Age and higher premiums go together: Is it fair?

[September 29, 2009]  WASHINGTON (AP) -- Old people get sick more than young people, and in most states that adds up to them paying a lot more for their health insurance premiums.

President Barack Obama and congressional Democrats want to restrict that practice as part of a top-to-bottom reshaping of the nation's health care system, a change that will help them politically with aging Americans skeptical about the government's plans. Urging them to do it is AARP, the powerful senior citizens' lobby, which says making older people pay more amounts to age discrimination.

On the opposite side is the health insurance industry, which says it's an unavoidable business decision because premiums are based on expected expenses and older people have higher health care costs.

Caught in the middle are people like Colleen Malone-Engel, 53, of Culver City, Calif., who says her insurance premiums jumped when she turned 50 even though she's in good health.

"I don't think it's fair," said Malone-Engel, whose name was provided to The Associated Press by AARP. "I understand why the insurance companies do that -- because they know that older people need more health care -- but I was pretty stunned to have that hit me at 50. Because 50 is still young."

Age rating has the biggest impact on people like Malone-Engel who are in their 50s or early 60s and buy coverage plans directly from insurers. Once they turn 65 they become eligible for Medicare and it's no longer an issue.

In states without restrictions on the practice -- around a dozen limit it to one degree or another -- insurance companies will typically charge six or seven times as much to older customers as to younger ones. For example, a 20-year-old might be able to buy an insurance plan for a monthly premium of $100 that would cost a 60-year-old $700.

The price difference could happen even if the 20-year-old is overweight, while the 60-year-old exercises and has no health problems. However, other factors, such as whether someone smokes, also are considered by companies when setting premiums.

House Democrats have proposed imposing an age rating limit of 2-to-1, meaning that a 60-year-old could only be charged twice as much as a 20-year-old based on age. That's the level embraced by AARP, but insurance companies say it could drive premium prices up for younger workers by as much as 59 percent. They say young people would be bearing larger costs because there would be less flexibility to charge older people more money.

An estimated 40 percent of the uninsured are between the ages of 18 to 34.

"We're very concerned that the impact is to raise rates so much for young people as to make it unaffordable," said Alissa Fox, a top lobbyist for the Blue Cross and Blue Shield Association.

Higher rates could have the effect of discouraging younger people from buying insurance, resulting in fewer healthy people in the insured population and more costly premiums for all, Blue Cross and Blue Shield wrote in a joint letter with America's Health Insurance Plans. The letter was sent to Senate Finance Committee Chairman Max Baucus, D-Mont., on Sept. 23.

In his committee's bill, Baucus originally had proposed a 5 to 1 age rating limit. But after complaints from more liberal Democrats -- who prefer the 2 to 1 ratio embraced by the House and the Senate Health, Education, Labor and Pensions Committee -- Baucus lowered it to 4 to 1.

The move by Baucus pleased no one. Insurers already thought the 5 to 1 ratio was too compressed and said 4 to 1 was even worse. AARP said it was a step in the right direction but still not good enough.

"Some people would characterize this as an age discrimination issue," said AARP Executive Vice President John Rother.

It's uncertain where age rating will end up in any final bill that passes Congress, and Obama's position is unclear. The White House Web site says Obama's plan "will limit premium variation based on age" but doesn't give any details, and a spokeswoman declined to elaborate.

Baucus aides said they tried to strike a balance between making coverage affordable for older people and getting young people into the market, but some committee Democrats are still pushing for a 2 to 1 limit. They say they hope to prevail with help from seniors monitoring the debate.

"Now they're watching the Congress talk about health care reform and the Congress is talking about passing a law that says it's OK to make them pay four times more than somebody else. And I just think the Congress will have to do better," Sen. Ron Wyden, D-Ore., said in an interview.

[Associated Press; By ERICA WERNER]

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