‘X’ marks big spot for health costs

By Jonathan D. Walker, M.D.
The Journal Gazette (Fort Wayne, Ind.), Feb. 24, 2012

There is an aspect of our health care system that costs us all a lot of extra money and affects about half the readers of this piece in a very negative way. But to understand it you need some background.

There are two main types of insurance: actuarial and social. Actuarial means that insurance companies know who you are and what you have done, and that determines the cost of insurance. Car and life insurance are examples of actuarial insurance.

Social insurance means that everyone puts in a little bit to help cover everyone – there is no attempt to divide people into who is risky and who isn’t. Medicare is an example, and in a sense so are policemen, firemen, public schools and other programs that we all pay for to have them there when we need them.

Americans have a split personality when it comes to how we pay for health care. For instance, if you are older than 65, most of your health care is covered by social insurance. The majority of us, however, get insurance coverage from private, for-profit companies.

Those companies have to use actuarial methods to survive; they need to look at whom they are insuring and charge premiums based on how risky those people are.

It turns out that there is one big group that automatically gets charged a higher rate by insurance companies. That group is much larger than other groups that insurance companies charge more for, such as smokers and diabetics. The group happens to be women, because on average women have higher health care costs than men. Young women tend to do expensive things like have babies. Middle-aged women have the unfortunate distinction of getting expensive diseases like breast cancer.

Charging more for women is known as “gender rating,” and it has several consequences. First, it means that employers have to pay more if they want to give benefits to female employees, which can translate into less money available for salaries and raises. Additionally, gender rating has a big effect on people with high-deductible insurance plans. Because women on average have more health care expenses, they automatically get a pay cut with high-deductible plans relative to men – on average it is a loss of income of more than $1,000 a year, according to a 2007 study in the Journal of General Internal Medicine. Finally, actuarial methods such as gender rating require each insurance company to have a large bureaucracy that determines everyone’s risk, and those bureaucracies result in administrative costs that make health care more expensive for all of us.

The new health care law tries to stop gender rating – but the rules won’t take effect until 2014, and they won’t take effect at all if the law is repealed. Unfortunately, insurance company lobbyists made sure that the rules do not apply to all insurance markets, so even if the law remains in place, gender rating will continue. If you are a female with private insurance, it means that you are more expensive to employ and you pay more money for health care because you have two X chromosomes.

There are a lot of data that suggest that we could all save money if we simply agreed that it is better to cover everyone uniformly – but we insist on having a fragmented system with costly bureaucracies that decide who is cheap and who isn’t. Women are bearing a huge part of that burden, and it doesn’t look like that will be changing anytime soon.

Dr. Jonathan D. Walker is a member of Hoosiers for a Commonsense Health Plan. He wrote this for The Journal Gazette.