When buying an individual health-insurance policy, should older people pay more than their younger counterparts? If so, how big should that price disparity be?
Variation of health premium cost by age is a contentious issue – particularly for customers age 55 and up, who are often charged more by insurers, based on the premise that they visit doctors and hospitals more than twenty- and thirty-somethings.
Both House and Senate versions of healthcare-reform legislation wade into the middle of this debate, by prohibiting insurers from charging older customers more than twice as much as younger ones for similar coverage.
But insurance firms think that spread is too narrow. They want Congress to allow them to charge those at the top of the age scale five times as much as younger, healthier people.
Anything less would amount to a cost shift, with the younger generation shouldering some of the expense for “the naturally higher healthy care costs of older individuals,” said the trade group America’s Health Insurance Plans (AHIP) in a recent letter to legislators.
If nothing else, the price-variation debate shows how controversial some of the smallest details of the big health-reform bills can be.
At issue is the cost of individual health plans purchased in the new health-insurance exchanges that would be established by the bills. Insurance provided by large employers, which typically has little price variation based on an employee’s age, would not be affected.
Medicare, the giant public health system for those over 65, is not a part of this, either.
Purchasing health insurance on the open market can be an adventure for those over age 55. In some markets, the cost disparity between older and younger customers can be as much as 11 to 1, according to data from the New America Foundation, a public-policy institute.
It’s certainly true that it costs insurers more to cover those 55-plus customers. But a ratio of 11 to 1 “moves beyond actuarially fair into the immoral category,” wrote Len Nichols, director of the New America Foundation's Health Policy Program, in a blog comment posted at NationalJournal.com.
Opponents of the 2-to-1 ratio under consideration in Congress say that it would amount to government price controls, in disguise.
While it might hold down costs for older insurance customers, it could also drive up the price for younger ones, who typically have smaller incomes.
And younger people currently are disproportionately represented in another important group: the uninsured. Raising their costs could discourage them further from entering the insurance market – even if the United States mandates that everyone buy health insurance, as current bills would do.
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