Healthcare Town Hall

The Patient Protection and Affordable Care Act (PPACA) introduces new restrictions on insurers’ ability to use demographic variables to price policies in the individual and small group markets. Gender, age, and other community variables have long been used for premium price differentiation. However, beginning on January 1, 2014, rates may not differ based on gender, and must adhere to a maximum 3:1 ratio when comparing the premium for the most expensive adult age group and the least expensive adult age group.

These new regulations will increase the difference between healthcare costs and what insurers are allowed to charge in premiums, raising the potential for adverse selection as traditionally less expensive demographics, such as young males, seek other health insurance alternatives. Plans will also be allowed to vary rates by area, tobacco use, and family size, but those factors are unlikely to offset this effect. Although much of the recent focus on the implications of this change is on the age limitations, in reality much of the restriction’s impact is caused by moving to unisex rates.

See the full article here.

Cost, Reform age rating, demographic, Doug Norris, gender, Mary van der Heijde

The Patient Protection and Affordable Care Act (PPACA) mandates changes to health insurance products if they are to be sold through an exchange starting in 2014. These benefit design changes will not only affect insurer cost, but may result in several other consequences—most notably changes in utilization. Insurers need to properly prepare for and manage the potential for increased utilization and adverse selection when designing plans for entry into a health exchange.

Read the full briefing paper on this here.

Reform Doug Norris, Mary van der Heijde, state exchanges