Saturday, April 28, 2012

Discrimination Against Women in Individual Health Insurance Policies. A Boring Post.

Sean Hannity interviewed the health care expert (joking) Michelle Malkin on the question whether health insurance discriminates against women or not:
This week, Fox News host Sean Hannity scoffed at the idea that women face discriminatory practices from the health insurance industry, arguing that it is "disinformation" to claim that repeal of the health care reform law, which bans such practices, will again subject women to unfair and discriminatory treatment by insurers. In fact, the law bans insurance companies from its current practice of charging women higher premiums for the same coverage as men, and forbids insurers from listing pregnancy as a pre-existing condition, which was often used by some providers as an excuse to deny coverage.

The video ends before Malkin gives us any pertinent data on that "distortion."

It isn't a distortion, though the overall situation is slightly more complicated.  Women who are covered through employer-based group policies do not have to pay higher premia just because they are women.  This is because those health insurance policies fall under employment law, and charging women higher premia would mean that they get a smaller total compensation for their work than an otherwise identically placed but male employee.

Things can be different when it comes to individual health insurance policies, those which a person contracts separately with an insurer.  Some states do not allow the companies to charge women more, just on the basis of gender, but some states allow it.  And the practice does exist, wherever it is allowed.

What motivates it?  The reasoning is based on the fact that the average woman consumes more health care than the average man.  Most of this difference has to do with fertility differences.  In some ways the health care consumption which really should be attributed to babies being born is attributed to women, for example, but much of women's greater use has to do with routine gyno checkups, pap smear and breast screenings and so on.  So far we don't expect men to get routine prostate checkups every year from early ages onward.

Whether women would still consume more than men, on average, if the obstetric/gynecological visits were excluded is unclear to me.  Perhaps, given that many experts believe that men, on average, do not see their doctors often enough.

Insurance companies and plans will use the higher average use rates of women as the basis for charging women more than men for the same policies if they are allowed to do so.  This is an example of statistical discrimination, by the way, and of a very odd type, because someone loses and someone gains (in an unfair way) whether the premia are allowed to differ between men and women or whether they are not.

To see why, note that if women and men are charged the same premia, then as a group women will consume more health care for the same cost.  One could argue that women (as a class) benefit and men (as a class) lose under this scenario (if we ignore the consumption having to do with giving birth which probably should not be attributed to women alone).

But if men are charged less for the same policies than women,  then all high-using men benefit and all low-using women get hurt.

What makes this particular example even more complicated is this:  Women's greater use of health care is something which disappears with age.  Indeed, the rank-order changes when people age, and at older ages the average man consumes more in dollar figures.  But guess what happens then?

Medicare soon takes over and it does not charge higher premia by gender.  This means that when we would expect the premia of those individual health care policies to become higher for men, based on statistical evidence,  the state takes over.

This type of statistical discrimination is very complex.  Other examples exist in car insurance where young men are charged higher premia than young women, for the same coverage.  The rationale is similar:  Young men, as a group, have higher accident rates than young women, as a group.  If all young drivers were charged the same premium,  young female drivers, as a class, would pay more for the same total compensations than young male drivers, as a class.  But the practice of charging young male drivers more discriminates against careful young men and benefits reckless young women.

The car insurance example does differ from the health insurance example, because the former has to do with behavior which can be affected, at least in theory, whereas the latter may be about one's basic medical needs, as defined by gender.  Thus, one could argue that the ethical concerns in the two cases are different.

This has been your long-and-boring post of the day.  Enjoy!