Latest health reform bill to address insurance 'age rating'

A key Senate committee led by Montana Democrat Max Baucus is expected to vote Tuesday on the latest version of health care reform, and there have been reports that the reform legislation would allow insurance companies to hike up premiums based solely on your age.

The idea of charging older people more for health insurance didn't begin with reform -- it's already happening. And the bill aims to limit the cost.

When insurance companies charge older people more for health insurance than younger people, it's called "age rating." For the most part it's limited to cases where individuals buy health insurance on the open market. It also applies to those in Minnesota's high-risk pool and sometimes people who work for a small company that offers insurance.

Those who are usually hit with age rating tend to be people who are self-employed or unemployed and are between the ages of 50 to 64, too young for Medicare.

Delores LaFollette, 64, fits that description. She publishes children's books in Brainerd and hasn't had insurance for the past four years.

"Once I hit 60, my premium went from $463 a month to $587 just for turning 60; that was my birthday present," LaFollette said. "I couldn't afford it. I shopped and it was a bare bones policy no office visits, no preventative visits, nothing."

LaFollette, who's also a volunteer activist with AARP, said she has no pre-existing conditions or health problems and doesn't take any medication. She thinks how you take care of your health, not age, should determine the cost of your insurance premiums.

"If you have a health condition that needs to be addressed, obviously you're probably going to end up paying more," she said. "Of the ones that are healthy and have a lifestyle that they try to stay healthy with, [they] should not be penalized for those who don't do that."

Julia Philips of the Minnesota Commerce Department said on average, as people get older they have more medical expenses.

"Obviously there are counter-examples: young people can have catastrophic medical expenses," Philips said. "But if you look at a population that's large enough to be statistically reliable, you can say that the groups of people that are older are likely to have larger expenses than the group that are younger."

There are two reasons why age rating is getting more attention. First, if health reform requires people to buy coverage they may be subject to some form of age rating. Second, the bills would limit the spread of how much more insurance companies can charge older people. Most states, but not Minnesota, have no limit.

The Baucus bill would restrict insurance companies to charging older individuals no more than four times what a younger person would pay. Different bills the Senate is considering would limit the charges to twice as much as a younger person pays.

The Urban Institute just released a study** that crunched the numbers on what those ratios mean per person. Researcher Linda Blumberg said it depends on your income.

For example, if you're between 55 and 64, single and earn less than about $44,000 a year, the bills provide some government subsidy. If you earn more, under the Baucus bill, you would end up paying about $10,000 a year for health insurance. Under the other proposals, you'd pay about $7,300.

Blumberg said that would by particularly hard on older people who earn more than $44,000 because in addition to higher premiums, they're also apt to need more medical visits, and as a result, pay more in out of pocket costs.

"For those who are just over that subsidy-eligibility range, those that wouldn't be offered a full premium out of pocket we need to worry about them, especially the older under these big 4 to 1 rating bands," Blumberg said.

Minnesota is one of the few states that already have an age-rating cap at 3 to 1, so an older person buying insurance on the individual market can't be charged more than three times more than what a younger person pays.

Right now, the bills don't address what would happen in states like Minnesota if Baucus' plan at 4 to 1 becomes law. The question is whether Minnesotans who aren't old enough yet for Medicare would pay more, or whether the law would apply only to states where such people are already paying more than they do here.

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**NOTE: Since the report came out, the Baucus bill lowered the age rating from 5 to 1 to 4 to 1.