Is it fair that women pay more for health insurance?

The National Women’s Law Center has just published a comprehensive report on individual health insurance. Nowhere to Turn: How the Individual Health Insurance Market Fails Women, that shows that women pay dramatically more than men of the same age.

… NWLC examined all “best-selling” plans (as identified by the online vendor) offered in the capital city in each state for a 40-year-old woman and man … For example, one insurer in Missouri charges 40-year-old women a whopping 140% more than men while another charges women 15% more than men. In Arkansas, all ten best-selling plans gender rate, and the difference in premiums ranged from 13% to 63% more for women. At the same time, not all plans use gender as a rating factor. For example, only some of South Carolina’s ten best- selling plans gender rate, but among those that do, NWLC found that 40-year-old women are charged between 15% and 54% more than men for the same plan.

How can that be? It happens because most states allow a practice known as “gender rating,” which allows insurers to set different health insurance rates for men and women. The National Women’s Law Center (NWLC) opposes this practice:

The wide range of differences in premiums charged women and men shows the arbitrary nature of gender rating in practice. Given the unfair and discriminatory nature of gender rating, and the financial barrier this practice creates for women to obtain necessary health care, the use of gender rating should be abandoned.

Is gender rating truly unfair or does it accurately reflect the differences in healthcare costs between men and women? Is gender rating discriminatory, or is it merely the flip side of an insurance system that routinely charges older men more for health insurance, and younger men much more for car insurance?

First of all, it is important to be clear that we are talking about only a small sector of the insurance market. Most people, including most women, obtain their health insurance through an employer. In fact, only 7% of non-elderly women purchase health insurance directly from the insurer in the individual market. However, the NWLC notes that individual health insurance may soon be a larger component of the health insurance market. Several proposals for healthcare reform involve giving people tax credits to buy insurance in the individual market. In addition, some employers have switched from providing employee healthcare insurance to giving workers a fixed sum to buy insurance in the individual market. Therefore, the phenomenon of gender rating may soon affect a larger proportion of women.

Why charge women more for health insurance than men? The answer is very simple; women under the age of 55 spend much more in hospital costs, physician costs and other health costs than men. There are three main reasons for this: maternity care, exclusively the province of young women; increased incidence of chronic conditions among women; and the fact that well women are more likely to access healthcare services than comparable age men. The fact is that providing healthcare to women under age 55 costs substantially more than providing healthcare to men of the same age.

Most insurance companies have decided to exclude maternity services from basic individual plans. In order to obtain coverage for maternity care, women buying insurance in the individual market must purchase a maternity care rider. A maternity care rider can cost more than the premium for health insurance itself. In addition, riders may be limited in scope, and may require a waiting period (10 months to 2 years) before they take effect. Even then, maternity care riders may leave women responsible for thousands of dollars in out of pocket expenses.

Is it discriminatory for women to pay more for the same healthcare coverage than men of comparable age? The NWLC thinks so. They advocate that states:

should eliminate the discrimination that women face by banning gender rating, ensuring all health plans include maternity coverage as part of the basic benefits package, and eliminating the practices of rejecting applicants due to health history, excluding pre-existing conditions, and rating based on age and health history.

But is it really discriminatory to ask people to pay more for health insurance when it costs more to insure them? Consider that the majority of insurers who charge women younger than age 55 more for health insurance than comparable age men, charge women over 55 less for health insurance than men of the same age. The NWLC does not appear to view this discrepancy as discriminatory to men. Consider also that young men are routinely charged much more to purchase auto insurance than young women, simply because they are more likely to get into accidents that incur substantial costs. The NWLC has not spoken out on gender rating in that part of the insurance industry.

What would happen if gender rating were prohibited? The overall cost of insurance would not change; women would pay less, but men would pay more. An argument can be made, particularly in regard to maternity care, that men are every bit as responsible for a pregnancy as the woman who carries that pregnancy. Therefore, they should share the costs for pregnancy and related services. In that case, premiums for men would rise substantially, but women would not be forced to purchase expensive riders to cover maternity care.

The NWLC acknowledges that what is really needed is fundamental reform of the health insurance system, either by making employee sponsored health insurance easier to provide and easier to obtain, or by merging the individual insurance market with other markets to pool risk over a larger group of group of people to keep down costs. In the meantime, though, the NWLC recommends abolishing gender rating and mandating the inclusion of maternity care. Their recommendations would certainly make individual health insurance more affordable for women, but it not necessarily more equitable for all.

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