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unisex rates do not help women

Kim Morris | May 6, 2009

Many people observe that charging women more for health insurance is unfair. Senator Kerry recently proposed federal legislation to correct the problem. While I absolutely agree with the intention of this proposal, it may not be practical to implement for several reasons. It is likely that there would be little net savings for a woman over her entire lifetime and there are multiple downsides of eliminating sex-based rating from the individual insurance market. Consider these risks:

1) The only reason that insurers are allowed to charge sex-based rates is that they presented credible data to the various state insurance departments showing that they paid out more claims to women than to men within specific age groups (usually under age 50). This rating principle is at the core of our individual insurance protection laws. Removing it would weaken rating protections available to all women for all insurance products for the benefit of a relative few who buy individual health insurance.

2) Each state insurance department allows the sex-based rating practice for all lines of insurance that are individually underwritten (auto, life, health, etc.).

3) It is mathematically impossible to change one variable in the actuarial rating system without adjusting all the other rating factors. In other words, eliminating the sex-based factor from the insurance rate formula would affect all other insurance rates. The far-reaching effects of Kerry's proposal make it far more challenging to implement than just adjusting the sex factor.

4) We have already outlawed sex-based rating in employer health plans using another entirely different type of sound legal reasoning. Unfortunately, this underlying legal logic of eliminating discrimination in the workplace does not apply to individually purchased commercial products. Some could easily argue that setting insurance prices that do not reflect the individual policy risk or making an individual subsidize another person's cost in a private commercial product is a violation of our society's other basic financial principles.

5) Even if sex-based rating is outlawed, health insurance product designs are still easily be biased against women. For example, almost all of the lowest cost health insurance plans exclude coverage for pregnancy. The trend toward this type of limited benefit insurance is accelerating rapidly and not likely to ease in the foreseeable future.

6) Basic economics says that individual buyers will always gravitate toward the product that offers the best for them. In insurance terms this is called "adverse selection" and will wind up increasing rates for insurance that offers benefits like maternity coverage as more men abandon the plan in favor of a "trimmed down" coverage.

7) Sex-based health insurance rates are not always biased against women. In the over 55 age group, women pay significantly less than men of the same age. Elimination of sex-based rating would mean a sharp rise in health insurance rates for older women at an age when they may be least likely to afford a cost increase.

8 ) The net affect of eliminating the sex-based factor in individual insurance rating would be close to zero, considering the factor listed above. Young women would certainly pay less for health insurance but they would pay more as they get older and would certainly see an increase in their auto and disability insurance rates.

9) The health insurance industry supports the proposal to change to unisex rates because they know it will increase their overall premium revenue since women are more likely than men to voluntarily purchase health insurance.

IMO, this is a good example of "be careful of what you ask for". In the bigger picture, I am sure that women are better off leaving things the way they are.

Tags : womens health insurance

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