Groups claiming to support women’s rights have recently thrown their support behind California bills AB 199 and SB 54, which would ban the practice of gender rating in the individual insurance market. If enacted, this legislation will have adverse consequences that seem to have escaped notice.
Gender rating enables insurance companies to consider the sex of the policyholder when calculating expected costs in health care. The California Association of Health Plans reports that health services for women under 50 cost 20 to 80 percent more than men in plans excluding pregnancy, and up to 150 percent more when pregnancy is covered. This is because women tend to visit the doctor’s office and emergency room more frequently, and require more preventative care than men.
On the flip side, men older than 59 are expected to cost slightly more than women in the same age group, due to factors such as cardiovascular disease and shorter life expectancy. These gender-associated costs often lead to higher policy premiums.
Hard data notwithstanding, feminists groups and liberal politicians believe gender rating discriminates unfairly against women. Specifically, they cite wide variations in gender-based premiums from state to state as proof of the arbitrary nature of the practice. The cause of this variation, however, is not discrimination, but differences in government regulation.
State government-mandated health services such as preventative gynecological cancer screenings, infertility treatment, acupuncture, and the like are disproportionately used by women. Consequently, in states where government makes coverage of these services mandatory, women’s health care costs go up considerably.
Opponents of gender rating seek a “fairer” individual insurance market, arguing that higher premiums unjustly punish women for something over which they have no control. Will charging women premiums below actuarial value really create a fairer market? Common sense leads us to conclude just the opposite.
For married couples, the health savings of a wife will be negated by increases in the husband’s premium, resulting in zero net savings for the family. For single policyholders, a ban on gender rating will simply shift the cost from women to young, healthy men. Note the irony. Apparently the “provider male” concept lives on with feminists, who have not lost all faith in chivalry, despite decades of striving for independence.
Much like community rating, which averages out risk among policyholders and forces the young and healthy to absorb the costs of the old and infirm, AB 199 and SB 54 will require low-risk policyholders to subsidize those who are more expensive to insure. The adverse effects of this kind of cost-sharing are less painful in the employer-provided health insurance market, where premiums are subsidized up to 80 percent.
The individual insurance market, unfortunately, enjoys no tax advantages and is often the last resort for those who cannot obtain employer-provided insurance and who do not qualify for government programs. As a result, individuals in this market are extremely price sensitive. The consequence of this legislation, therefore, will be an exodus of the lower risk individuals from the market.
A sudden increase in premiums will force many young men to forgo health insurance altogether, adding to the state’s already swelling uninsured population. This will increase the average expected cost of those remaining, causing rates to go up again. In the end, it is quite probable that instead of relieving women’s health care costs, the state will have added to those costs.
Those disturbed by this prospect should consider this novel concept. Instead of writing counterproductive legislation, the state and federal governments should get out of the business of redistributing burdens and into the business of eliminating them. The opportunities abound, the task is not difficult, and new spending is not what is needed today.
First, simply level the tax playing field so individual insurance policyholders enjoy the same tax breaks as everyone else. Remove state regulations that mandate unnecessary health benefits, community rating, and guaranteed issue laws. Allow insurance companies to exclude certain hospitals and doctors from their networks. A 2005 report cited by the Heritage Foundation estimates that eliminating these four state regulations alone can decrease insurance premiums by as much as $2,000 a year.
Those who claim to champion women’s rights should support policies that increase choice, not eliminate it. As we have often noted in this column, women overwhelmingly prefer jobs with fewer, more flexible hours, and value the freedom to move in and out of the work force as their family life permits. These preferences render them less likely to qualify for employer-provided health insurance.
Removing government policies that discriminate against those who need individual insurance will undoubtedly benefit women. In fact, the only demographic group likely to be adversely affected by a reformed tax code and health care industry will be state and federal bureaucrats.