Health insurance is an expensive business for anyone, but statistics show it is especially pricey if you happen to have ovaries.
In the world’s largest health insurance market, the USA, women are routinely charged more than men for the same health coverage. To add insult to injury, women pay higher premiums for longer as they also live longer than men—while still only making 77 cents to every dollar men earn.
This all adds up to make health insurance a key issue for women, with women by-and-large supporting healthcare reform.
Differing insurances costs are not just a problem in the USA, but affects women worldwide. So why is it that women sometimes pay more than men and is such a pay-difference simply good economics or a blatant case of unfair gender discrimination?
Where and when women pay more
Factoring gender into the risk calculations for insurance premiums is referred to as ‘gender rating’, and unsurprisingly it is illegal in many parts of the world.
The logic behind gender rating is simple: women are more likely to go to the doctors, fill-in prescriptions and use other health services than men. Because of this, many insurers feel that they should be able to base their premiums on gender just as they do on age.
In the US, gender rating is a tricky subject and it is already banned or limited in 14 states (including New York and California). Come 2014, it will be banned across the United States when the Affordable Care Act comes into force. Many insurers however feel that banning gender rating will give them less room in setting fair insurance premiums for men and women alike.
Should women pay more for health insurance?
Many market purists see nothing wrong with charging women more since on average they are more likely to use health services, often drawing the parallel that men pay more than women for car insurance because men on average file more claims.
While the market argument is a fair point, it is also a slippery slope down to discrimination. Ethnic minorities are also more likely to be unhealthy, but you would be hard-pressed to find someone who agreed with discriminating price on the basis of race.
There is also an argument to be made about whether the difference in price between women’s and men’s premiums really reflects the difference in risk. Many healthy women non-smokers pay more than older male smokers even though statistically the latter group is more likely to need health services.
Statistical basis flawed?
The ‘extra’ price that women pay varies massively between insurers, leading many to believe that women arbitrarily pay more and that insurers simply exploit gender rating to increase female premiums out of line with actual risk.
It is also important to remember that this is a discussion about basic health insurances premiums, which do not cover the cost of maternity care. Therefore as well as paying more for their basic premium, women also have to pay extra to cover reproductive services.
Can community rating solve the problem, or does it simply add to it?
Many insurances markets are now trying to move over to what is called ‘community rating’, where risk is balanced out across the entirety of the insurance pool. This means that what one pays in health insurance is not based on their gender, age or pre-existing conditions. Community rating is the law of the land with private health insurance in Australia, The Netherlands and many other countries—and it will also soon be encouraged in the US via Obamacare.
Community rating is lauded by many as a step in the right direction to making coverage affordable for everyone, but it is not without its critics. Community rating shares risk across the entire insurance pool, making insurance cheaper for high-risk groups (like the elderly and pregnant women) but also making it more expensive for low-risk groups (like young people and non-smokers).
Because of this, community rating sometimes leads to what insurers call ‘adverse selection’: low-risk individuals do not want to pay higher premiums so they do not buy health insurance. Without the low-risk individual in the insurance pool to subsidise high-risk individuals, the high-risk individuals sometimes end up paying more than they arguably would have if community rating was not in place.
The only way to stop this from happening, the market purists argue, is to mandate health insurance for everybody. However there is great debate about how often adverse selection actually occurs.
All in all, most economists agree that it community rating is the better economic pricing plan in the long run because it ensures that health insurance is within the reach of everybody. Community rating also will end the practice of women paying more for health insurance.