Category: ACA and Policy, Cost of Healthcare, Health Insurance

No Reward for Loyalty

Blue Cross has an active social media presence on Facebook, Twitter and Pinterest. We got this Facebook message from a member, and this is my response.

Dear Sean,

You are 100% right to be concerned about your rates and how they are computed. Before March 2010, if a health insurance company wanted to create a rate discount based on loyalty, they could certainly do that. Today, thanks to the healthcare reform law, it is not allowed.

When the Affordable Care Act (ACA) was passed on March 23, 2010, one of its many rules took the way health insurance is priced and rated away from insurance company control, and even from the state’s control, and sent that power to Washington, D.C.

The newly created federal agency overseeing health insurance rates (CCIIO: Center for Consumer Information and Insurance Oversight) sent out rules that tell every health insurance company in the U.S how to price our insurance.

Now, federal law says all we can do to set rates is look at the cost of the WHOLE risk pool of people, and then divvy up the costs by age, tobacco use, geography and family size. We are not allowed to take anything else into account.

The big drivers – 85% of your rate – are:

  1. The amount of money your ENTIRE risk pool of people is spending
  2. Your age

The feds say you must pay more as you get older. They even tell us how to divide things up based on age.

A basic rate is for a 21-22 year old; let’s call that 1.0. A child rate (age 0 to 20) is 0.65 of that. To make the math easy, we’ll illustrate it this way: the premium for a child would be $65, while a 21-year-old would pay $100.

Rates go up every year based on age in nice, even increments until age 53. That’s when you hit 2.0 (twice as much as 21, or $200 in our example). At age 64, the rate is 3.0 ($300 for our example).

This rate plan was specified in ACA and enforced by the CCIIO. There is zero flexibility. It is very straightforward and forbids us from rewarding people based on their health, loyalty or a host of other factors we think are important.

Compare this to your car insurance. That industry is free to price any way a state will allow them to price, with no federal oversight at all. So the longer you go without a wreck, for example, the cheaper your rates could get. Health insurance cannot be priced that way, so your health or loyalty has been taken out of the equation as a factor by the law.

I’m sorry I don’t have better news for you. This one is directly because we no longer have sole authority (with oversight by the state) over our rates because of the ACA.  And it affects us all, including my family’s insurance costs.

Take care….mrb

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