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Tightening Age Rating Bands Will Increase Premiums For Younger Individuals And Families And Destabilize Health Insurance Risk Pools

posted by Federal Affairs

on January 15, 2013

Background

Today, 42 states allow heath insurance rates to vary by age by a ratio of 5 to 1 (5:1) or more. These ratios are based on the broadly accepted premise that utilization of health care services is correlated with age and that health insurance only works if younger and healthier consumers are part of the risk pool. Age rating ratios of 5:1 or 6:1 strike a careful balance: they provide protection to older consumers without making it impractical for younger consumers to purchase insurance.

But beginning on January 1, 2014, the Affordable Care Act (ACA) restricts age bands in all states to a ratio no greater than 3:1. The Secretary of the Department of Health and Human Services (HHS), in conjunction with the NAIC, recently issued proposed regulations to establish these standard age bands.