Friday, August 02, 2013

Will rates for older individuals be going down?

Some background. Today when a person buys a plan in the Individual and Small Group medical insurance market it is not unusual for a 62 year old's premium to be five times higher than for someone age 22. One change in Federal health reform is to restrict the maximum difference for a 62 vs a 22 to no more than three times.

So to answer the question. If today’s plan coverage were to continue and these new age based rules where applied the rates for someone say close to 60 would come down and the rate for individuals in their 20s and 30s would go up quite a bit. However, today's coverage will be changing. Health reform requires all Individual and Small Group market plans to cover 10 essential health benefits plus meet limits on how much the plan pays and how much an individual will have to pay.

Let’s look at how premiums will be developed beginning January 1, 2014. For illustration I will use a family where the Father is 52 and the Mother is 48. They have several children:

Child One is age 23 and in College. Child Two is also in College and 21. Child Three is 19 and in high school. Child Four is 17 and Child Five is 15 and both are in high school. Child Six who is a late arrival to the family is 7!

Starting January 1, 2014:
● In a situation where just Mother and Dad were covered for example on Plan abc the premium will no longer be based on Dad’s age as now, whether covered on a small group plan or under an individual plan. There will also no longer be male and female premium amounts and each age will have a separate rate. Thus, in this situation the two amounts are added to get Mom and Dad’s monthly premium for Plan abc.

● In a situation where Mom and Dad are going to cover themselves and just Child One and Child Two each will be charged the Plan abc rate for their age. BTW, the premium for someone age 21, 22, 23, & 24 will be the same. Thus, these two amounts will be added to Mom and Dad’s premium.

● In a situation where the couple wants to cover themselves and just Child Three, Four, Five, and Six, shown above, there are special rules for children age 20 and under. The Plan abc premium will be .635 of the age 21 amount for Child Three, Four, and Five. These three amounts will be added to Mom and Dad’s premium.

● What about Child Six above? When a family has Child Four or more, age 20 or under, there is no additional cost.

Each medical insurance plan has to use the new year by year rates, which start at age 21. This is the base rate and considered to be a Factor of one. Starting at 25 the factor will increase a certain amount for each age until age 64, which will be a Factor of 3. Thus, the amount for the person 64 will be three times higher than someone age 21.

Specific premiums have not been finalized here in Connecticut but initial insights indicate we will see:
● Individual plans continuing to be less expensive than small group plans.

● Not a lot of difference (generally) in the premium charged by different health insurance companies for the same plan.

● A variation in premium based on location, as it now does, with Fairfield County tending to be the most expensive. Premiums here in New London County may also be higher for certain companies than in some other counties.

Federal health reform also brings us a new online place for Individuals and small employers to review plans from different companies, select one, and enroll for coverage. It is called a Health Insurance Marketplace and here in Connecticut it will operate under the name Access Health CT. The details on how much of the application and enrollment process will initially be fully automated are still in the to be determined pile.

The Access Health CT online marketplace is the only place where a person can apply and perhaps, based on their income, receive a premium discount. You can learn more about it here.

The companies currently selling medical insurance plans in Connecticut’s individual and small group “outside” market will continue to offer plans. Individuals may have options in the “outside market” in addition to what is offered “inside” Access Health CT.

John C Parker, RHU, LTCP

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