Gender Rating in Health Insurance Under Review in California

Gender rating in health insurance, which results in higher premiums for young-to-middle-aged women and older men, is under siege in California.

Two bills banning the practice are before the Legislature, and two state government agencies face a lawsuit claiming that the state constitution prohibits gender rating.

Gender rating for health coverage is illegal in 10 states and tightly regulated in two others. But not in California.

California women buying individual health insurance policies pay as much as 39% more than men for similar coverage because women are more expensive to keep healthy until at least age 55, according to insurance companies and actuarial statistics.  The tables turn later in life, and older California men frequently pay higher premiums than women.

The practice affects only individual health insurance policies. In California, the percentage of people individual policies cover is estimated at close to 10%, a little higher than the national estimate of 7%. California has the highest total of individually covered people at about 2.6 million, according to industry estimates.

Critics say gender rating is unfair and illegally discriminates.

Health insurers say it’s based on the same principles that allow auto insurers to charge more for covering young men and life insurers to charge more for covering men of any age.

Bills Introduced, Lawsuit Filed

Sen. Mark Leno (D-San Francisco) and Assembly member Dave Jones (D-Sacramento) introduced twin bills — SB 54 and AB 119 — to prohibit gender discrimination in health insurance rates.

San Francisco City Attorney Dennis Herrera filed a lawsuit claiming the California Departments of Insurance and Managed Health Care approved a system that is unconstitutional because it discriminates based on sex.

Legislators as well as the San Francisco city attorney’s office would rather deal with the issue in the legislative arena than the judicial.

“I think it’s our responsibility to craft laws, and I think the Legislature is the appropriate place to pursue this but I’m glad the suit is there in case the Legislature doesn’t do the right thing,” Leno said.

San Francisco’s Deputy City Attorney Erin Bernstein agrees.

“As the legislature created the problem of gender-rating by passing statutes that allow health insurers to charge different rates for men and women, the legislature is the ideal body to fix the problem,” Bernstein wrote in an e-mail request for comment. 

“The legislative process can also sometimes achieve quicker results than litigation, and we would like to see this problem — which affects nearly one million California women — addressed as swiftly as possible.   But should the legislative process falter or fail, the City Attorney’s Office is committed to correcting this constitutional problem through litigation,” Bernstein wrote.

Insurers Say It’s Standard Practice

Nicole Kasabian Evans, spokesperson for the California Association of Health Plans, said gender rating is a valuable tool for assessing risk used widely throughout the insurance industry, not just in health care.

“In auto insurance, young men tend to be higher risks than young women, and they pay considerably higher premiums as a result,” Evans said.  

“It’s the same with life insurance — women are expected to have a longer life span, so they typically pay lower premiums than men,” Evans said.

Leno called the industry’s standard-practice argument “disingenuous” in California.

“This is a relatively new phenomenon in California,” Leno said. “They’ve only been doing it here in health care for a couple of years. The fact that they’re able to do it at all illustrates that the insurance industry is running the health care system in this state,” Leno added.

Jones, the new chair of the Assembly Health Committee, points out that gender rating is not allowed in group coverage.

“When it comes to health benefits provided directly by employers, this type of gender discrimination has been banned for over 30 years,” Jones said in a written release. “Those seeking health insurance in the individual market should have the same protections from gender discrimination as those whose health benefits are provided by their employers,” he added.

San Francisco’s lawsuit zeroes in on health insurance because of the financial implications for both government agencies and individuals.

“We’ve focused this lawsuit on health insurance because gender rating in health insurance has direct financial effects on the city, and also because of the devastating effect of being uninsured can have on individuals’ health and personal finances,” Bernstein wrote.  “The same provisions of the state constitution apply to life and auto insurance, but the analysis may be different as applied to those types of insurance,” Bernstein added.

As they’re priced out of the market for individual coverage, more women have to rely on public hospitals and clinics putting a strain on government resources, San Francisco officials said. The financial burden will continue to grow as the economic downtown worsens and the costs of health care rise, city officials said.

California Not Alone

Last fall, a report from the National Women’s Law Center pointed to wide disparities between what men and women pay for similar coverage in the individual policy market.

Since the report, Nowhere to Turn: How the Individual Health Insurance Market Fails Women, was released in September, health officials or legislators from at least four states — California, Colorado, Connecticut and New Mexico — have contacted the center exploring legislative or judicial remedies.

National Women’s Law Center representatives said the report exploring the individual insurance market was needed for two primary reasons — to inform a growing number of women seeking coverage in the individual market and to make sure the issue was addressed in various health care reform proposals being considered nationally and at the state level.

Insurance industry representatives point out the issue is not new and warned that experience shows coverage in states where gender rating is banned or tightly regulated is more expensive for everyone.

“Many states looked at this issue back in the 1980s and different states took different approaches,” said Robert Zirkelbach, spokesperson for the national trade group America’s Health Insurance Plans. “These decisions are based on actuarial tables that pretty much show the same results no matter what state you’re in.”

Evans, from the CAHP, said states that restrict the insurance industry’s use of risk assessment tools like gender rating — known as “guarantee issue” states — tend to have higher premiums than less regulated states.

“Those are the states where health coverage costs the most,” Evans said.

In Massachusetts, a guarantee-issue state, an individual policy covering a family of three costs about $17,000 a year, according to Evans, one of the highest rates in the country. In California, a comparable policy costs about $5,800, close to the national annual average, according to Evans.

Race On Between National, State Reform

The fate of California’s gender rating for health insurance ultimately might be determined by who wins the race between national and state reformers. While the two bills and lawsuit make their way through the Legislature and California courts, respectively, several national reform proposals that also address gender rating are in the works in Congress.

Moreover, President Obama is talking about a major overhaul of the country’s health care system.

Asked if national policy on gender rating might change before California dealt with the issue, Leno said “I’ll take that bet.”

“I am encouraged that for the first time in over a decade that Washington is talking about health care in a serious, substantive way,” Leno said, adding “But I don’t think we should wait. I think California should take the lead.”

Judy Waxman, vice president of health and reproductive rights at the National Women’s Law Center, said a national policy would be best, but she urged states to pursue the issue.

“Ideally it could be done in one fell swoop,” Waxman said. “But if states want to move forward and help to inform the national debate, that’s a good idea,” Waxman added.

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