Insurers have been saying the age-rating provision in the health care reform law will raise premiums for young adults, but a new report suggests that assumption is overblown.
The health insurance pricing report, out this week from HealthPocket, a website that compares and ranks health plans, found that premiums are already largely in line with the Patient Protection and Affordable Care Act’s age-based restrictions on pricing.
Under the health reform law, insurers are limited to the amount they can charge older people for their insurance to a maximum of three times the amount younger people pay.
HealthPocket analyzed more than 20,000 premium quotes for 3,629 health insurance plans available within the two largest metropolitan regions in each state. It examined price increases in existing policies for males and females ages 23, 30 and 63. Health plans were limited to the individual and family insurance market for consumers under 65.
The study found that average premiums across the nation are 260 percent higher for 63-year-olds vs. 23-year-olds under current plans, under the 300 percent cap allowed under the PPACA.
“The biggest unknown right now for health care consumers is how health reform will affect what they pay for health coverage starting in 2014,” said HealthPocket CEO Bruce Telkamp. “It is encouraging to know that age-rating requirements in the health law will not be a major driver of increases to premiums.”
The age-rating provision has been one of many hotly contested arguments over reform's consequences on premiums.
In January, actuaries at consulting firm Oliver Wyman warned that the law’s age-rating provision could mean a 42 percent hike in premium costs for people aged 21 to 29 when they buy individual coverage.
Supporters of the law say the age-rating restrictions are necessary to ensure seniors are fairly charged for coverage, but others argue the requirement will raise costs for young adults and lead them to forgo health insurance, which will negatively impact the entire market.
“If younger, healthier people choose to forgo purchasing insurance until they get sick or injured, costs will increase for everyone — young and old,” America’s Health Insurance Plans President and CEO Karen Ignagni has said.
But HealthPocket researchers said that assumption is unfounded. They did, however, warn that men may prepare to have to pay up as a result of reform.
Currently, men enjoy lower average premiums than women. For example, the average premium for a 23-year-old man was nearly 20 percent less expensive than the average premium for a 23-year-old woman, HealthPocket data found. But PPACA will eliminate gender distinctions, so a same-age male and female nonsmoker in the same city will pay the same rate.
“Unlike the age-rating limit, the elimination of gender-based pricing will drive premium changes. Certain segments such as younger women will benefit from the prohibition while younger man may pay more as a result,” Telkamp said.