Yesterday’s news was that insurers are ‘offering’ to phase out their practice of charging higher premiums to sick people if national health reform includes a mandate for coverage. Skeptics denigrated the concession, particularly because it did not apply to small group coverage, claiming the key point of the insurers is their drive to prevent a public option competing with private plans.
In Massachusetts, these practices were eliminated in the early and mid-90’s. But in yesterday’s Commonhealth Blog, Nancy Turnbull reminds us that there is one area in Massachusetts where insurers are still allowed to discriminate – age rating. She thinks age rating’s time may have passed:
“I’d been meaning to suggest that Massachusetts should think about abandoning the major discriminatory rating practice we do still allow, and that’s age rating. Our insurance laws permit health plans to charge older people as much as twice the premium rate as younger people for the same product. The classic argument in favor of age-rating has been that it’s necessary to have lower rates for younger people in order to convince them to purchase insurance. The ability of health plans to age-rate also creates a troubling inequity in the state’s affordability schedule at the highest income levels, where the schedule requires people to purchase insurance regardless of the cost…
But if we look back at the history of many insurance practices that were once common in the insurance market in Massachusetts but have been abolished—like rating based on race or gender, or not providing coverage for maternity care and mental health—we find the same initial opposition. We’ve done many innovative things under the state’s health reform law—let’s talk about whether eliminating age rating should be another one.”
We think this is an important issue to be raised now. ACT!! has long advocated for greater affordability protections for older people who are hard hit by the mandate. There’s no magic about the current 2:1 rate band. New York has long required full community rating – no age discrimination allowed – for small groups. This should be on the health policy agenda for the near future.
Georgia J. Maheras
The older I get, the less age rating seems to make sense. With age comes wisdom, I guess.
An important component of Health Care Reform was to get younger, healthier individuals enrolled, because the primary reason they don’t buy coverage is the cost. The Department of Revenue’s Data on the Individual Mandate and Uninsured Tax Filers for Tax Year 2007 illustrates that point. While individuals between the age of 18 to 26 represent just 14% of all adult residents, they comprised 28% of tax filers without coverage in 2007 and 60% of uninsured tax filers in 2007 were under the age of 40. Charging everyone the same rate will increase the cost for a group of individuals that Health Care Reform was designed, in part, to get into the pool. This will result in more of these individuals choosing not to buy coverage, undercutting Health Care Reform by increasing the cost for those who remain.
Age rating is not discrimination. The question is whether that classification is fair, founded in sound actuarial evidence and whether its use results in an appropriate spreading of risk that helps keep coverage affordable for the broadest range of individuals. Age rating meets all those tests. It reflects the correlation between age, health status and use of the system, and, because Massachusetts limits the extent to which rates can vary based on age, it also fairly spreads risk between the older and younger populations.
States without any kind of age rating, such as New York, have higher insurance costs than Massachusetts. According to the Kaiser Family Foundation, the average single premium for individuals enrolled through an employer in 2006 (the last year data was available) was more than $150 higher in New York than in Massachusetts. For small businesses, those additional costs are significant. Until the individual mandate is enforced completely, young people will continue to avoid paying for coverage and more will drop from the insured ranks if they are forced to subsidize older populations even more than is already required under the current rating law. As the risk pool gets older under this scenario, older people will end up paying more, not less, for their coverage.
Making changes to the rating rules does nothing to get at the underlying factors driving the cost of health care. Health insurance premiums are driven by health care costs and the bulk of the premium dollar – roughly 90 cents – goes to pay for medical services, such as doctor visits, prescription drugs, and hospital costs. Doing something about how much medical services cost will go a long way towards making health care more affordable as opposed to changing the rules so that younger people pay more.
Then why not disease rating. I have HIV. Shouldn’t I be penalized for that. What about my high blood pressure. Ummm why not throw in how depressed I feel now that we’re rating everything.
We want (or should want) the level of rating classification which maximizes the amount of medical care delivered. This is NOT necessarily the same as maximizing the number of people covered, which is what the insurance industry always talks about. Read this paper:
“Loss coverage as a public policy objective for risk classification schemes” http://tinyurl.com/cgal3g
Marylou, I just wrote a response to your same comment on the WBUR Commonhealth website so you (and anyone else who is interested) can check it out there once it’s posted at: at:http://commonhealth.wbur.org/nancy-turnbull/2009/03/two-thoughts-about-possible-reforms-to-the-massachusetts-health-insurance-market-by-nancy-turnbull/#comments.
Neil, I agree with you wholeheartedly on the wisdom that comes with age. Thank goodness there are some benefits!
Nancy
Dr. Buyse,
It would seem that the Massachusetts mandate eliminates the need to make health insurance more attractive to younger people. They are required to have it now. Age rating IS discrimination, just as race rating would be.
The reason you use age as your criterion for a sliding-fee scale, is because it is easy to quantify. You already have the data, and people can’t lie about their age when you have their SSN for verification. However, it is one of the least useful factors to determine how much caring for a person’s health will cost.
I am fifty years old. I just finished the Boston Marathon with a better time than three of my teammates who are in their thirties. I don’t smoke, drink, use drugs or take any medications. My father lived to be eighty-five. My mother is alive and well at eighty-seven. My blood pressure and cholesterol are perfect. I don’t eat red meat or trans fats. I take a vitamin supplement every day. And, my BMI is normal.
Yet, my cost for the same insurance plans offered by the Mass Health Connector are more than twice what they are for a coworker who is overweight, smokes, drinks and does not exercise, simply because he is younger than I am.
I believe that this is illegal discrimination. And, if it is not, it should be. I intend to become very active in fighting against this discriminatory practice, and I encourage anyone who reads this to be as well. Contact your representatives. Contact the ACLU. Write a letter to the editor of your local newspaper. Don’t take this lying down!
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We’re not really talking about “older” people, we’re talking about upper middle age people ineligible for Medicare.
Presumably they pay more because they are more expensive to insure, and because they earn more (in a perfect world).
The trick is to bring down their premiums by encouraging more younger people to get insured and thereby boost the amount of available funds.
Unless health insurance is mandatory raising young people’s premiums will hurt that goal.
“The trick is to bring down their premiums by encouraging more younger people to get insured and thereby boost the amount of available funds.
Unless health insurance is mandatory raising young people’s premiums will hurt that goal.”
This just sounds like a huge Ponzi scheme doesn’t it? Really, I don’t see much difference.
John
@J Braxton: Insurance has always been a ponzi scheme.
Absolutely not.. It should be straight across the board.
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Companies should not be able to discriminate based on age.. it’s crap. But don’t worry– with Obamacare you won’t have even think about insurance coverage! Over 50– let em die!