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Washington Bureau -
Under the healthcare proposals now before Congress, insurance company would no longer be able charge higher prices to policy-holders who had diabetes or cancer, became pregnant or was severely overweight.
But the far-reaching clamp-down on insurance companies leaves one highly controversial element untouched: The question of how far insurers can go in charging higher premiums to older policy-holders than to younger, presumably healthier consumers who are less likely to file costly claims.
Under the provisions in the bill taken up by the House on Saturday (update if passed), as well as in the likely Senate version of a healthcare overhaul, insurers will be able to charge middle-aged consumers at least twice as much as they do younger customers.
And depending on the ultimate language of the Senate bill--still under development--insurers could be allowed to demand four or five times as much.
"There's no argument that healthcare spending for older adults is substantially higher than younger adults," says Linda Blumberg of the Urban Institute, a Washington think-tank that has studied the matter. "The issue is how we want to distribute those costs."
Experts use the arcane-sounding term "age rating," and they discuss it in terms of rations as in a 2 to 1 formula or a 4 to 1 formula. But behind the technical jargon, the issue has huge financial and other implications for millions of Americans.
For example, according to a recent Urban Institute study, if the age-rating ratio were set at 2 to 1, a typical 58-year-old policy-holder would pay about $5,900 a year for health insurance. If the age rating were 4 to 1, the premium could jump to $8,650 a year.
Conversely, a 24-year-old would pay about $2,965 under a 2 to 1 rating system, but the premium could fall to $1,880 if the 4 to 1 ratio were used instead. Beyond what age rating will mean for individuals and families, the issue has huge implications for insurance industry revenues and how affordable coverage might be for different groups of people.
With so much at stake, it's not surprising that a fierce behind-the-scenes struggle has broken out on Capitol Hill.
Advocates for older Americans argue that age rating amounts to discrimination, gives insurers a back-door way to deny coverage to those who need it most, and imposes serious hardship on many middle-aged persons who can't afford sharply higher premiums and are years away from being eligible for Medicare.
"Age is an immutable characteristic. I can't make myself younger," said Natale Zimmer, policy director for OWL, an advocacy group for middle-aged women. "To charge someone more simply based on age really amounts to discrimination."
Moreover, the bills before Congress would bar insurers from denying coverage on the basis of pre-existing conditions or other health status, critics like Zimmer say, but age-rating is just another way of doing it by making premiums virtually unaffordable for the age cohort most likely to develop serious problems.
Some advocates argue that even a 2 to 1 ratio is overly punitive--and ignores the fact that an in-shape 52-year-old can be healthier than an overweight 28-year-old.
On the other side, the insurance industry argues that age rating is necessary to make coverage is affordable for younger people and balance the higher cost of covering those approaching Medicare age.
Rating policy-holders consumers based on age and charging accordingly is the only way to keep costs down for young, healthy people, whose participation in the system is critical to keeping the overall costs of insurance down for everyone.
Because young consumers submit fewer health claims than their older peers, their premiums help cover the costs of older consumers who file bigger claims. "Over time, in order for it to be a solvent insurance pool, you have to do one of the two things: Raise premiums for everyone or figure out a way to get more people into the pool," said Jason Grau, an analyst with Oliver Wyman, a consulting firm that has studied the effects of age rating nationwide on behalf of the industry.
"The premiums need to be able to cover the expected medical expenses."
Currently, age rating is dealt with by states. Their practices vary widely, but age rating is widespread and the rules tend to reflect the insurance industry's perspective. Some states allow rations as high as 10 to 1; some impose no limits at all.
Congressional Democrats are seeking a national standard.
With the House committed to a 2 to 1 ration, Senate leaders are grapple with a bill produced by the Finance Committee, which allows a 4 to 1 rating ratio, and another version passed by the Senate Health Committee, which has 2 to 1.
The industry says that, if the ultimate bill settles on a 2 to 1 age rating, those under 25 would see their premiums jump by 90 percent and anyone under 50 would see their insurance rates increase at least somewhat.
But Blumberg argues that young people are more likely to benefit from the government subsidies to buy health insurance that will be offered to those who make incomes slightly above the federal poverty level, reducing the overall cost to them.
Meanwhile, if the rating bands are extreme, older people will have both higher costs and higher out-of-pocket expenses because they are more in need of services. "It really is a double whammy as you get older," Blumberg said.
Younger people, she argues, should pay a greater share of the expense, knowing that eventually they will take advantage of the same framework. "If they have to pay a little bit more now in the future, they're going to reap the benefits of knowing they have stable coverage at an affordable price that they can plan for," Blumberg said.
