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Higher Premiums for Older Adults at Issue in Health Care Debate

By Jane Norman, CQ HealthBeat Associate Editor

November 12, 2009 -- Health insurers are wading anew into the thorny issue of age rating, which means allowing health insurance companies to charge higher premiums to older people who buy insurance in the individual market.

Where to set the limit in the health care bill is the delicate question, as well as how to accomplish that without alienating seniors already skeptical of the overhaul.

It's an approach that pits two of the largest health industry lobbies against each other as the congressional debate over the overhaul gets down to the nitty-gritty. They are American's Health Insurance Plans (AHIP) and AARP, the advocacy group for seniors, which issued a powerful endorsement of the House health care bill approved on Nov. 7, in part because of its treatment of age rating.

The health insurance industry is arguing to lawmakers that cost containment is a vital issue that has so far not been considered enough in the overhaul, and drawing plenty of young, healthy people into the system by extending them reasonable premiums is part of the equation.

About 30 percent of Americans ages 19 to 24 lack insurance, as do 26 percent of those ages 25 to 34, according to AHIP information derived from a Kaiser Foundation data table.

But at AARP, it's a question of how far age rating can go before it becomes age discrimination, and before premiums rise so high they are unaffordable for adults age 55 to 64 not yet eligible for Medicare.

The House bill would impose a 2-to-1 age rating, which means someone 55 or older could be charged at the most two times as much as a young enrollee. The Senate Finance Committee adopted a 4-to-1 age rating, thus allowing older people to be charged four times as much as younger people. In some states currently, age ratings can range as high as 7-to-1.

At a briefing with reporters on Thursday, Karen Ignagni, the head of AHIP, said the group is talking with lawmakers about an age rating limit of 5-to-1 in a structure similar to what was proposed during a debate over health care in California. An "external subsidy" was proposed there for people over 55, essentially giving additional money to help older people pay their premiums, Ignagni said. She said AHIP is "very dedicated" to trying to curb the impact of higher premiums on older people.

In the health overhaul on the Hill, initial studies by AHIP show that with a 5-to-1 band, the cost of federal subsidies for younger people would be reduced because their premiums would cost less. That would more than offset the cost of extra premium money for older Americans, she said.

"We've begun to talk to people on Capitol Hill," she said.

Depending on the benefit package, something in the range of $500 per older person could be added to premiums, she said.

Young, healthy people would be more inclined to purchase health insurance under the 5-to-1 age rating band, the insurers argue, thus increasing the size of the risk pool and lowering costs across the board.

Ignagni distributed charts that the association has developed showing that in the 2-to-1 age rating band, annual premiums for the "silver plan" in the Senate Finance Committee version of the health bill would be an estimated $3,179 annually in 2013 for those age 29 and younger in the individual market. Premiums under a 5-to-1 band would be $1,620.

"We were very concerned, looking at these numbers, there might be a strong incentive for younger people to not stay in the pool," said Ignagni. Young adults might instead accept the penalty if they perceive the system is unfairly weighted against them, she said.

But Jim Dau, a spokesman for AARP, said health insurance age rating is nothing more than discrimination that makes health coverage unaffordable for older people.

"Last week, we endorsed the House's health care bill in part because it takes a major step toward ending this practice," Dau said in a statement. "The industry's continued embrace of age rating is further proof that private insurance companies only pose as champions of older Americans when it is convenient to their bottom line. We need to abolish age rating for the same reasons we're ending private insurance discrimination based on a person's gender or health history — because fairness is a fundamental American value and arbitrary discrimination in any form runs counter to who we are."

AARP's John Rother testified before a Senate panel in June that in Massachusetts, even with an age rating of 2-to-1 as well as state subsidies, insurance remains a difficult issue for AARP members there. Massachusetts has already instituted its own health care overhaul, including a requirement that everyone must be insured.

The lowest-priced benefit package in Massachusetts for someone age 60 is $420 to $575 a month, he said. If the age rating were 5-to-1, the package would total $1,050 to $1,335 a month, or half the median income of uninsured Americans age 50 to 64, said Rother. "If age rating is not seriously constrained within national health reform, insurers likely will charge higher rates to older people to substitute for rating based on medical condition," he said.

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