Health Insurance Gender Rankings Rankle

At a recent Capitol Hill press conference on women and health care reform, Sen. Barbara Mikulski started things off with rallying cry: "Equal insurance for equal premiums!" Four female senators spent the event discussing disparities women face in the individual health-care market, where eight states and D.C. consider domestic abuse a preexisting condition and maternity coverage is often lacking. Chief among concerns about health-care discrimination is gender rating, the health-insurance practice of charging different premiums based on gender. Mikulski reiterated the point on Larry King last Thursday: "Just like we didn't get equal pay for equal work, we haven't got equal insurance benefits for equal insurance premiums."

But as is often the truth in politics, strong sound bytes betray a larger, more complicated issue. NEWSWEEK's Sarah Kliff tried to get the facts on what some call smart business, and others call outright discrimination.

Why do insurance companies charge more?
Gender is among a set of characteristics, like age or smoking, that health-insurance companies routinely use to predict a consumer's costs and thus set the price of their premiums. Aside from the obvious added costs of maternity care, research has found women are more likely to visit their physicians than men and thus incur higher costs. This changes around age 50, when men tend to require more health care, and the premiums for women become lower. Federal law prohibits companies with more than 15 employees from charging different premiums for health insurance based on gender or other factors. This works out fine for insurance companies, because costs get spread over a large pool of subscribers. But in the smaller, individual market, premium pricing is largely left up to the company. Insurance companies defend the practice as simple math: those who cost more, pay more, or else the system could not stay afloat. Aetna spokespman Ethan Slavin explains in an e-mail: "In the current environment, using gender as one factor in the rating process helps to ensure that premiums fairly reflect each individual's expected costs and how they currently contribute to the overall pool of available insurance coverage."

So what's the problem?
Women's-rights groups have become increasingly aggravated with the practice, which leaves some unable to afford a plan. They argue that the insurance company's decisions are more motivated by greed than by economics.. The issue came to head last year when the National Women's Law Center published a report finding widespread variation in gender pricing, with women charged inconsistently high rates, depending on company and state of residence. A 25-year-old woman, for example, could be charged anywhere from 6 to 45 percent more than a 25-year-old man. "The huge variations in premiums charged to women and men for identical health plans highlight the arbitrariness of gender rating," the report concluded. (It's difficult to tell how arbitrary gender rating is, since insurance companies do not publicize their costs, although there is at least some research finding women cost more to insure then men). Twelve states either limit the use of gender rating or bar the practice outright; others have considered similar methods. Legislators and activists taking up the cause have termed the disparities "gender discrimination."

So why not just get rid of it?
Proponents of gender rating argue that if you eliminate gender rating (or pricing on any other risk factor, for that matter) and you run the risk of "adverse selection": men, who feel they're paying too much relative to the few benefits they receive, opting out of the system. As the pool becomes more female heavy, men increasingly pull out, to the point that insurance companies no longer have an interest in the market. This played out in Kentucky in the mid-1990s. In 1994, rates for young women were 150 percent that of those for young men. So that year the state passed legislation limiting insurance companies in their ability to charge different premiums based on things like race and gender. Over the next 10 years they saw low-risk individuals—the guys who thought they were overcharged—simply opting out altogether. Then the insurance companies fled, too, about 40 had left the market by 1998. So that year Kentucky largely repealed the program. The insurance companies returned to the state shortly afterward.As the Kentucky experience shows (and similar experiences in other states also demonstrate) small changes in regulation can ripple through a market to have a serious, and not necessarily favorable, impact.

But by no means is Kentucky the rule. Montana, for example, successfuly outlawed gender rating in 1993 and never looked back. A dozen states are now managing similar bans or restrictions. And even if some adverse selection does occur, advocates of gender-netural policies say that's OK—there are larger, philosophical issues at stake. The NWLC report describes how advocates for the Montana and Minnesota bans argued that "society considers gender discrimination to be just as repugnant as racial discrimination," and therefore should drop gender rating, just as they did for race in the 1950s and 1960s.

How will the health insurance reform affect this practice?
Right now, the tide seems to be turning in favor of eliminating gender ratings. In May, the group America's Health Insurance Plans issued a statement in support of "discontinuing rating based on a person's health status or gender" alongside a "personal coverage requirement to get everyone into the system." That second part, the "personal coverage requirement" (or, in health-reform-speak, the individual mandate) is key to what AHIP is saying. Because if everyone has to sign up for health care, adverse selection becomes a moot point: there isn't any selection at all. So it would function much like the current employer-based system, where women and men pay the same, and costs get spread across a large pool. But individual mandates have become a contested point in the health-care debate. If they don't make it into the final legislation, expect to see insurance companies rethinking their support for scrapping gender ratings, and the battle starting anew.