Call It The Xx Markup

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THE PLANK JUNE 26, 2008

Call It The Xx Markup

As if it weren't bad enough that women still end up getting stuck with more of the housework, now it turns out they're also getting stuck with higher health insurance bills.

That's the news out of California, where the state's Blue Shield insurance plan recently announced new rates for people purchasing coverage individually, rather than through an employer or other large group. Blue Shield unveiled the new rates in a recent letter that contained a chart. And if you examined the chart closely--as David Lazarus did for his Sunday Los Angeles Times column--a gender differential comes into view.

Men and women start out at the same place: 18-year-olds of both sexes will pay $98 for a bare-bones, catastrophic plan. But women who are two years older will pay $119 for the same plan, compared to $110 for men of the same age. At age 45, the monthly premiums are $275 for women compared to $246 for men; at age 60, they are $589 for women versus $548 for men. So that's almost $500 a year more that the older woman are paying. For more comprehensive plans--the kind that most people have and that offer a wide array of benefits--the gap is presumably even bigger.

Blue Shield justifies the higher charges by arguing that women, overall, run up greater health care costs--and not just because of pregnancy. (In fact, many of the individual policies don't even cover pregnancy.) One possible reason: Women are more likely to seek preventative care.

This may seem perverse: As Lazarus notes, getting regular preventative care is supposedly a good thing: It prevents serious illness and, if done properly, should keep you alive longer. But by the time the benefits of that materialize in a significant way, during old age, people are getting their basic insurance from Medicare. At the ages people are seeking insurance from Blue Shield, women probably do cost more. Thus, the higher premiums.

Of course, this is preicsely the problem with a system in which insurance is voluntary, expensive, and run by profit-seeking companies allowed to enroll beneficiaries selectively. People who represent higher medical risks will end up paying more for their health insurance. And while sometimes those higher risks are a product of voluntary behavior--eating a poor diet, not exercising, neglecting chronic conditions--sometimes those higher risks are the product of genetic luck. That's the case here. After all, everybody's chance of getting two X chromosomes is precisely 50 percent.

And it's not like you can necessarily blame Blue Shield for taking this sort of action. According to Lazarus' article, Blue Shield decided to start charging women more only after two of its competitors, Aetna and Anthem Blue Cross, started doing the same. Among the large California insurers Lazarus surveyed, only Kaiser Permanente was sticking to gender parity in premiums. But a Kaiser spokesman indicated that it was aware of the market shift--and keeping an eye on it.

This is an old, depressing pattern--familiar to anybody who knows the history of health insurance in America. The earliest insurance policies, which were established by hospitals and grew into the original Blue Cross system, charged everybody one, community rate, paying little or no attention to medical risk. They did so out of a combination of idealism (they were non-profits) and sheer pragmatism (they existed primarily to create a broad base of paying patients for the hospitals).

But in the 1940s and 1950s, commerical insurers entered the market: They "cherry picked" the healthiest beneficiaries to whom they could charge lower premiums. The Blue Cross plans found themselves with an ever-sicker pool of beneficiaries, forcing them to raise rates, which in turn sent more people scurrying to ohter plans. Eventually, the Blue Cross plans had to give up commuity rating--and start discriminating among customers the same way commercial insurers did--because it was the only way to stay in business.

That's the way our insurance system works: To remain competitive, insurers must differentiate based on medical risk. The only way to end the practice is to re-engineer the whole system--either by having government insure everybody directly or by creating a regulated market in which insurers must sell to everybody at uniform prices. In other words, you need a truly universal health care plan.

Which reminds me... Did I mention that John McCain opposes universal coverage--that, instead, he proposes to dump even more people into the individual market, where the price discrimination by health status is most pronounced?

--Jonathan Cohn 

 

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posted in: the plank, business, disaster, education, health, labor, law, politics, social issues, technology, company competitor, david lazarus

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