(Bloomberg View) — Should women have to pay more for health insurance than men? That has been a critical question for opponents of Republican health care reform efforts, and it requires grappling with the fundamental nature of insurance, market prices and fairness. Related are questions about how much older people should pay relative to the young, or to what extent individuals with pre-existing conditions should be vulnerable to higher premiums.
The Affordable Care Act limited the ability of health insurers to charge women more than men, and more generally imposed greater uniformity of policy prices. Under Republican plans, those provisions are repealed. The return of many decisions to the states would most likely mean more differential pricing, namely higher policy prices for people with higher expected health care expenses. After all, women’s lifetime costs are expected to be much higher than for men, by about $100,000 by one estimate.
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Let’s first consider the negatives of such a change in course from Obamacare. Insurance is fundamentally about the pooling of risk. If you are trying to cover $100,000 in health care costs by buying a policy that costs you about $100,000, that isn’t really insurance at all. It’s merely changing who cashes your check. Differential pricing moves in this direction, and thus it limits one of the major benefits of insurance.
Second, the higher health care spending for women is partly because of services related to childbearing. Society may have an obligation to help out babies (and mothers), plus they will someday finance our retirement, so let’s make childbearing easy. That said, governments have numerous means of subsidizing childbearing — direct payments, tax credits, free clinical services and public education — and it’s not obvious that regulating insurance pricing is this best way to achieve this end.
So what is there to be said for differential pricing?
First, it doesn’t mean that individual policy prices exactly match individual spending. If many women are pooled together into more expensive policies, the women with especially high health care costs are still subsidized by the women with especially low health care costs. That is less gain for women than if they received an indirect subsidy from male policyholders, but much of the value of insurance remains.