Sunday News (Lancaster, PA)

Business Section
August 17, 2003

For insurance, age, sex matter

By Gail Rippey

Sunday News Staff Writer

Employers can't discriminate by sex or age, but many insurers can (and do) in providing employees with health-care benefits.

It's gotten to the point that the age and gender composition of a work force can be the maker, or breaker, in a small business's decision whether to provide coverage.

That's because more and more insurers, such as Aetna, Capital Blue Cross and HealthAmerica, have moved to a demographic rating system.

Meaning that women and older workers, who statistically use more health care, cost more to insure. And healthy young workers cost much less to cover. Either way, a Montgomery County state senator, along with some insurers and small-business owners, argue that employing demographics to price health insurance is unfair.

Bill 671 would make access easier

Republican Sen. Rob Wonderling has introduced legislation, now before the Senate's Banking and Insurance committee headed by Refton Sen. Gibson E. Armstrong, aimed at scrapping demographic ratings for a more broad-based classification system that would help all workers gain access to health insurance. Currently, 80 percent of those without health-care coverage have jobs, Wonderling said.

As legislators continue to ponder the situation (an amended bill is expected to emerge by October), many employers here and throughout the sate have opted to offer wellness programs and other strategies to help themselves and their employees keep health insurance affordable.

Employers say with a shortage of skilled, young workers on the horizon, they'll need to attract and retain older employees.

Cherry-picked

Those insurers who treat all employees the same, such as HealthGuard of Lancaster, a health maintenance organization have had customers who favorable met demographic criteria “cherry-picked” away from the m by competitors, said HealthGuard president Jim Godfrey.

HealthGuard, as well as Independence Blue Cross, which serves Wonderling's senatorial district, still use “community ratings” to determine how much employers will pay to insure their workers.

Community ratings treat employees as one group, or community , and pool the claims history of all the members to set the price. Employers then pay the same rate for the same set of benefits, regardless of age, sex or health of their employees.

Demographic ratings establish a base rate similar to the community rating, but adjust it according to each employee.  Business consultant Ira Wolfe, of Success Performance Solutions, Leola, said health insurers using demographic ratings consider 40 to be today's average employee age. So they'll routinely charge employers 40 percent less to insure a 20-year-old man than to cover a 40-year-old one, but they'll sock them for 2 1/3 times more money to insure a 55-year-old man.

Child Bearing

Women employees, up to age 50, always cost more to insure than the men, Wolfe said.   At 40, they're charged 26 percent more than the males. After 50, when most are long past childbearing age, women's rates drop.

The men's rates really start to climb at 55, Wolfe said, because health claims show that's when cardiovascular problems and diseases such as lunch, colon and prostate cancer crop up.

While rating health insurance costs by demographics seams equitable in that those who statistically access health care more often are charged more, Sen. Wonderling and James Mead, Capital Blue Cross chief executive officer, say applying community ratings spreads the costs more evenly.

Still, Wolfe said mandating the use of community ratings wouldn't be a good idea.  “They're looking for quick fixes and quick fixes could be a disaster,” Wolfe said of Wonderling and his supporters.

And Mead, although he favors community ratings, agreed.

Blue Cross

Capital Blue Cross reluctantly adopted demographics ratings in April 2002 to stay competitive with Highmark Blue Shield, its former partner. “We had no choice other than to go to a demographic rating” he said. “And going to that was very disruptive. It cost some people a lot of money in big price increases.   “Going back to community ratings would have the same effect on the young, healthy work groups.”

Besides that, Wolfe said there aren't enough young workers coming into the labor force to make community ratings succeed.  “The numbers of young people available to redistribute the higher rates is not there,” he said. “Employers are caught between ‘We need these older people to do the job' and ‘We can't afford them anymore.'”

Wolfe said in the past, employers wouldn't have dreamed of hiring older workers, and would have replaced those nearing retirement age with young talent.

Sen. Armstrong has yet to take a stand on the ratings issue, according to aide Bob Thompson.   “Both sides are making decent points,” Thompson said. “Some of the smaller insurance companies ay it (banning demographic ratings) would definitely put them out of business.  “But then community ratings assure more people access to health care.”  There also doesn't seem to be a rallying cry for Wonderling's bill among business people here.

Evened out?

Despite the vast differences in the costs of insuring their workers, several employers, both large and small, said no one has gotten hit too hard.

Richard H. Burd, a fellow of the Society of Actuaries and vice president of actuarial services for Benecon, a Leola benefits and consulting group, and most insurers blend components of community and demographic ratings to establish their prices. “They're charging the young (work) groups more than they should and they're giving the older ones a bread,” he said.

Burd also said a lot of companies blend their rates for men and women to create a “unisex rating,” and they consider factors unique to the industry they're going to insure.  For example, he said a dairy farmer might get a 4 percent discount, while veterinary service provider might be charged 5 percent above the base rate.

Wellness programs

No matter what ratings system is used, many human resources managers and business consultants agree that the best solution to minimizing health-care costs lies with employees taking better care of themselves, especially through employer-sponsored wellness initiatives.

 “You find them early, you treat them early,” said Margaret Stoltzfus, Lancaster Laboratories' human resources group leader. “That keeps employees healthy and working. It keeps employees off of disability.”

The dangling carrots fro employee involvement in wellness programs (which include health-club memberships, blood-pressure screenings, flu shots and health fairs) embody contests, trading off employee benefits and even additional pay.

Lancaster Laboratories' employees may choose one of four health plans, or opt out of the company plan altogether (providing they have other health insurance) and get a benefit credit toward something else, such as additional vacation.

Snack-food manufacturer Snyder's of Hanover started its model “Wellness Points” program in April 2002.

As employees take part in a specific wellness activity, they earn points toward winning prizes.

Wendy Shearer, Snyder's occupational health coordinator, said the company employs about 1,000 workers, “but last year, we estimated we had more than 3,500 entries in our final (prize) drawing.”  Some employees had multiple entries because they took par in several offerings, she said.  Asking workers to take a role in staying healthy is a far cry from the longstanding paternal role of employers and the entitlement philosophy some employees have, said Carol Szutowicz, executive director of the Lancaster County Business Group on Health, a coalition seeking solutions to rising health insurance coasts.

“Many employees have had to become reluctant shareholders,” she aid. “It's now consumer-driven health care, but some workers aren't quite ready for the deluge of information, or the responsibility to empower themselves.”

Kathy Shivery, corporate benefits manager for High Industries, agreed.  “The people who really don't need them (wellness programs) seem to do them the most, and those who do need them don't sign up,” she said.

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