It doesn't.

By Sy Mukherjee
July 20, 2017

President Donald Trump has an…interesting conception of how health insurance works.

In a new interview with the New York Times, Trump defended his knowledge of health care and the Senate’s chaotic attempts to pass a Republican health care bill to repeal (and, perhaps, replace) Obamacare. (On that front, the situation has been changing almost hourly over the past three days, but GOP leaders reportedly plan to hold a vote on some version of the bill next Tuesday. A Congressional Budget Office score of a new version of the Better Care Reconciliation Act was just released Thursday, projecting that 15 million more people would be uninsured next year compared with Obamacare and 22 million more would lack coverage in 2026.)

But in one eyebrow-raising moment, Trump told the Times that health insurance costs about $1 per month when you’re young. “Because you are basically saying from the moment the insurance, you’re 21 years old, you start working and you’re paying $12 a year for insurance, and by the time you’re 70, you get a nice plan,” he said.

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There are several issues with that statement. For one, private health insurance definitely does not cost $12 per year at any age. (The government Medicaid program is only allowed to have nominal premiums, but that’s limited to the poor and disabled.) During the first two months of open enrollment for Obamacare in 2017, the average monthly premium for an individual insurance plan was $393. For 18-to-24-year olds, that figure was $219 per month. Now, that’s before federal subsidies kick in (and the vast majority of Obamacare enrollees receive those subsidies)—but even with the most generous subsidies, monthly premiums likely wouldn’t be much less than $80 to $100, even for younger, less medically costly Americans.

So what if Trump was talking about employer coverage, which is a far larger market that typically carries lower premiums? According to the Kaiser Family Foundation (KFF), the average single employee contribution toward a employer-sponsored health plan in 2015 was $1,255, or about $105 per month. Employers on average kicked in another $4,708 toward workers’ health coverage over the year.

The numbers are clearly a far cry from Trump’s assertion. But, furthermore, the president’s framing that paying just a little into the private insurance system provides some sort of bulk benefit later on in life is also a misreading of how health insurance works. The setup that Trump describes is more akin to a hybrid of term life insurance and whole life insurance.

“[Y]ou know, a lot of the papers were saying—actually, these [Senators] couldn’t believe it, how much I know about it. I know a lot about health care,” Trump told the Times.

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