Amy Lotven of Inside Health Policy is reporting that health insurers are now lobbying the Department of Health and Human Services to adopt a transition period for the age-rating provision of the Affordable Care Act. Under the law, beginning in 2014, insurers will have to guarantee coverage to everyone who applies and charge older people no more than three times what younger individuals would pay. But the industry is saying that if it had to adopt that change instantaneously in January of 2014, younger individuals would face big price increases:
The insurance industry is urging the Obama administration to at the very least create a transition process that would phase-in the health reform provision that allows insurers to charge older people no more than three times the amount they ask younger people to pay for premiums. Insurers are concerned that the age-rating provision, slated to go into effect in 2014, will result in “sticker shock” for young people, America’s Health Insurance Plan’s Karen Ignagni said recently.
In 85 percent of the states, the average age rating band is about 5:1 or 6:1, Ignagni said during a panel session at the National Business Coalition on Health’s recent conference in Washington. That means that older people on average are charged five to six times what younger people pay. In those state, premiums will be affected “overnight,” she said.
The age-rating limit by itself is worrisome to insurers, but even more so because it comes in addition to the tax on health insurance plans and a weak insurance mandate that penalizes those not purchasing insurance with a $95 fine in 2014, she said. When all of these policies are compounded, it creates a “major issue” and threatens the ability to get costs under control, she says.
Insurers urged Democrats to stretch out the age-band to 5:1 back in September of 2009. “If age bands are narrowed or ‘compressed’ too much, premiums will rise significantly for these individuals, making coverage unaffordable, and resulting in a smaller and less stable pool, and higher premiums for everyone,” the industry warned. And it’s the same argument they’re making now. But does it have any merit to it? Probably not.
If you think about the economic make-up of most young people, you quickly realize that a good number will actually pay less for coverage because they’ll qualify for subsidies and possibly even Medicaid. The Center on Policy and Budget Priorities (CBPP) estimates that nearly 75% of young adults (under 30) now with individual market plans have incomes below 400% of poverty, as do 85% of young people who don’t have insurance. In fact, 54% of those earn below 200% of the poverty line and would qualify for sizable premiums credits/cost-sharing reductions or Medicaid. Many young people under 30 will also be able to purchase a catastrophic plan which would have a deductible of about $6,000 and much lower premiums.
As CBPP’s Edwin Park put it to me in an email, “If anything, the premium and cost-sharing subsidies and the individual mandate would significantly increase participation among young adults and improve the risk pool (young adults, as one would expect, because of their income and their generally good health are the most likely to be uninsured), easily outweighing any negative effects due to age rating on young adults and limiting premium instability due to having age rating limits for older adults.”
He added, “This is really about wanting to delay lowering rates for older adults and enrolling a higher risk population (as age can be a proxy, albeit an imperfect one, for health status) , at the same time insurers won’t be able to adjust premiums based on health status in 2014.”