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HR 544 And Health Premium Rates (Update) Liberty Act

In my previous blog regarding the "Liberty Act" HR 544 seeks to increase the mandated ratio of premium pricing from 3:1 to 5:1 to help reduce monthly health insurance premium costs to younger people.  Currently the PPACA requires that the maximum rate differential between the oldest subscriber and youngest cannot be more than 3 times the youngest subscriber's rate.

To understand what is at issue for younger California residents (and other states as well), we need to first look at rate differential under the current underwriting (can be denied if too risky) system which enrolls only generally healthy individuals.

For my area zip code 95020:

Clear Protection Plus 3300 PPO (most popular plan in CA) at standard monthly rate:

Age 19 - $86.00
Age 63 - $347.06
Age 19 Adjusted to PPACA Ratio - $115.67 (immediate 35% Rate Increase)

1/3 of the age 63 rate would be $115.67.  Under the current system (not a guaranteed-issue take all comers system), the 19-year-old would experience an immediate 35% rate increase on 1/1/2014 to meet the mandatory 3:1 ratio.  The carrier is certainly not going to lower the age 63 rate.  

SmartSense Plus 6000 PPO with Standard Rx at standard monthly rate:

Age 19 - $109.00
Age 63 - $436.00
Age 19 Adjusted to PPACA - $145.33 (immediate 33% Rate Increase)

1/3 of the age 63 rate would be $145.33.  Under the current system (not a guaranteed-issue take all comers system), the 19-year-old would experience an immediate 33% rate increase on 1/1/2014 to meet the mandatory 3:1 ratio.  

As you can see by the examples above, the immediate impact IF the current underwriting system were kept in place and high risks could be denied would result in an IMMEDIATE rate increase for a healthy 19-year-old of approximately 34% across the board.  

Further assuming that rates will be adjusted upward of these current lower-risk underwritten rates to accommodate community rated guaranteed-issue coverage and cover all required essential health benefits and precious metal tier requirements, the rate for the 19-year-old could be stratospheric.  It will certainly be more than the current 34% average increase as the medical underwriting system will disappear and anyone, regardless of health can buy coverage at the same premium rate as someone at the same age in their rating area (community rating).

HR 544 would increase the ratio from 3:1 to 5:1 which would then allow some relief for those at younger ages with the ability of the insurer to price at 1/5 the price of the 63-year-old and not 1/3 the price.

Young people need to be concerned about this.  I have heard rumors that one organization, an association for retired people, is fighting against this bill.  Young people need to be concerned or their health insurance rates (you have to buy it by law staring next January or face a penalty or tax or whatever they are calling it).  



  1. Thanks for the updates, Dave! Your post about premium rates is really informative. It gives awareness to everyone regarding the rates they pay. I’m so glad that I dropped by. I believe everyone should see this. Thanks!

    Fe Penley


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