Restrictive age rating regulations would increase premiums for the youngest and healthiest Americans

Sep 24 2009

Allowing age adjustments more restrictive than 5 to 1 would cause dramatic premium spikes for the young and healthy in the individual insurance market, making coverage unaffordable for many according to a new analysis.

The Blue Cross and Blue Shield Association (BCBSA) released today new data, prepared by Oliver Wyman's Actuarial and Health and Life Sciences practice, showing that a 2 to 1 age rating ratio would increase premiums for the youngest and healthiest Americans in the individual market in many states by nearly 50 percent in the first year, relative to a 5 to 1 age rating ratio.

Currently 42 states permit health plans to vary premiums based on age by 5 to 1 or more -- the primary benefit being that premiums are kept affordable for younger individuals to encourage broad participation. If more restrictive age ratings are implemented, younger people would opt out of purchasing coverage. Oliver Wyman estimates that, over a five year period, more than 1 million younger members would leave the market, resulting in a 10 percent premium increase overall for individuals in some parts of the country.

"An affordable, sustainable insurance market requires broad participation across all age groups to maintain more affordable premiums. As this analysis shows, overly restrictive age rating regulations would hurt a large portion of those with individual coverage -- making coverage less affordable and undermining the key goals of healthcare reform," said Scott P. Serota, president and CEO of BCBSA. "To ensure the long-term sustainability of healthcare reform, we must strike the right balance on age rating to avoid disproportionately burdening one segment of the population over another. For this reason, we support a 5 to 1 age rating similar to what the vast majority of states permit today."

The Oliver Wyman analysis also finds that restricting age rating ratios to 3 to 1 would increase premiums in many states by as much as 30 percent for younger people, relative to a 5 to 1 ratio.

"Younger individuals are much more sensitive to the costs of health insurance compared to older individuals. The bottom line is that if premiums are too high, young and healthy individuals simply will not purchase insurance and their needed cross-subsidies for older, sicker people will be lost, increasing the cost of healthcare for everyone," Serota said.

The study, prepared by Oliver Wyman for BCBSA, can be found on the BCBS website at: http://www.bcbs.com/issues/uninsured/background/impact-of-changing-age-rating.html http://www.bcbs.com/issues/uninsured/Sherlock-Report-FINAL.pdf

The Blue Cross and Blue Shield Association is a national federation of 39 independent, community-based and locally operated Blue Cross and Blue Shield companies that collectively provide healthcare coverage for more than 100 million members -- one-in-three of all Americans. For more information on the Blue Cross and Blue Shield Association and its member companies, please visit www.BCBS.com.