This story was originally published Feb. 12, 2013.
A 32-year-old owner of a small software company pays $275 a month for his and his wife’s health insurance.
A Boise State University business student sends about $130 of her student-loan money to her health insurer each month.
A 29-year-old mother spends about $170 a month on health insurance for her daughter — but not herself, because it’s too expensive. She isn’t sure what she’ll do in 2014, when she’s required to have coverage.
And a 26-year-old Idaho resident, in medical school in Texas, paid $285 a month for health insurance here last year.
These Idahoans could pay much more for health insurance next year, in part because of new federal rules that affect how much insurers can charge people based on age for coverage they buy on their own for themselves and their families. Known as “age band compression,” this shift will transfer some of the costs of health insurance from older Americans to people in their 20s and 30s.
YOUR AGE AFFECTS HOW MUCH YOU PAY
Idaho is one of the cheapest states for buying health insurance, partly because its insurers can factor characteristics like age into a person’s premiums.
Older adults tend to be sicker and have costlier claims than younger adults. Insurers in Idaho can — and do — charge their oldest members more than five times as much as their youngest members for the same coverage.
Starting Jan. 1, they won’t be allowed to do that for new plans. Instead, they’ll be limited to charging three times as much.
The limit doesn’t apply to premiums that workers pay through large employers but does apply to small employers’ plans. People who already have individual plans and don’t change them might not be affected, either.
The idea is to spread the costs among everyone in the health insurance pool more evenly. But in states like Idaho, it could backfire, insurers say. They worry that young, healthy people will take one look at higher premiums and flee the market altogether — deciding it’s cheaper to pay the “individual mandate” fine, which starts at $95 a year in 2014 and plateaus at $695 starting in 2016.
That, in turn, would make the insurance pool on the whole sicker and older — meaning higher premiums for everyone.
“Frankly, if everybody was in the plan, you wouldn’t need the (age-related) difference,” because the pool would be more homogenous, said Blue Cross of Idaho spokeswoman Karen Early. “The reason you have it is older people tend to buy more, because they need it more.”
Regence BlueShield of Idaho’s parent company already operates in two states, Washington and Oregon, that regulate their age bands more strictly than Idaho does, said Scott Kreiling, who leads Regence in Idaho. He has heard that rates in Idaho for young people could rise 27 to 55 percent.
BY THE NUMBERS
Actuaries Kurt Giesa and Chris Carlson of New York management consulting firm Oliver Wyman recently studied what the Affordable Care Act’s changes mean for those in their 20s or 30s.
People 21 to 29 who buy their own insurance and earn too much for low-income premium subsidies will pay about 40 percent more for health insurance, according to Giesa and Carlson. Those in their 30s will average a 31 percent increase.
Brian Cohen, the owner and sole employee of a Boise software company, is happy with his plan through PacificSource. The premium isn’t bleeding him. But what if it goes up 31 percent?
“You know, that’s an $85-a-month increase,” he said. “We can handle that, but we’re definitely not going to be happy about that.”
According to Giesa and Carlson, those at the upper end of the age-rating spectrum — pre-Medicare members in their early 60s — will still pay 1 percent more.
This is just one way that health care reform will have an effect on each person who starts buying health insurance next year, they said.
A DEEPER LOOK
It is “important to move beyond broad averages” when talking about the law’s effect on health premiums, Giesa and Carlson said. “Averages may mask substantial differences in how market reforms will affect individual states and various populations in those states,” especially age groups, they said.
A 25-year-old making $33,510 a year can find insurance for $2,400 somewhere in the U.S., they said. But changes to the law will boost that to $3,408 — a big hike even after a $225 tax credit from the government.
The national health insurance trade association, America’s Health Insurance Plans, is pushing for delayed implementation of the 3-to-1 limit on premiums.
The article suggested another approach, too: phasing in the ratio change instead of letting it hit on Jan. 1.
THE FINE PRINT
There are ifs, ands and buts to these projections. The Oliver Wyman report addresses some of these, and the fact that a lower-priced catastrophic plan will be available to some young people.
▪ The changes will affect everyone differently. Though rates will rise, the arrival in 2014 of federal premium subsidies will lessen the blow to many Idahoans. And rate increases are likely to be steeper for males than for females, who already pay higher rates in the younger age brackets.
▪ They apply to premiums, not out-of-pocket costs that could be free or cheaper because of the overhaul.
▪ Many younger adults in Idaho would qualify for Medicaid if the Idaho Legislature decides to join a federal expansion. The premium hikes on private insurance wouldn’t affect them.
Most of these unknowns are pertinent to Sandra Russell, a Boise State business student who will be 29 when the age-band change kicks in. She considers health insurance a necessity, so she has a $5,000 deductible Blue Cross of Idaho plan.
Her premiums have gone up very little — maybe $15 — in the six years since she started buying her own health insurance, she said.
School is her full-time job, so her lack of income could mean she’ll get health insurance through Medicaid or with a premium subsidy next year.
If that doesn’t happen, she figures she’ll just pay for a more expensive plan, even though money is already a little tight when she has to pay her premiums at the end of the semester, before student loans are disbursed.
“I could take that $130 a month (this year) and spend it or save it,” she said. “But ... you don’t know what’s going to happen tomorrow.”