AARP Smears a Good Reform Proposal as an ‘Age Tax’

The AARP, the nation’s largest association of retired persons, is criticizing a proposal to more closely align premiums with actual health care costs, calling it an “age tax” that will supposedly “line the pockets of big insurance companies.”

In reality, the proposed change would simply undo a misguided provision of Obamacare that forced insurers to artificially lower premiums for older adults and increase them for younger adults.

The more accurate characterization is that the Obamacare rating provision “taxes” younger adults by making their premiums more expensive than they need to be, and “subsidizes” older adults by making their premiums cheaper than they should be. Thus, undoing that provision would simply remove a tax on young people and end an artificial (hidden) subsidy to older individuals.

One can understand why it may be in the self-interest of AARP’s members to want to keep that subsidy, but removing an artificial subsidy does not constitute the creation of a new “tax.”

It is a basic fact that older adults consume more in health care services than younger adults. Indeed, health care consumption among adults varies along an age curve by about a 5-to-1 ratio.

In other words, average health care costs for 64-year-olds are about five times the average costs for 21-year-olds.

What Obamacare did was to impose a federal rule on all insurers in the individual and small group markets that says a 64-year-old cannot be charged more than three…

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