Rate Cap For Older Consumers Under ACA Will Hurt Younger Insureds
HHS has finalized a series of reforms to the health insurance market that prohibit insurers from charging older consumers more than three times the premiums charged to younger consumers.
Premium variations based on age would be required to fall within a three-to-one ratio for adults. The new rule would establish three age "bands" for insurers to use when setting premiums. One band would include children ages 0 through 20 and charge the same rate. The next band would allow insurers to adjust premiums each year for adults between 21 and 63. The third band would include all adults ages 64 and older.
Currently, 42 states use a five-to-one ratio for adults when setting premiums in the individual market.
"The new restrictions on age rating will result in an overnight increase in health care costs for people in their 20s, 30s and early 40s," AHIP President and Chief Executive Officer
The NAIC said implementing the age rating rule over a three-year period would "mitigate the rate shock" for a key demographic in the market.
"With a transition to the required three-to-one age ratio, younger, healthier individuals will experience more gradual rate increases rather than large one-time rate shocks and will be less likely to drop coverage and further destabilize the market," the NAIC said in its December comment letter. "We agree that using single-year age bands and determining age at renewal makes sense. However, we want to ensure that states can institute different policies if they so desire."
That said, states have moved slowly to enact rules designed to put the ACA into effect.
A total of 39 states have taken no action to implement the ACA market reforms. Those in part include a requirement to guarantee insurer acceptance of all individuals and employers who apply for coverage and prohibiting insurers from imposing waiting periods of more than 90 days before employee coverage takes effect. Other reforms are setting rating requirements that allow rates to vary based on family composition, geographic area, age and tobacco use only and banning insurers from denying people health insurance because of pre-existing conditions, according to a new
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|Source:||A.M. Best Company, Inc.|