Obamacare math may not add up for 'young invincibles': Study

A young woman works with an insurance agent with Sunshine Life and Health Advisors as she tries to purchase health insurance under the Affordable Care Act at the Mall of the Americas in Miami.
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Obamacare could require far too much expense and provide too few benefits for the percentage of healthy young-adult enrollees to rise, according to a new analysis.

Consumer price comparison site NerdWallet said its analysis suggests that healthy younger adults who go without insurance could on average spend up to five times less on health care than those who sign up in Affordable Care Act plans.

The site predicts that, despite a legal mandate to obtain coverage, many young adults will remain uninsured in 2014 because it is cheaper for them to pay their medical bills than to buy insurance. That's true, the company said, even if they are eligible for tax credits to offset the cost of coverage.

"It isn't just a 'young and reckless; mentality keeping so-called young invincibles from signing up," NerdWallet said. "Many young adults will follow a logical financial rationale for remaining uninsured in 2014."

That view conflicts with claims by federal officials, who this week said they expect a significant jump in the percentage of young adults buying plans by the March 31 deadline for open enrollment.

(Read more: Obamacare blitz woos the young with star power)

As of Dec. 28, just 24 percent of the 2.2 million enrollees were adults between 18 and 34, versus the 40 percent target officials are eyeing. They want more young adults in the risk pool to balance insurers' costs from older, sicker participants.

"Our analysis suggests that health insurance—even with subsidies' discounts—will be a tough sell to the healthy majority of young adults who would otherwise have very few health expenses," said Christina LaMontagne, health vice president at NerdWallet, which launched a health insurance buyer's guide this week.

"Many young, healthy adults will skip insurance in 2014, as their expected health needs won't justify insurance," she said.

Addiction and Obamacare
Addiction and Obamacare

NerdWallet found that a typical adult between 18 and 34 buying an ACA plan will pay $1,717 for health care this year—mostly in the form of premiums.

But the average young adult without coverage will pay just $348, which includes the price of going to the doctor, as needed, as well as the penalty for not having insurance. That penalty is $95 or 1 percent of taxable income, whichever is greater.

The savings continue even when factoring in an emergency room visit. One trip to the ER, added to the other health costs, would result in a total annual cost of $2,022 for an average, uninsured young adult—compared with $2,791 for one who is insured, the analysis found.

(Read more: Wanted: Young Obamacare enrollees)

NerdWallet noted that most young adults require little medical care. About 95 percent report being in good, very good or excellent health, according to government data.

Less than 24 percent of the group will visit an ER during the course of a year, and just 7 percent are expected to stay overnight in a hospital. About 30 percent won't visit a doctor at all, the site said.

Some ACA proponents argue that young adults are more likely than others to wait until the deadline to enroll, so they expect their participation numbers to rise.

Timothy Jost, a law professor at Washington and Lee University who specializes in health policy, said that it is "still possible" that young-adult enrollment will hit 40 percent by March 31.

Even if the current rate doesn't rise much, he said, "it wouldn't be the end of the world."

He and others point to a recent Kaiser Family Foundation study that found that even in a worst-case scenario, with just 25 percent enrollment by young adults, insurers likely would increase premiums only about 2 percent next year.

But in its new analysis, consumer finance site ValuePenguin.com said that the shortfall of young adults suggests that current enrollees are more likely to have health problems. Their benefit costs could be a bigger factor in premium inflation than just having too few young adults in the mix, it added.

Estimated health care costs for young adults in 2014

Scenario Uninsured,<br> healthy Insured,<br> healthy Uninsured, 1 ER<br> visit Insured, 1 ER<br> visit
2014 Tax penalty$95 N/A$95 N/A
Total annual premium costN/A$1,200 N/A$1,200
ER visitN/AN/A$1,674 $1,074
Physician office visits$253 $517 $253 $517
Total out-of-pocket cost in 2014$348 $1,717 $2,022 $2,791

Source: Source: NerdWallet Health analysis.

ValuePenguin.com analyst Jonathan Wu said young adults with health issues would have been motivated to sign up for ACA plans already. For them, benefits would likely outweigh coverage costs.

But for healthy young adults, he added, "it's hard ... to value that, or see the potential benefit until they have to use it," which could lead many of them to sit out Obamacare this year.

Wu expects risk "pools will be a little poorer at this stage than the insurers would like."

(Read more: Young and healthy are eyeing Obamacare: Survey)

Several Obamacare provisions are designed to offset losses or excessive costs to insurers. They include a reinsurance program that could keep premiums affordable for several years, but it would need to improve over the long run, he said.

LaMontagne at NerdWallet predicts that healthy young adults who don't sign up this year will become more inclined to do so as the penalty for being uninsured jumps dramatically.

"By 2016, paying a steep penalty of $695 and getting nothing in return will be a very unattractive option," she said. "Young adults will determine they'd rather receive the benefits of insurance than waste money on the penalty."

By CNBC's Dan Mangan. Follow him on Twitter @_DanMangan.