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Some firms still basing health insurance rates on gender

As of Jan. 1, California requires all individual health insurance policies to be sold on a “gender-neutral” basis — that is, without any consideration for whether you’re a man or woman.

Some are meeting that requirement. Others, including Anthem Blue Cross, the state’s largest provider of individual coverage, appear to be playing fast and loose with ending what regulators call a discriminatory practice.

“The intent of the law was that insurers would end gender-based pricing as of Jan. 1,” said Janice Rocco, the deputy state insurance commissioner for health policy. “That’s what we expected would happen.”

But that’s not how it’s played out. Blue Shield of California appears to be the only major insurer to have fully complied with the law. Anthem, Kaiser Permanente and Aetna each say it could take months before all individual policyholders have gender-neutral rates.

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At the heart of the matter is what used to be an industry standard: Factoring in a person’s gender when determining monthly premiums. The practice was based on statistical evidence that showed women in their 20s and 30s on average submitted more healthcare claims than older women.

Similarly, men in their 40s and 50s were seen as more costly than younger men.

This isn’t an unreasonable conclusion, just as it could be argued that people who live in certain neighborhoods on average get into more accidents and thus should pay higher rates for car insurance.

But this doesn’t account for individual behavior. A driver might live in an accident-prone area but still have a sterling record behind the wheel. That’s why California now requires insurers not to use ZIP Codes as a main factor in setting rates.

In 2009, state lawmakers passed legislation, which was subsequently signed into law, prohibiting insurers from basing rates for individual health insurance policies on a person’s gender. The thinking was that it’s unfair to lump all men or women into a single category.

The legislation was introduced after I wrote a column about a 22-year-old Blue Shield customer whose rate went up 20% in part because she was a woman. She was in a good health and hadn’t been seeing the doctor a lot.

Hers and other women’s rates went up simply because, as a Blue Shield spokesman told me at the time, the company’s “egghead actuaries” had determined that women are more expensive to insure than men.

One reason for this may be that younger women are more likely to seek preventive care, according to the Kaiser Family Foundation. In other words, they tend to take steps to stay healthy.

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That, you’d think, would be exactly what insurers want. But insurers chose to see younger women as a liability, just as they viewed older men (who also are statistically more prone to doctor visits) as pricier to cover than older women, regardless of individual differences.

I wrote that this was wrong — in the same way that insurance rates can’t be based on race or religion. Lawmakers agreed, and now California has a gender-neutrality law on the books.

But that’s where things start to get fuzzy.

Before the law was passed, insurers told lawmakers that they couldn’t possible do away with gender-based rates overnight. They asked for, and received, an additional year to comply with the law.

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Rocco in the insurance commissioner’s office told me the Jan. 1 start date was never a question in negotiations with insurers. “This was why we gave them delayed implementation of the law,” she said.

The law applies to “contracts issued, amended or renewed on or after Jan. 1, 2011.”

Blue Shield introduced gender-neutral rates for all its 330,000 individual policyholders statewide at the beginning of the month. This resulted in rate increases of as much as 15% for younger men and rate cuts of up to 16% for younger women.

Tom Epstein, a spokesman for Blue Shield, said the company’s lawyers interpreted the law as making clear that no gender-based rates were permissible after the first of the year.

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“We switched over all our individual policies to gender-neutral rates on Jan. 1,” Epstein said.

For its part, Aetna switched about 45,000 individual policyholders to gender-neutral rates Jan. 1. An additional 20,000 policyholders with 12-month rate guarantees will be phased in when their guaranteed terms expire.

Kaiser says 80% of its 305,000 individual policyholders received gender-neutral rates as of Jan. 1, with the remainder to see their rates adjusted in July.

But Anthem says it’s introducing gender-neutral rates for its more than 700,000 individual policyholders only on an annual basis. If a policyholder signed up for coverage last December, say, the new rates might not kick in until this December.

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Jim Anderson, a Kaiser spokesman, said the law states that existing policies need to be updated with gender-neutral rates when they’re renewed. He said Kaiser’s policies renew on an annual basis, so any policies issued in the second half of 2010 won’t have to comply with the new law until July.

Peggy Hinz, an Anthem spokeswoman, also said renewals are made annually so the company hasn’t run afoul of the law.

“We strive to keep rate renewal adjustment periods for individual medical policy renewals consistent,” Hinz said. “It is important to note that Anthem will notify affected members 60 days prior to implementing rate adjustments for our individual product members.”

Rocco said state officials were unaware that so many policies still had gender-based rates. She said regulators will now reexamine each company’s rate proposals for the year.

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As it happens, the gender-neutrality law was originally introduced by former Assemblyman Dave Jones, who is the newly elected insurance commissioner.

Insurers are already feeling heat from his office after Blue Shield, citing higher medical costs, said it would raise rates for individual policyholders for a third time since October. This would hit some consumers with a cumulative rate hike of as much as 59%.

Under the terms of the law, insurers are correct in saying that existing policies need to comply with gender neutrality when they come up for renewal. But it appears most insurers have overlooked the portion of the law that also requires compliance when a policy is amended.

Virtually all insurers have cited the federal healthcare reform law as a key reason for recent rate hikes. That change would seem to represent an amendment of previous terms and thus require immediate compliance with gender neutrality.

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But the bottom line is this: Insurers asked for and received an additional year of charging gender-based rates with the understanding that all such rates would be eliminated by Jan. 1 of this year. That’s how lawmakers and state regulators interpreted the deal.

Now most of those same insurers are saying they’ll get around to eliminating gender pricing as soon as they can, but in some cases it could take up to an additional year to bring all customers into compliance with California law.

That’s not good enough.

The new insurance commissioner should tell insurers that no rate increases will be approved for 2011 until each company lives up to the terms of the bargain.

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Denial of payments — that’s a concept these guys should understand.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com


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