Age Rating Under Comprehensive Health Care Reform

Although Congress has discussed eliminating health-status discrimination in the sale and price of health insurance, there is debate about how to achieve this goal—and whether it’s fair to charge people who are different ages different rates for insurance. While older adults tend to use more care, should insurers be permitted to set higher premiums for the same coverage?

Urban Institute researchers used their Health Insurance Policy Simulation Model to calculate the financial implications of age-based premiums under three different scenarios. They found that regardless of the rating option, there would be little difference in overall health insurance coverage or total spending. However, the affordability of health care costs (premiums plus out-of-pocket expenses after any government subsidy) will be strongly related to the age-based premium rating.

For example, a 55- to 64-year-old buying a nongroup policy but ineligible for a low-income subsidy would face average medical costs topping $10,600 under 5:1 age rating, but about $7,400 under 2:1 rating. Medical costs would be about $5,500 under pure community rating (1:1), where premium prices would be the same regardless of an applicant’s age.

For many older adults and older families, the higher out-of-pocket costs that come with greater medical use in older age, combined with higher premiums due to a steep age rating (such as 5:1), would lead to a high burden of health care costs relative to income.