Whatever states do about health insurance prices for older and younger adults, one thing remains certain: it will be unlikely to please everyone.
Frederic Blavin and his colleagues at the Urban Institute in Washington, D.C., have published data on how efforts to keep or eliminate age-based pricing differences might affect U.S. residents. The researchers published their data in Health Affairs, an academic journal that focuses on the finance and delivery of health care. The researchers discussed the choices states will have before them should the Patient Protection and Affordable Care Act of 2010 (PPACA) be implemented as written.
Mired in controversy, legal wrangling and political argument since its signing into law in 2010, PPACA faces a multiple-front effort to get the law repealed outright in Congress, as well as to have it overturned in the Supreme Court. Oral arguments before the Supreme Court over the constitutionality of PPACA's individual mandate begin in March.
However, if PPACA survives these efforts to undo the law, and if PPACA is fully implemented on schedule (by 2014), it will create, among other thing, a Small Business Health Options Program (SHOP) exchange system for small businesses and another exchange system for individuals. Exchanges are no-frills online venues consumers can use to buy health insurance; each state must set up its own exchange by 2014 or let the federal government provide exchange services for its residents. The exchanges are supposed to help individuals meet new PPACA health insurance ownership requirements.
Individuals with incomes under 400% of the federal poverty level will be able to use new tax subsidies to buy coverage through the exchanges, and many small businesses will qualify for a 2-year health insurance purchase subsidy.
Insurers will have to see coverage on a guaranteed-issue, mostly community-rated basis, but the researchers point out that states will have the authority to let health insurers charge the oldest consumers in the individual market three times what they charge the youngest adults.
States also will be able to choose whether to merge their individual and small group markets, and, until 2016, they will be able to decide whether a "small group" is an employer group with 50 or fewer workers or 100 or fewer workers.
The researchers used a simulation model they have developed to predict how various decisions might affect the cost of coverage and who has what type of coverage.
The researchers found that the choice of small-group cut-off has little effect on how the health insurance market performed in their simulations. Groups with 50 to 100 lives would, for example, have little incentive to buy coverage through an exchange, the researchers say.
Merging the individual and small group markets seems likely to lower individual market rates without having much effect on small group rates, the researchers report.
Merging the markets might cut prices about 10% for individuals who buy through an exchange and about 8% for individuals with coverage outside the exchange system while leaving small group prices unchanged, the researchers say.
Because merging the markets could lower prices for some without having a significant impact on the rates that others pay, that change could increase the percentage of insured U.S. residents from 90.2% to 90.6%, the researchers say.
If a state chooses to eliminate age rating in an attempt to be kinder to consumers ages 45-64, it could decrease premiums by about 13% (to $8,300) for people in that age group who earn more than 400% of the federal poverty level, and it could decrease the total uninsurance rate in that age group to 6.6%, from 7.6%, or by about a million people, the researchers say.
But eliminating age rating would increase rates by 22% for relatively high-income consumers ages 18 to 34 and increase the uninsurance rate for those consumers from 9.9% to 10.6%. Moreover, the overall uninsurance rate for nonelderly adults might increase from 26.2% to 27.2%, the researchers say.