GOP's prescription for insurance markets could raise premiums for older patients

Dale Marsh has not been enamored with his health insurance since the Affordable Care Act took effect. Premiums for Marsh, 53, and his wife, Tammy, rose, their deductibles grew, and they gave up access to their regular doctors to keep costs down. This year, facing monthly premiums of $1,131 -- a 47 percent increase from four years before -- they decided to go without coverage.

"It's useless insurance," said Marsh, who owns a software company with Tammy, 52, in Graford, Texas. "We're praying for the best, that neither one of us need insurance, that we don't have to go the hospital."

Yet, a new premium spike may be in store for those in their 50s and 60s. As Republicans consider how to bring down costs for younger people, lawmakers are considering relaxing or eliminating the restrictions on how much more insurers can charge older consumers.

Middle-aged Americans already face the highest premiums in the health care markets for individuals who don't get coverage from their workplace or the government. Plans are permitted to charge three times as much for a 64-year-old as for a 21-year-old. Last year 3.3 million consumers ages 55 through 64 bought insurance on the marketplaces. That was a quarter of all those covered, more than any other age group tracked by the federal government, data show.

The GOP has not unified behind a single plan, but one proposal last year by House Speaker Paul Ryan (R-Wis.) would let insurers make older people pay five times more than young adults. Another plan offered by Department of Health and Human Services Secretary Tom Price when he was a Georgia congressman would do away entirely with age restrictions and instead give tax credits that increase by age. House Republican leaders embraced a similar concept of tax credits this month.

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The politics for Republicans are precarious as older voters are such an important part of their support. More than half of consumers who bought insurance on the federal exchanges last year in Iowa, Ohio, Pennsylvania and Wisconsin -- all important states in the presidential election -- were 45 or older, according to a Kaiser Health News analysis. Insurance purchasers in Florida and Michigan also trend older than in most states.

Many older customers think current prices are not fair. "I'm in excellent health, I don't live at the pharmacy," said Susan Finney, a 59-year-old commercial real estate broker in Chesterfield, Mo. "I'm a walker, four miles a day."

Finney said her monthly premiums have risen from $490 to $793 since 2015. "The health insurance companies are out of control," she said.

Before the health law, insurers selling policies to individuals could base their premiums on several factors, including age, gender and health history. That meant many states allowed ratios of 5 to 1 or even higher.

The insurance industry favors relaxing the age rules, arguing it will allow them to reduce rates for younger consumers, who are coveted because they tend to be healthier and thus use fewer medical services. Last year 2.2 million people ages 26 to 34 obtained coverage on the markets -- a third fewer than purchasers ages 55 and over. The imbalance between young and older consumers is one reason premiums jumped in many markets this year.

Two studies predict changing the age rules to 5 to 1 would lead to double-digit spikes in premiums for older people and significant but smaller reductions for the young. A major reason for the dramatic swings is that age is one of the few elements that insurers are allowed to consider when setting rates. The 2010 health law barred insurers from considering most other factors, including the health and medical histories of people when setting rates and their genders.

The actuarial firm Milliman estimated that if insurers were allowed to charge older people five times more than young ones, adults in their 20s would see their annual premiums drop by $696 -- 15 percent -- to $4,008 next year.

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But those savings would pale next to the added burdens on older people, Milliman said. Those in their 60s would see average annual premiums rise by 22 percent, growing by $3,192 to $17,916, according to Milliman's projections, which were commissioned by AARP. That lobbying group for older Americans opposes loosening the age rules. A study last year by the Rand Corp. for the Commonwealth Fund, a New York foundation, projected up to 29 percent premium increases.

"We do need to make it more affordable for young people," said Susan Murray, the Marshes' health insurance broker in Dallas. But, she said, plans are already too expensive for many older people who earn too much to qualify for financial assistance from the government. "There are the lost people like Dale who just can't afford it," she said.

James Capretta, a former budget adviser to President George W. Bush now at the American Enterprise Institute, a Washington think tank, said older people can afford to pay higher premiums than young people, especially if Republicans add other provisions to cushion them from the highest costs.

"People 50 to 65 are probably in their higher earning years, they've had the capacity to work and save more," Capretta said. "People at 25 are just starting out, and we're adding this additional burden on them."

Others worry the changes might backfire by discouraging healthy older people from signing up. "Those are the very people you want to keep," said Sabrina Corlette, a researcher at Georgetown University's Health Policy Institute. "They're healthy, and because they're older, they pay a higher premium."

It's not clear how many people would be swayed to buy -- or drop -- insurance if age changes were made. Milliman estimates that if the age ratio was increased to 5 to 1, enrollment for people ages 50 and older would drop by 18,000, while enrollment for those under 50 would increase by 386,000. That would mean a net increase in enrollment of 2 percent. Rand had more seismic estimates, predicting 3 million people under 35 would gain coverage but 700,000 people over 47 would drop coverage.

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"Reduced coverage among older adults, who are at greater risk for health problems, under the 5:1 approach could likewise raise costs for hospitals, doctors, and other health care providers, who will see more uncompensated care," the Rand economists wrote.

As Republicans mull various ideas to lower premiums, health economists say each has drawbacks. Some want to give the most expensive patients separate insurance underwritten by the government, which would add billions to the budget deficit.

Others want to trim all the types of services insurers must cover, but savings would be limited by the fact that the costliest kinds of care, including hospitals, doctors and prescription drugs, are the ones that most people can't do without. Lawmakers are considering several methods to make sure healthy people buy insurance, including automatically enrolling them and letting insurers charge higher rates to those who let their coverage lapse.

Price suggested replacing income-based tax credits with age-based tax credits up to $3,000, but those wouldn't even cover the premium increases anticipated by Rand and Milliman. It would be unlikely to be enough for someone like Robert Baker, a 59-year-old hairdresser in St. Louis, who says insurance costs are too high even though he qualifies for an income-related subsidy.

Baker said he did not buy insurance this year. The 2008 financial crisis wiped him out, he said, and he needs to sock away earnings for retirement. "If I spend most of that on insurance, I won't have any money when I'm old," he said.

Twitter: @HC_Finance