But the far-reaching clamp-down on insurance companies leaves one highly controversial element untouched: The question of how far insurers can go in charging higher premiums to older policy-holders than to younger, presumably healthier consumers who are less likely to file costly claims.
Under the provisions in the bill taken up by the House on Saturday (update if passed), as well as in the likely Senate version of a healthcare overhaul, insurers will be able to charge middle-aged consumers at least twice as much as they do younger customers.
And depending on the ultimate language of the Senate bill--still under development--insurers could be allowed to demand four or five times as much.
"There's no argument that healthcare spending for older adults is substantially higher than younger adults," says Linda Blumberg of the Urban Institute, a Washington think-tank that has studied the matter. "The issue is how we want to distribute those costs."
Experts use the arcane-sounding term "age rating," and they discuss it in terms of rations as in a 2 to 1 formula or a 4 to 1 formula. But behind the technical jargon, the issue has huge financial and other implications for millions of Americans.
For example, according to a recent Urban Institute study, if the age-rating ratio were set at 2 to 1, a typical 58-year-old policy-holder would pay about $5,900 a year for health insurance. If the age rating were 4 to 1, the premium could jump to $8,650 a year.
Conversely, a 24-year-old would pay about $2,965 under a 2 to 1 rating system, but the premium could fall to $1,880 if the 4 to 1 ratio were used instead. Beyond what age rating will mean for individuals and families, the issue has huge implications for insurance industry revenues and how affordable coverage might be for different groups of people.
With so much at stake, it's not surprising that a fierce behind-the-scenes struggle has broken out on Capitol Hill.
Advocates for older Americans argue that age rating amounts to discrimination, gives insurers a back-door way to deny coverage to those who need it most, and imposes serious hardship on many middle-aged persons who can't afford sharply higher premiums and are years away from being eligible for Medicare.
"Age is an immutable characteristic. I can't make myself younger," said Natale Zimmer, policy director for OWL, an advocacy group for middle-aged women. "To charge someone more simply based on age really amounts to discrimination."
Moreover, the bills before Congress would bar insurers from denying coverage on the basis of pre-existing conditions or other health status, critics like Zimmer say, but age-rating is just another way of doing it by making premiums virtually unaffordable for the age cohort most likely to develop serious problems.
Some advocates argue that even a 2 to 1 ratio is overly punitive--and ignores the fact that an in-shape 52-year-old can be healthier than an overweight 28-year-old.
On the other side, the insurance industry argues that age rating is necessary to make coverage is affordable for younger people and balance the higher cost of covering those approaching Medicare age.
Rating policy-holders consumers based on age and charging accordingly is the only way to keep costs down for young, healthy people, whose participation in the system is critical to keeping the overall costs of insurance down for everyone.
Because young consumers submit fewer health claims than their older peers, their premiums help cover the costs of older consumers who file bigger claims. "Over time, in order for it to be a solvent insurance pool, you have to do one of the two things: Raise premiums for everyone or figure out a way to get more people into the pool," said Jason Grau, an analyst with Oliver Wyman, a consulting firm that has studied the effects of age rating nationwide on behalf of the industry.
"The premiums need to be able to cover the expected medical expenses."
Currently, age rating is dealt with by states. Their practices vary widely, but age rating is widespread and the rules tend to reflect the insurance industry's perspective. Some states allow rations as high as 10 to 1; some impose no limits at all.
Congressional Democrats are seeking a national standard.
With the House committed to a 2 to 1 ration, Senate leaders are grapple with a bill produced by the Finance Committee, which allows a 4 to 1 rating ratio, and another version passed by the Senate Health Committee, which has 2 to 1.
The industry says that, if the ultimate bill settles on a 2 to 1 age rating, those under 25 would see their premiums jump by 90 percent and anyone under 50 would see their insurance rates increase at least somewhat.
But Blumberg argues that young people are more likely to benefit from the government subsidies to buy health insurance that will be offered to those who make incomes slightly above the federal poverty level, reducing the overall cost to them.
Meanwhile, if the rating bands are extreme, older people will have both higher costs and higher out-of-pocket expenses because they are more in need of services. "It really is a double whammy as you get older," Blumberg said.
Younger people, she argues, should pay a greater share of the expense, knowing that eventually they will take advantage of the same framework. "If they have to pay a little bit more now in the future, they're going to reap the benefits of knowing they have stable coverage at an affordable price that they can plan for," Blumberg said.
