Young adults may forgo coverage due to 'rate shock'

Now that the U.S. Department of Health & Human Services has issued rules limiting how much higher insurers can charge their older members, some insurers and state regulators are concerned that younger members could face sticker shock when the new prices are implemented.

HHS limited insurers from charging their older members any more than three times the amount they charge younger members. Although that limitation will help curb costs for consumers with expensive health conditions, it will increase rates for young consumers, reported Kaiser Health News.

The concern, however, is that if young healthcare consumers can't afford the higher insurance policies come 2014, they may choose to pay a penalty instead, particularly since they start relatively low at $95 per person in the first year, the Hartford Courant reported. By opting out of insurance coverage, the older, sick consumers who do have insurance could face higher costs.

"We are very concerned about what will happen if essentially there is so much rate shock for young people that they're bound not to purchase [health insurance] at all," California insurance commissioner Dave Jones, told federal health officials at the National Association of Insurance Commissioners fall meeting.

To help avoid this so-called rate shock and compel younger consumers to purchase health insurance, Sandy Praeger, the Kansas insurance commissioner, suggested HHS implement a more "gentle phase-in" of the age rating rule, KHN noted.

But HHS might not have the power to adjust how the age rating is phased in, Gary Cohen, director of the Center for Consumer Information and Insurance Oversight, said at the National Association of Insurance Commissioners meeting. "The statute is pretty clear."

Instead, he suggested state insurance commissioners submit their comments to HHS. "We welcome comments on the rule--both on the policy implications and the reasons why people would like to see a different outcome--but also on what the legal pathway might be that we would employ to get there assuming we agreed on the policy," Cohen said.

To learn more:
- read the Kaiser Health News article
- see the Hartford Courant article