Gender bias in long-term care costs

California, home to the largest number of older adults in the nation, would become the third state after Colorado and Montana to prohibit sexual discrimination in the costs of long-term care policies  — if a  new measure ultimately becomes law.

A lawmaker facing her final year in the Assembly is pushing legislation to ban the widespread industry practice  of charging women more than men for similar policies.

“I term out in November … so this is my first and last opportunity — as an Assembly member anyway — to take this issue up,” said Assemblywoman Mariko Yamada, D-Davis. Her bill, AB 1553,  was introduced Jan. 27.

Last April, coverage providers across the country started charging single women about 40 percent to 60 percent more than single men for the same coverage, according to the American Association for Long Term Care Insurance, a Washington, DC-based trade group that tracks the issue.

Insurers said the disparity reflected the greater life expectancy of women, who on average live five years longer than men, according to a recent study by the Centers for Disease Control and Prevention.

Gender-linked pricing for insurance products has precedent.

“For example, we know that younger men who are applying for car insurance in their younger years are a greater risk because of their, frankly, unfortunate tendency to be more reckless,” Yamada said. Auto insurance – or other proof of financial responsibility — has been mandatory in California for generations. A voter-approved ballot measure passed in 1988, Proposition 103, barred discrimination in auto and some other types of coverage, but not health or long-term care.

Long-term care insurance, or LTCI, is relatively new.

Mariko Yamada

It began being offered in the late 1980s to supplement care costs for people – mostly the elderly — unable to perform the basic activities of daily living, such as eating or bathing. According to the federal statistics, about six out of every 10 individuals over age 65 will require the service in their lifetime.

Providers are just now realizing the true costs of policies that were inaccurately estimated in the beginning and presumably were under-priced, an industry expert said.

“In the late ‘90s early 2000s, when the industry was selling a majority of their policies, it was a very competitive time and companies may have been more interested in gaining market share than they were interested in the pricing of the policies,” said Bonnie Burns, a long term care specialist working with California Health Advocates.

“Over time, the pricing I think has caught up with them,” she added.

In April 2013, the American Association for Long-Term Care Insurance reported that companies began petitioning states to impose rate increases based on gender.

As a result the industry saw LTCI premiums for single women jumped 12 percent in 2013, while single men saw a 14 percent drop.

According to the association, the costs of policies vary. For a single individual age 55, the average cost for coverage that provides $150 daily over three years is $1,720 per year with a range that extends from $1,428 to $2,552, depending on the company. The range extends more dramatically as the patient ages.

“Many more women than men were claiming benefits, and the expenses for those claims was often higher than for men and for perfectly reasonable reasons,” Burns said.

As a result the industry saw LTCI premiums for single women jumped 12 percent in 2013, while single men saw a 14 percent drop.

Gender-based pricing is banned under the Affordable Care Act, but LTCI was not included in that ban.

LTCI also isn’t considered health insurance under state law, even though as Yamada said, “many of the services and supports that long-term care insurance pays for certainly relate to an individual’s health and well-being.”

“Sen. Ted Kennedy’s defining input in the Affordable Care Act was the Class Act, which was the federal answer to providing a program and an option for people to purchase long-term care services and support through a national program,” Yamada said. “But we know what happened… Class was stripped out.”

For actuarial and sustainability reasons, the final version of the ACA didn’t include a national route for LTCI, which could have saved the industry from taking steps like gender pricing, dramatically increasing premiums and instituting a more difficult application process for new customers.

LTCI also isn’t considered health insurance under state law, even though as Yamada said, “many of the services and supports that long-term care insurance pays for certainly relate to an individual’s health and well-being.”

If it were classified as such, it would fall under ACA restrictions. But instead it’s considered disability insurance, and reclassifying it under state law is a can of worms that, thus far at least, no one is trying to open.

So that leaves the Legislature, controlled by Democratic two-thirds majorities in both houses, to ponder Yamada’s prohibition from gender pricing, which she says is not an attack on the industry. Limiting gender discrimination traditionally resonates with her fellow Democrats, but changing the insurance industry’s behavior is a difficult task in Sacramento, where insurers are well-financed and wield political clout.

“But we’ve got to engage in this conversation so perhaps California can be a leader,” Yamada said. “Again, Colorado and Montana have already taken steps to address this problem and I hope we will be able to engage the insurance industry to discuss the problem that I think we all see.”

State Insurance Commissioner Dave Jones, who is seeking reelection in November, has yet to say whether he will allow companies to use sex as a qualifying characteristic for higher premiums.

Even if Jones permits the practice and companies voluntarily abstain from partaking, the customer migration toward those companies would inflate prices in other areas of the industry, Yamada said.

“We’re trying to even the playing field for any long-term care insurance carriers that wish to do business in California.”
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Ed’s Note: A version of this story by Capitol Weekly reporter Samantha Gallegos originally appeared Feb . 8 in the Santa Rosa Press Democrat, a content partner of Capitol Weekly.