Question of the Week: Will my premiums be lower if I'm healthy?
QUESTION: I am an active person. I exercise and eat right, maintaining a healthy life style. I have been doing so for more the 3 years now. Will my premiums be lower because I am staying healthy?
There are two main insurance company practices to discuss when it comes to this question: health status rating and wellness incentive programs.
Health Status Rating
Currently, health insurers in most states set premiums for people looking to purchase coverage on their own (in the individual market) based on their health status. This means that insurers can look at medical histories and any health risks that people have in order to decide how much to charge them. An active person who eats right may fare well when the insurer looks at how “risky” their health profile is. However, even most healthy people have something—a bad ankle from a teenage injury or allergies that sometimes require medication—in their medical history. When it comes to health insurance, rather minor medical issues like these can end up costing even the healthiest people. Insurers can jack up rates for any blip in an applicant’s medical history, no matter how small. Therefore, while it may seem appealing to healthy people to pay a premium based on their health status, in the end they might not get what they bargained for.
In addition, when premiums are based on health status, those who are sicker find themselves in big—and expensive—trouble. People who fall ill are often charged exorbitant premiums. This concerns us all, because although we may be healthy now, the fact is, someday we might not be. The point of insurance is to share the risks of medical costs with others, which provides the security that if you face large expenses in the future, you will be protected from costs you can’t afford. This can’t happen if people with greater medical needs are charged drastically more for coverage than healthier people.
Under health reform, premium rates will no longer be based on health status. Insurers will not be able to charge healthy people more for the ailments that affected them long ago. They will also be prohibited from drastically hiking up rates for people who are sicker. These prohibitions, along with many other new rules to keep premiums fair and reasonable, will make health coverage affordable for everyone, healthy or sick.
Wellness Incentive Programs
Currently, and also under health reform, insurers and employers may offer premium discounts to health plan enrollees who meet certain goals in “wellness incentive programs.” These goals may be based on participation in a program, or they may be based on actual health outcomes.
Unfortunately, wellness programs are not always fair or effective. When wellness programs are based on health outcomes, such as a lowering blood pressure or cholesterol, the programs may end up punishing people for medical problems that they can’t control. In this case, the result of a wellness program is really no different than an insurer looking at peoples’ health status to find reasons to charge them higher premiums. In addition, many wellness programs don’t provide any supports (like coaching services, weight loss interventions, or even just a convenient location where people can participate) to help people achieve the goals. In these cases, wellness programs function more like a system of surcharges than a real tool to help people stay or become healthy.
Health reform will create new rules to make sure that wellness programs are effective and based on evidence. However, groups representing consumers are concerned because health reform also allows the premium incentives in wellness plans to be larger than they are now. For people with lower incomes or people whose life situations make it impossible for them to participate, the higher premiums they may face if they can’t meet wellness plan goals could make it hard or impossible for them to afford health coverage. When it comes to wellness programs, insurers, employers, and consumers—even those who are relatively healthy—must proceed with caution.
The main takeaway on health status and insurance premiums is that things are not always as they seem. While it may seem like a good idea for healthy people to be charged lower premiums than sicker people, this defeats the purpose of health insurance. Health insurance is meant to be a safeguard that is there for people during the unpredictable times when they most need it—whether it’s for a sudden emergency or for when they are older and in less than perfect health. Only by sharing risks throughout our lifetime can we all have quality, affordable coverage and the peace of mind that it will be there for us when we need it.
Claire McAndrew is a Health Policy Analyst at Families USA, a nonprofit, nonpartisan organization striving to achieve quality, affordable health coverage for all Americans. For more information, visit www.familiesusa.org.