Health Care Reform: The Older You are, the More You Pay

Another thing about the health care reform act: Insurers, including those in the exchanges, can charge higher premiums to older people. The legislation permits “age-rating,” which is terrible for people ages 50-65, who are too young for Medicare, but old enough to pay twice as much as younger people. But of course, AHIP’s Karen Ignazio is complaining that the ratio limit is too low–they want to be able to pay 5 times as much. Why? because, they say, the old geezers drive up costs for young people. Poor babies. Seems like the one thing the health insurance can’t stop doing is  promoting a phony generation war.

Age-rating has received little attention from the media, even from those criticizing the legislation. The exception is women’s groups, who today pointed out that the reform promotes both age-rating and gender rating (not to mention limiting payment for abortion). 

In a press release, NOW says:  

Fact: The bill permits age-rating, the practice of imposing higher premiums on older people. This practice has a disproportionate impact on women, whose incomes and savings are lower due to a lifetime of systematic wage discrimination.

Fact: The bill also permits gender-rating, the practice of charging women higher premiums simply because they are women. Some are under the mistaken impression that gender-rating has been prohibited, but that is only true in the individual and small-group markets. Larger group plans (more than 100 employees) sold through the exchanges will be permitted to discriminate against women — having an especially harmful impact in workplaces where women predominate.

We know why those gender- and age-rating provisions are in the bill: because insurers insisted on them, as they will generate billions of dollars in profits for the companies. Such discriminatory rating must be completely eliminated.

I also wrote about age rating on Unsilent Generation last year, when it was part of the so-called Baucus plan in the Senate. You can read that piece here.
Probably the best report on age rating came out last year from the Urban Institute last October. While it’s now out of date when it comes to the numbers, it provides a good understanding of what’s involved.

One of the central goals of comprehensive health care reform is to eliminate discrimination by health status in the sales and pricing of health insurance and reduce the financial burdens associated with poor health. Consequently, current proposals being considered by Congress would prohibit health insurers from setting premiums based explicitly on the health experience of enrollees. These proposals would promote sharing of health care risk by limiting, but not eliminating, the differences in premiums charged to individuals of different ages.

The age rating limits are quite different across the proposals under consideration. The Baucus proposal (as of September 16, 2009), for example, would allow age rating bands of 5:1 (i.e., the premiums charged the oldest adults could be no more than 5 times those charged younger adults), while the House Tri-Committee proposal and the Senate Health, Education, Labor, and Pension (HELP) Committee proposal would limit age rating bands to 2:1. The larger the variation permitted in premiums based upon age, the less broadly risk is shared, as health care expenditures tend to increase with age.2 The smaller the variation permitted, the greater is the extent to which younger individuals who purchase coverage will tend to cross-subsidize the health care expenses of older individuals.

Such differences in age rating bands will lead to significant differences in the distribution of health care burdens across individuals and families of different ages, particularly those enrolling in coverage independently through the proposed National Health Insurance Exchange (referred to here as “the exchange”). This analysis highlights these differences, providing insight into the trade-offs inherent in this policy choice. We compare the distributional consequences across individuals and families under a health care reform approach similar to that delineated in the House Tri-Committee proposal (H.R. 3200) using age rating of 5:1, 2:1, and 1:1 (i.e., pure community rating where all ages are charged the same premium).

4 responses to “Health Care Reform: The Older You are, the More You Pay

  1. thanks for article…I am 54 years old, fell 6 mos short of my civil service pension (became disabled), and, since I didnt pay enough into SS and Medicare (I paid in PERS, which I do not qualify for, despite working almost 20 yrs), will , as far as I can tell, have to stay on Medicaid for the rest of my life.. I cannot work, accumulate assets (I had to give up my family inheritance–you cannot hide these things!) and I had to give up what was left of a settlement that the drunk, rich guy who hit me on a motorcycle had to give me…I will be broke forever..thanks alot Democrats…

    Before I retired I worked as a social worker–believe me, Medicaid is NOT an answer…I had clients who wanted]to work and could have–if they didnt have to hold onto Medicaid..we are wasting alot of precious talent in this country…shame..after quitting high school, going back, getting a fellowship and scholarship to get an MS degree, here I sit at 54…I just cant believe that NOTHING is going to change for me…

  2. The danger with community rating, gender rating, and minimum packages is that it actually accelerates adverse selection by young healthy people, males especially thus driving up costs more. If young people believe they are paying a wildly disproportionate share of the costs relative to what they use, they are more likely to drop out of the pool, leaving an older sicker population. This is especially true since the fine for opting out would be very low compared to artificially inflated premiums and insurance companies now have to cover preexisting conditions. The young could save thousands and opt in when they get sick!!
    I see the penalties increasing if adverse selection gets out of control, but then you run the risk of younger people being forced in and purposefully overutilizing the healthcare system. After all, if they are paying artificially high premiums, they will likely want at least something in return other than piece of mind.

    This “discrimination” happens in auto insurance in reverse. A 17 year old male driver with 3 tickets is not going to pay the same cheaper auto premiums as a 40 year old driver with a clean record! Why is that ok?

    Perhaps we should vary premiums based more on actual health, rather than age/gender. Ie. an older man with a healthy lifestyle should pay less than a young obese smoking/drinking individual. But how do you police this? Forced physical, etc? Big Brother will be watching you.

    Just some thoughts.

  3. Pingback: Links? Missin’ any links? « eats shoots 'n leaves

  4. Not one penny for private health “care” insurance from me. This travesty of a “law” is no solution. Single-payer or they can go all to hell.

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