Yesterday, America’s Health Insurance Plans (AHIP) — the health insurance lobby — held a press conference focusing on “the need for major change, and for keeping costs in check.” AHIP President and CEO Karen Ignagni warned that “the bill the House passed could thrust too much of the cost of health care onto the shoulders of younger people because it lets insurers charge older people – who typically incur much higher medical bills and whose incomes are generally higher – just twice as much as younger people.”
The lobby has long argued that if insurers can’t set premiums for older adults “as much as 5 times as high as those for younger adults for identical coverage,” then they would have to shift costs to younger applicants. Coverage would become “unaffordable,” “resulting in a smaller and less stable pool, and higher premiums for everyone.”
But a recent report from the Urban Institute disputes these claims. The report, which models premiums under 5:1, 2:1, and 1:1 age bands, concludes that “overall, there is almost no difference across the premium rating options in the share of the total population that would be left uninsured.” Similarly, the various age bands would be very little effect “on aggregate health spending of government, employers, and household.”
However, the report concluded that the insurers’ preferred rating of 5:1 would “significantly alter health care financing burdens for the youngest and oldest adults and families” who don’t qualify for government subsidies (for those who do qualify, the difference would be absorbed by the subsidy.) As the chart below demonstrates, “the affordability concerns are substantially more pronounced” for older single adults (55-64yo) under the 5:1 rating than for younger single adults (18-24yo) under the 2:1 rating”:
A 5:1 rating would significantly burden 55-64 year olds purchasing non-group coverage and actually increase subsidy costs. An earlier version of the Senate Finance Committee bill adopted the industry’s 5:1 recommendation, but changed the rating during mark-up. The insurers, however, insist on the 5:1, noting that the government could provide seniors with an “external” subsidy outside of the exchange to help them afford coverage.
Generally, the industry is concerned that a tighter age band would jeopardize the industry’s ability to attract a significant number of young people into high deductible policies outside of the exchange (in the remaining individual market). A 4:1 or 2:1 community rating would force insurers to charge younger people higher premiums and would presumably attract fewer enrollees; a 5:1 community rating would allow insurers to charge older people more and market more “affordable” (read: high deductible) policies to young and healthy applicants who pay more in premiums than they file in claims.
As former health insurance executive Wendell Potter explained in an interview with ThinkProress, insurers would “like to move us all into high deductible plans.” “[The would like to] have high deductibles that we would all have to meet and or [move us] into these limited benefit plans that are very skimpy and don’t cover you, don’t cover what you need. That way, when you do get sick, they’re not on the hook to pay you anything. They would love to have you enrolled in these.”