $10,000 will pay it and anyone making less than $15,800 in a year is eligible for free or low-cost Medicaid if they live in a state that's accepting federal funds for its expansion. By its third year, 2016, however, the penalty increases more than seven-fold to the greater of $695 or 2.5 percent of annual income. Anyone making longterm healthcare decisions based on the first year's "relatively small tax" will be very disappointed in two years. But like a homeowner betting on a teaser rate lasting forever, let's start with the lowest priced scenario GenOpp sketches: paying a $490 premium plus the minimum $95 tax penalty in 2014 for a total of $585. Maybe that's not so much. But within two years the cost of opting out of Obamacare jumps to $1,185.
(Update: As a reader points out, GenOpp's suggestion has another problem: it doesn't make much sense. They seem to define opting out of Obamacare as deliberately incurring the tax penalty of the individual mandate. But buying the health insurance policy they cite would probably comply with the mandate. The main impact of buying such a plan buying outside of the exchanges is that it wouldn't be eligible for any tax credit subsidies, which are discussed below. Since the key part of GenOpp's opt-out advice is "not buying government-approved health insurance," for purposes of comparison, we've assumed someone's followed their advice to the letter and is paying both an insurance premium and the tax penalty.)
None of that amount actually buys any medical care. The cheap plan GenOpp recommends has a $10,000 deductible (shown at left), which means it pays no benefits until a person's annual out-of-pocket medical costs exceed $10,000. The reason it's called catastrophic coverage is that it's primarily intended to keep people from racking up huge amounts of debt for catastrophic injuries like getting hit by a bus. Until tragedy strikes, however, every doctor's visit, lab test, and prescription filled comes out of pocket. How much does a young person pay in medical costs over a year? The most frequently cited figure is $854, which was cited by Justice Samuel Alito during oral arguments during the Supreme Court's Obamacare case. It comes from this amicus curiae brief filed in the case by economists which came up with their estimate by querying this database for how much health spending was reported for people ages 21 to 35 after excluding anyone who suffered expensive ailments like diabetes, cancer, and high blood pressure. But as this blogger noted at the time, the figures were based on 2008. He applied inflation expectations for health care costs through 2016 and came up with a figure that had grown to $1,262 per year. That number combined with the catastrophic care premiums and the full 2016 tax penalty puts the cost of opting out at more like $2,377.
Keep in mind, though, that all of that rests on qualifying for that $490 premium. The second lowest plan in GenOpp's screenshot was 59 percent more expensive with an annual cost of $781 while the highest of the three shown, presumably the three lowest quotes they found, has a pricetag of $903. And what GenOpp doesn't mention is that online insurance sites often show "starting rates" that get more expensive as you tell them more about your age, state, gender, and most importantly, medical history. eHealthInsurance lets you know right on the main page that the rates you see are not necessarily what you can get. So, the cost of opting out of Obamacare — and before spending a single dollar for any health care — in just the first year might be less than $600 or closer to $900 or more than $1,000. As Pasch said, "every individual is different."
So, that's the route GenOpp recommends. How does Obamacare compare? For people under 30 making less than $30,000 a year and looking to spend as little as possible without incurring the tax penalty in the individual mandate, there are some catastrophic plans available in the Obamacare exchanges, but not everyone qualifies. So let's talk about the kinds of plans GenOpp wants people to boycott. The Associated Press looked at average premiums for the "bronze" level plans — insurance that is designed to cover 60 percent of medical expenses — offered in Virginia and calculated that, "For a 27-year-old person earning $25,000 a year, the premium would be $80 a month, with a tax credit" or $960 annually, which is less than the $1,185 premium-plus-full 2016 penalty cost of the GenOpp option.
The out-of-pocket costs incurred in a bronze plan aren't likely to be different than GenOpp's catastrophic option (however, the Obamacare plan caps annual out-of-pocket costs at $6,350 instead of that $10,000 deductible) since bronze plans often will have high deductibles in order to keep their premiums low. But unlike catastrophic plans, even before the deductible is met, they might cover some of the costs of things like routine doctor's visits, preventative care and prescriptions. The next level of "silver" plans have better benefits and more expensive premiums, but a young person earning $25,000 would qualify for additional tax credits that can reduce both premiums and out-of-pocket costs.
Would opting out of those Obamacare plans be cheaper for Millennials? GenOpp doesn't have the data. Still, they'll continue advocate that they do so. The organization has plans to visit 20 colleges to spread its under-researched message. Sen. Angus King, a Independent of Maine, called the group "guilty of murder" for persuading young people to opt out with those creepy Uncle Sam ads. But that may, in the end, be the only selling point Generation Opportunity has. As we finished our phone call, Pasch said, completely unprompted, "It's lot less creepy to opt out of Obamacare."