patients typically utilize more, and higher cost health care services than
younger patients. One way states can ensure that coverage remains affordable
for everyone is to use age rating bands that spread premium costs over a range
of age groups. For example, in a state
with a 5:1 age band, the ratio limits the amount an older individual will pay
to no more than five times what a younger individual pays in premium
dollars. Currently 42 states have age
rating bands that are 5:1 or more.
January 1, 2014, the law limits the age rating band to 3:1, causing an
overnight increase in premiums for younger individuals (ages 18-49) that live
in states that currently have higher age bands. This increases the likelihood that younger, healthier people will choose
to pay the penalty and wait to purchase health insurance until after they get
sick or injured, thus driving up costs for everyone else. An article from actuaries at Oliver Wyman published in Contingencies highlights the impact of the Affordable Care Act’s (ACA) age rating restrictions on premiums.
To see how age rating will affect premiums, watch AHIP's new video:
A new report from Milliman, Inc. helps explain how the Affordable Care Act’s (ACA) coverage expansion, new benefits, and market reforms will impact individual market health insurance premiums in 2014. The report highlights how some provisions will increase premiums while others will make health care coverage more affordable for consumers. The focus of this report is to highlight the broad range of changes happening in the marketplace and the wide variation in impact that is likely to occur.
This presentation from Oliver Wyman examines the impact of ACA market reforms on affordability.
America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni released the following statement in response to new rules released today by the U.S. Department of Health and Human Services (HHS) finalizing the age rating restrictions included in the health care reform law.
America’s Health Insurance Plans (AHIP) has raised concerns about the impact the ACA’s age rating restrictions will have on the affordability of health care coverage.
Wyman has developed an actuarial model to study the impact of different reform
proposals on the individual and small employer health insurance market. According to this model, if the age band is
compressed to 3:1, premiums for the youngest-healthiest third of individuals
would be 35% higher in Year 1 compared to reform with 5:1 rating bands.