HB-10 1008: Concerning a prohibition against consideration of gender in setting rates for individual health insurance policies.

This bill represents a net opportunity gain for Colorado. By equalizing the cost of health insurance premiums paid by men and women in the non-group market, the bill will reduce gender discrimination in health insurance. The bill will help reduce the financial barriers that women face to quality, affordable health care in Colorado.

Summary of Legislation

House Bill 1008 prohibits insurers from using gender to establish premium rates for individual health insurance policies. The bill also declares premium rates based on the gender of the policy-holder to be unfairly discriminatory. All other underwriting practices allowed under state law (such as claims experience and geography) are not affected. The Legislative Council staff's fiscal note reports that the bill will not have a fiscal state impact. (1)

Background

Gender rating is the practice of charging women higher premiums than men for the same health insurance coverage in the non-group (or individual) market based on their gender. Although Colorado bans gender rating by insurers in the small-group market, there is no similar prohibition against the practice in the non-group market.
Last year, a similar bill (HB09-1224) was introduced in the Colorado House of Representatives. During the legislative session, the bill was modified to be a study by the Health Care Task Force to examine the impacts of gender rating during the 2009 interim session. It also directed the task force to make recommendations on gender rating. The current bill, HB 1008, is the result of that study.

Research and Evidence of Effectiveness

The percentage of insured people who are enrolled in the non-group market has remained around 7 percent since 1994.(2) Women, whites, older individuals, those with higher income, those with more education and the self-employed are significantly more likely to purchase non-group insurance.(3) Nationally, 5.9 percent of non-elderly adult (19 to 64 years of age) women and 5.6 percent of non-elderly adult men had non-group health insurance in 2008.(4) In Colorado, 8.4 percent of women (130,400) and 6.6 percent of men (103,200) had non-group insurance in 2007-2008.(5)

With the exception of a few states, non-group plans are medically underwritten and individuals can be denied coverage based on medical history. For those granted coverage, monthly premium costs can vary greatly because benefits, deductibles and co-insurance levels are generally selected by consumers and based on individual needs. Premiums also vary by gender.

Indeed, nationwide studies by the National Women's Law Center(6) found that women generally pay higher premiums for non-group health insurance up to age 55 than do men. After age 55, the trend reverses and men generally pay more. The prevalence of gender-related premium variation cannot be explained by maternity coverage, since in most states, like Colorado, insurers are not required and generally do not offer such coverage. Rather, substantial variations within and across states demonstrates the arbitrariness in setting premiums by gender.

In Colorado for example, a 40-year-old female non-smoker living in Denver will have a premium that is 4 to 49 percent higher than a 40-year-old male smoker living in Denver.(7)

For identical plans in Denver, Fort Collins, Colorado Springs and Grand Junction:

• • A 25-year-old woman pays 10 to 56 percent more than a 25-year-old man.
• • A 40-year-old woman pays 15 to 59 percent more than a similarly aged man.
• • A 55-year-old woman pays 9 percent less to 2 percent more than a 55-year-old man.(8)

Those arguing that gender rating is important for assessing risk maintain that a ban on gender rating will increase premium costs for men and push otherwise healthy individuals out of the market.

However, the limited research available on the impact of rating structures, premiums and non-group market activity does not support this assertion. It is difficult to establish a connection between gender rating restrictions and premiums because of the multiplicity of factors influencing the market.

The National Conference of State Legislatures surveyed states that have banned or limited gender rating, and those that responded reported no negative effects from the restrictions.(9) In a 2005 study on price-elasticity in the non-group market, the Congressional Budget Office found that region, demographics and state regulations had no effect on overall demand of non-group insurance, concluding that, in general, individuals are "relatively unresponsive" to changes in non-group premiums.(10)

Estimate of Impact and Benefits

As the Bell has demonstrated, access and affordability in the non-group market present significant concerns for all Coloradans.(11) Women are particularly vulnerable because they are more likely to work part time and earn significantly less than men. In 2008, women's median earnings were 77.5 percent of men's earnings in Colorado.(12) As the data from the National Women's Law Center demonstrate, Colorado women can pay up to 59 percent more in health insurance premiums in the non-group market than men. In other words, men make more money but pay less for insurance than women. In 2008, one in seven privately insured women reported postponing or going without needed care because it was unaffordable.(13) This disparity can be offset by the elimination of gender rating.

HB1008 will promote the fair and equitable treatment of women in the non-group health insurance market and may allow more women to enter that market. The net positive benefits outweigh the uncertain economic costs.

End notes

(1) Colorado Legislative Council (2010). Fiscal Note on HB10-1008
(2) Frontsin, P. (2008). Sources of Health Insurance and Characteristics of Uninsured: Analysis of the March 2008 Current Population Survey. EBRA Issue Brief No. 321. Washington D.C. Employee Benefit Research Institute.
(3) Congressional Budget Office (2005). The Price Sensitivity of Demand for Nongroup Health Insurance Congressional Budget Office Background Paper. The Congress of the United States, Washington, D.C.; see also, Baker, R. (2009) and Fronstin, P. (2008).
(4) Henry J. Kaiser Family Foundation (2008). Health Insurance Coverage of Women, 19-64, states (2007-2008), U.S. (2008).
(5) Henry J. Kaiser Family Foundation (2008). Colorado: Health Insurance Coverage of Women 19-64, states (2007-2008), U.S.
(6) National Women's Law Center (2008). Nowhere to Turn: How the Individual Health Insurance Market Fails Women; National Women's Law Center (2009). Still Nowhere to Turn: Insurance Companies Treat Women Like a Pre-existing Condition
(7) Still Nowhere to Turn: Insurance Companies Treat Women Like a Pre-existing Condition
(8) Codispoti, L., National Women's Law Center (2009, Aug. 10). Testimony before the Colorado Health Care Task Force.
(9) Cauchi, D., National Conference of State Legislatures (2009, Aug. 10). Testimony before the Colorado Health Care Task Force.
(10) Congressional Budget Office (2005); see also, Baker, R. (2009) and Fronstin, P. (2008).
(11) Baker, R. (2009). Non-group insurance: not a quick fix for health care.
(12) U.S. Census Bureau (2009). Men's and Women's Earnings by State: 2008 American Community Survey.
(13) The Henry J. Kaiser Family Foundation (2009). Women's Health Insurance Coverage.
Note: To get an electronic version of this Opportunity Note with active hyperlinks, please visit our website, www.thebell.org.