How much should age play a part in determining health insurance premiums? That’s a question that lawmakers are debating, and one that might require an answer that is more strategic than it is fair. In general, older people have higher health care bills than younger people. Because of their lower claims, younger people currently pay much lower premiums for health insurance than older people. But they continue to be the most uninsured segment of our population.
In 2007, the Lewin Group released a report for the Colorado Blue Ribbon Commission for Health Reform. It showed that 38.7% of Colorado residents age 19 – 24 were uninsured. This was far more than the next highest category (27.1% of people age 25 – 34 were uninsured). Several factors contribute to the high percentage of young people who are uninsured. They tend to be healthy, and thus aren’t as likely to see the value in health insurance. They tend to work in entry-level jobs that aren’t as likely to provide health insurance benefits. And they usually have lower incomes than older workers, making health insurance – even if it is cheaper for them – harder to afford.
Various committees in congress have proposed reforms that limit premiums for older Americans to two, three, or four times the cost of premiums for younger people. One way or another, health insurance companies have to take in enough in premiums to cover the cost of claims for the entire insured population. If the amount that can be charged for older insureds is limited to twice the cost of premiums for younger people, it makes sense that premiums for younger people will rise substantially above where they are now. Given the large number of uninsured young people – many of whom cite cost as a major factor in their lack of coverage – it seems that dramatic increases in premiums for this demographic will be counterproductive. Especially if the mandate requiring everyone to have health insurance remains weak.
In order for the health insurance system to function well, and really spread risk across the whole population, we need to make sure that young, healthy people are insured. And to do that, we have to make sure that premiums are affordable for them. People who are sick, and people who are older and more likely to have chronic health conditions, already see the value in health insurance, and will work to fit it into their budget. Young, healthy people might not have as much motivation to budget for health insurance. And if the premiums skyrocket, they will be even less likely to obtain coverage. We need to work on long-term solutions for lowering health care costs for everyone. But in the beginning, we need to make sure that young, healthy individuals aren’t facing health insurance premiums that are dramatically higher than the current premiums that they struggle to afford.