HEALTH REFORM: Phasing Out Age Rating
This post appears on the National Journal's Health Care Experts Blog where you can also see what other health policy analysts have to say about age rating, a process which. as we noted in a post yesterday, allows health insurers to charge older people more for health insurance.
Age rating (varying premiums based on age), like medical underwriting (varying premiums based on health status), is one way for insurers to segment risk -- separating the healthy from the sick, making insurance cheaper for some, but inaccessible and unaffordable for many others. In some markets today, premiums can vary as much as 11:1 based on a customer's age. That means the oldest customer could pay as much as 11 times more than the youngest customer simply because of his or her age! In my view, this moves beyond actuarially fair into the immoral category.
Let us not forget one of the central goals of reform is to channel self-interest to serve the social interest. In the case of insurance markets, this means forcing insurers to compete based on price, value, and customer satisfaction, rather than avoiding the sick. Allowing insurers to charge older Americans vastly higher premiums simply because they are older is not part of this vision.
Ultimately, age rating should be eliminated. In the transition period, however, we could lessen its impact significantly by reducing -- without eliminating entirely -- the amount by which premiums can vary based on age. When combined with sliding scale subsidies based on income, this transition period will ensure health insurance is affordable for the young and healthy, while providing immediate relief to those Americans who find insurance unaffordable or inaccessible because of their age.