Gender Rating in Health Insurance

by admin on July 7, 2009

A healthy woman and healthy man, same age, same area and same coverages don’t pay the same amount for health insurance and has been a very big issue for a while now.


Several legislative proposals requiring all Americans to obtain health insurance and mandating that insurers accept any applicant regardless of health status — or gender — are gaining broad support from trade group America’s Health Insurance Plans (AHIP) and other industry leaders.

At the same time, several states, including California, are following suit, and moving toward a ban on the industry’s longstanding practice in which women typically pay more than men for the same health coverage.

Health plans tell HPW that gender-based health insurance pricing reflects the underlying differences in costs for men and women as documented in actuarial studies and general claims experience. “The rating differentials for individuals mirror differences in utilization patterns,” Aetna Inc. spokesman Ethan Slavin explains.

“Younger adult women tend to use slightly more health care services than men,” he says. “The differences in utilization tend to diminish between men and women in their 40s and 50s. At that point, men, on average, tend to consume more health care services and may have higher rates than women as they age, generally reflecting differences in chronic conditions such as hypertension, high cholesterol and coronary artery disease.”

The National Women’s Law Center is among those claiming that the practice — which is now banned in 10 states — is discriminatory.

The center cites wide variation in gender-based premiums across the U.S. Insurers using gender rating charged 25-year-old women from 6% to 45% more than 25-year-old men, and charged 40-year-old women from 4% to 48% more than 40-year-old men for identical plans, according to its report released in December 2008.

Reform Bill May Ban Gender Rating

Sen. John Kerry (D-Mass.) cited the report’s findings when he introduced legislation May 5 that would ban gender rating in the individual health insurance market. The bill (S. 969) was referred to the Senate Health, Education, Labor and Pensions (HELP) Committee, chaired by Sen. Ted Kennedy (D-Mass.). That panel’s own reform bill, which got a preliminary costs “scoring” from the Congressional Budget Office (CBO) June 15, calls for barring the practice of gender rating in the individual and group markets.

Meanwhile, the Senate Finance Committee stated in one of its recent “options” papers — used by panel members in sifting through national health reform issues — that it would consider barring gender-based pricing for health insurance in the individual and small-group markets. That bill’s release has been delayed until after the July 4 recess. At a roundtable discussion conducted in May by the panel’s chairman, Sen. Max Baucus (D-Mont.), Karen Ignagni, AHIP’s president and CEO, basically reiterated the group’s position that gender rating should be phased out as part of comprehensive health reform.

Indeed, in AHIP’s first letter to Congress on reform — sent March 24 to Baucus, Kennedy, and Sens. Charles Grassley (R-Iowa) and Michael Enzi (R-Wyo.), the ranking minority members of the Finance and HELP committees, respectively — the group said it supports moving to an insurance system “in which health-status-based rating is no longer used.” AHIP went on to say that “rating flexibility based on age, geography, family size, and benefit design is needed to maintain affordability.”

AHIP Wants National Rating Reform

AHIP spokesman Robert Zirkelbach tells HPW that AHIP believes rating reform should be done at the national level. Its March letter “addressed the issue of health status rating specifically because that is where all the focus was,” he says. “But we clearly and intentionally left out gender as one of the rating factors that should be continued in a reformed health care system.”

“My guess is they’ve seen the same polling that we have,” Lisa Codispoti, senior counsel for the National Women’s Law Center, says of AHIP’s support for the elimination of gender rating.

On the House side, the Tri-Committee (Ways and Means, Energy and Commerce, and Education and Labor) continues its work on the introduction of a single health-reform bill. “We expect that likewise it will ban gender rating, and we hope reforms apply to the individual and group market, not just the small-group market,” Codispoti says. “We’re very hopeful to see health reform eliminate this discriminatory practice.”

Gender Is ‘Integral Part’ of Rate Setting

Yet actuaries describe risk classification, including gender pricing, as a fundamental principle of a viable voluntary insurance system. Using risk characteristics such as gender is an integral part of calculating premium rates, states the American Academy of Actuaries in a May 2009 paper entitled “Critical Issues in Health Reform.” The nonpartisan group’s paper says that charg-ing different premium rates for men and women reflects the value of the policy and benefits received by the purchaser.

Aetna’s Slavin says it all boils down to the competitive nature of the marketplace, which demands that health plans deliver quality products and services at a good value to all customers. “Aetna’s principal goal is to deliver the most valuable products to as many individuals as possible, irrespective of gender or other personal or demographic characteristics,” he says. “While some would contend that current rating practices challenge women’s access to affordable health coverage, we have been highly successful at developing products that are appropriate and affordable to women. In fact, women make up the majority of our membership for most of our products in several of our largest regional markets.”

Gender is “like any other rating variable,” Mike Sturm, a consulting actuary with Milliman, Inc., tells HPW. “You want to establish people’s rates as accurately as possible, and obviously men and women have different health care spending patterns.”

Sturm calculates that women, including maternity costs, are about 30% to 40% more expensive than men, using Milliman research data on the weighted average of all commercially insured women and men throughout their lifetimes. Even factoring maternity into the calculation, women remain higher cost than men by 20% to 30% over their lifetimes, he notes.

Without gender rating, if a man costs $100 and a woman costs $200, the insurer would charge them $150 apiece, Sturm explains. The situation works if the man and the woman stay in the pool, he says. But if the man leaves the pool, the insurer has $200 worth of cost and only $150 of premium. Yet Sturm says this result is not necessarily clear cut because age and health status seem to be more significant rating characteristics than gender.

If an insurer rates appropriately by age, Sturm asserts that there likely won’t be much adverse selection from gender because men pay more for women’s maternity costs in the younger years, but women pay more for men’s health conditions in the later years, evening it out in the long run.

Cori Uccello, a senior health fellow at the American Academy of Actuaries, analyzes the situation differently. If health insurance costs $100 for men and $200 for women and then insurers go gender neutral, men facing an increase to $150 may drop out. By contrast, more women may enter the pool because premiums are falling by $50. If, instead of a 50-50 split, women end up comprising 75% of the pool, the average premium would rise to $175 even with a gender-neutral premium because insurance still reflects the cost of people buying policies.

“Any time you can’t adjust premium to reflect risk characteristics, then you could have this adverse selection…that raises premiums for the pool as a whole,” she explains.

Uccello says it goes beyond having everyone playing by the same rules: Everyone must buy coverage under an individual-mandate policy, thus keeping a relatively even mix of men and women in the pool. In a voluntary market, if premiums for men are higher than what is reflected by actual spending, then men will be less likely to buy coverage. As the pool’s average is weighted more toward women, additional men may drop out. Factoring in such enrollment effects, she says, the result may be less of a decrease in premiums for women — and more of an increase for men.


The only thing that will happen is the rates for men will go up. Insurance Carriers can not lower the rates for woman, it just can’t happen. Makes sense to me why woman are more expensive, woman have children for one which is a huge expense. More to come I’m sure.


Questions Please call Politi Insurance Agents & Brokers


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