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WASHINGTON — High mental health costs for young adults threaten to undermine a key assumption of the Affordable Care Act: that insuring more young people will lower costs because they are healthier and require less expensive care. The Obama administration estimates that 2.7 million people between the ages of 18 and 30 need to buy health insurance through the federal and state marketplaces to offset the health care needs of older Americans buying insurance as required by the Affordable Care Act.
But while those younger Americans may not have physical ailments, they are more likely to have mental health issues that will now be treated the same as physical problems because of the law.
An analysis of insurance records of 6.8 million people 18 to 35 years old by data analysis firm BeyondCore showed that 18% had been diagnosed with a mental health condition, such as depression or an eating disorder, said Arijit Sengupta, the company's CEO.
Treating a young person for depression costs about $7,000, the BeyondCore study showed, about the same as the cost for treating an older person for high blood pressure. But doctors diagnose twice as many people with depression as for high blood pressure, Sengupta said.
"The bad news is there has been a mental health epidemic," Sengupta said. "The good news is, if, for no reason other than we get mental health out the shadows, it will be worth it." He added that catching mental health issues early could save a lot of money in the long run.
The administration's hypothesis about younger insurance customers may be false, Sengupta said. "Healthy older people may be more important."
"There's a lot of conventional wisdom about young, healthy people, but I think that's been a little bit overplayed," said Jon Kingsdale, who headed up the Massachusetts health exchange. "The most important thing is to get people enrolled, whether they're young or not. That's the point of the law."
"We have been encouraged by the significant public interest in coverage available on the marketplace so far; we are focused on reaching, educating and enrolling as many people as possible; and we are confident we will have a balanced risk pool at the end of open enrollment," HHS spokeswoman Erin Shields Britt said.
As more people become insured, either by staying on their parents' insurance until age 26 as now allowed under the new law, or because of the requirement to buy insurance beginning in January, more people will be diagnosed with mental health issues, Sengupta said.
The Affordable Care Act requires health insurers to treat mental illnesses as they would other ailments, such as cancer. In the past, insurance companies offered little or no coverage for mental health disorders or offered limited treatment. For example, a person with depression might be covered for six sessions with a therapist, rather than enough sessions to bring the disorder under control.
While the potential for higher mental health treatment costs may reduce the benefit of adding more young people to the insurance pool, Sengupta and others say middle-aged people who exercise, have healthy diets and have preventive exams may be the ones who help the insurance pool the most.
Several people have predicted a "death spiral," or that so many sick people would sign up for the exchanges that they would force premiums up and make them unaffordable for everyone. The law provides some protection against that, including a tax on non-exchange insurance products that will be used to offset rising costs, if necessary. There are also risk-adjustment provisions for the insurers, as well as $10 billion worth of re-insurance in 2014 for those who sign on higher levels of people with chronic conditions.
Also, Kingsdale said, many young insurance customers may receive federal subsidies to help buy insurance, so they could cost the system more than older customers who have more money to buy insurance without subsidies.
"The tax subsidy pays in, so if you're supposed to pay $100 based on your salary, you're going to," Kingsdale said. "There are higher premiums, but not higher prices for individuals — their price is pretty much fixed based on their income."
That means younger people are more expensive, he said.
Some analysts have predicted the insurance market could go into a "death spiral" without enough young insurance customers buying into the market and driving down rates for everyone. If older and less healthy people dominate the insurance pool, they will end up costing more in benefits and insurers will have to raise premiums to compensate for the higher costs.
So far, however, that hasn't been the case, said Jen Mishory, deputy director of the Young Invincibles, a non-profit group dedicated to persuading young people to buy insurance.
"With all the competition that we've seen in the marketplaces, insurers are putting out a price, and then they're putting out a lower price," Mishory said. "So that's going to drive down costs as much as anything."
"Having young people as part of the pool is important, but the more people you bring in, the less it matters," she said.