The costly effects of charging seniors more for monthly premiums

Under the Affordable Care Act, individuals who are 64 and older cannot be charged more than three times as much as 21- to 24-year-olds for the same plan.

Many critics, believe this 3-to-1 ratio discourages younger enrollees from purchasing plans and have thus proposed increasing the ratio to 5-to-1. But while 5-to-1 rate banding, as it's typically called, would insure more young people, federal health spending would increase and nearly 400,000 older people would lose coverage, according to a Commonwealth Fund report.

The Commonwealth Fund, using a microsimulation model to analyze data, found that with a 5-to-1 ratio, individuals older than 47 would face higher premiums--a jump from $8,500 to $11,000--while those younger than 47 would benefit from lower premiums, or a drop from $2,800 to $2,1000.

Nearly 1.8 million additional Americans would be insured with a 5-to-1 ratio, the report finds, but the price isn't cheap.

For starters, many young people would be ineligible for federal subsidies, meaning the increase in federal spending on older adults would offset federal savings coming in from newly enrolled young people. The report predicts that federal spending would thus increase by $9.3 billion.

Additionally, revenue from the ACA's individual mandate penalty would decline with a 5-to-1 ratio model because more people are gaining coverage.

As the report concludes, the 5-to-1 rate banding may not be a cost-effective solution, especially for taxpayers. While many critics have issued ACA alternative proposals and plans, the Commonwealth Fund says other approaches could help increase enrollment at a lower cost, such as consumer outreach and improving the user experience for consumers shopping on the health insurance exchanges.

For more:
- here's the Commonwealth Fund report