Chairman Max Baucus’s (D-MT) original mark of the Senate Finance Committee’s health care bill used a modified community rating formula that allowed private insurers to charge older people five times more for coverage than younger people, a ratio that far exceeded the Kennedy and House bills’ 2:1 rating. On Tuesday the Chairman modified his mark with an amendment that lowered the rating to 4:1 and sparked a harsh response from the health insurance lobby.
In fact, today, in its second letter to the Chairman, America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni criticized Baucus — who is already requiring all Americans to purchase private health insurance — for improving the affordability measure. “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 letter warned:
The Mark’s original age band of 5:1 already reflects compression, relative to the natural distribution of underlying health care costs across age groups, and sets a balance whereby younger individuals are cross-subsidizing the cost of coverage for older Americans…For these reasons, we respectfully urge that you restore the age band to 5:1.
Ignagni and the health insurers support modified community rating and believe that in order for insurance pools to function, younger people must subsidize the costs of the sick. But insurers are apparently concerned that a 4:1 community rating 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 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.”