Health care: Lowering costs for old could raise them for young

Chris Denny, who runs a small marketing firm in Santa Rosa, Calif., buys his own health insurance for $117 a month. An avid gardener, Denny, 27, describes himself as healthy and fit.

Yet the same policy, from the same insurer, would cost a 60-year-old man $735 a month, according to an estimate at eHealthInsurance, an online marketplace that lists quotes and coverage from a variety of insurers.

Such a difference in cost — common around the country — doesn't surprise Denny, who says older people use more medical care: "So is it unfair to charge them (that much) more? I don't think so."

For years, insurers have charged older customers far more than younger ones, in part because of older residents' higher use of medical services. Now, as Congress wrestles with a health care overhaul aimed at covering the majority of the 46 million uninsured, that discrepancy is one area targeted for change.

The outcome could affect tens of millions of people — young and old — who don't get insurance through their jobs and buy it on their own, as well as some small businesses. It would not affect people who are covered by Medicare, or people who work for large companies, which usually get group rates for health coverage.

Lawmakers face a delicate balancing act involving fundamental issues of fairness and cost. Limit insurers to charging only a small difference in monthly premiums between older and younger people, and the younger ones would likely pay far more than they do now. Allow a larger spread, and older residents may be priced out of coverage.

"It's absolutely a double-edged sword," says Marian Mulkey, a senior program officer at the California HealthCare Foundation, a non-partisan group that studies health care. Currently, older customers pay insurers up to four or five times more than younger ones, Mulkey says.

Proposals approved by House and Senate committees would limit insurers to charging older people no more than double what younger people pay. Only nine states now restrict the range insurers can charge individuals based on age.

The congressional limit would apply to insurance sold through proposed "exchanges" — regional or national marketplaces where insurers would offer a variety of policies to individuals and small businesses.

What insurers want

Insurers want Congress to let them charge older Americans five times more than young ones.

The industry trade group America's Health Insurance Plans said in a July letter to House leaders that anything less than that would force many young people to pay more to "heavily subsidize the naturally higher health care costs of older individuals."

"The policy question that needs to be answered is, how much do you want young people to absorb?" says Karen Ignagni, the group's CEO.

If the country doesn't want to shift more costs to younger residents, Ignagni says, lawmakers should allow the wider spread — and back it up with additional subsidies for those 55 and older.

While none of the competing bills in Congress contains the 5-1 ratio, it is included in a policy options paper released in May by the key Senate Finance Committee, which is expected to finalize its bill after Labor Day.

Even advocacy groups are split. AARP, the lobbying group for those 50 and up, opposes the 5-1 ratio but supports a 2-1 ratio.

Meanwhile, a coalition of other groups representing older Americans wants age dropped as a factor entirely.

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