September 14, 2009, 12:01 PM
How Much Should Older Americans Pay for Insurance?
By MICHELLE ANDREWS
Should older people pay more for health insurance than younger people, and if so, how much more?
The issue has long been on the radar of health policy analysts and consumer advocates weighing the fairness and affordability of health care costs. But it’s likely to receive more scrutiny now. The health reform “framework” put forward by the Senate Finance Committee’s chairman, Max Baucus, Democrat of Montana, proposed a new standard that would permit older people to be charged significantly higher premiums than would be the case under any of the other health care reform bills.
Under Senator Baucus’s plan, insurers would be permitted to charge older people five times more for their health insurance premiums than younger people. That proposal, first circulated in a Finance Committee policy options paper last spring, is a significant departure from the approaches put forth by three House committees and the Senate Health, Education, Labor and Pensions Committee. Those bills would only allow insurers to charge older people twice as much as younger ones.
“A lot turns on whether it’s a 5:1 ratio or a 2:1 ratio,” said Drew Altman, president and C.E.O. of the Kaiser Family Foundation. “It makes a big difference as to whether a 55-year-old worker will be able to afford health insurance.”
According to AARP, the lobbying organization for older Americans, the number of uninsured adults between 50 and 64 grew to 7.1 million in 2007, an increase of 36 percent over 2000. Among the main reasons for the increase: higher premiums demanded of older, sicker people seeking coverage in the individual insurance market.
Currently, people who get health insurance through their employer generally can’t be charged higher premiums because of their age. But in the individual insurance market, “age-rating,” as it’s called, is common, and only eight states place limits on how much more insurers can charge older people, according to a report by the National Women’s Law Center. In all other states, insurers can — and do — charge older policyholders more, though insurance industry representatives say they can’t pinpoint exactly how much more on average.
The proposals under consideration in Congress would apply to individuals and small businesses that bought coverage through the proposed health insurance exchanges, where insurance companies would offer a variety of plans.
The rationale for charging older people more is simple. Older people typically have higher health care costs, so they are riskier and thus more expensive to insure. A typical person aged 18 to 24 incurs $1,441 in annual health care expenses, according to Kaiser Family Foundation research. The annual tally for someone between 45 and 64 is more than three times that: $4,863.
But some health policy experts argue that allowing insurers to charge older people five times more than younger ones would be a giveaway to the insurance industry, which already stands to benefit handsomely from millions of new customers if, as proposed, everyone is required to have insurance.
Proposed health care legislation would forbid insurers from charging sick people more or rejecting them outright. But by allowing insurers to charge so much more for older, often sicker people, “You’re just using age as a proxy for health status,” said Uwe Reinhardt, an economics professor at Princeton University. He estimates that Senator Baucus’s age-rating plan would allow insurers to cover roughly 70 percent of the additional risk they’d take on by being required to accept all comers, regardless of health.
Not surprisingly, the insurance industry begs to differ. Noting that in addition to higher health care costs, older people also tend to have higher incomes, Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, said, “Our goal is to make coverage as affordable as possible for as many people as possible.” He said that tax credits should be made available to help those who couldn’t afford premiums.
Beyond the question of affordability is one of philosophy. Without special rules, everyone agrees that younger people, who are generally more healthy than their elders, would end up shouldering a disproportionate share of health care costs. But maybe that’s exactly what they should do, some argue, knowing that when they get older they’ll benefit from that arrangement.
Dr. Reinhardt, for one, thinks this attitude is unlikely to take hold. “Americans are basically just a group of people sharing the same geography,” he said. “We don’t have a sense of social solidarity.”
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Originally Posted by Lewkowski
