Impact of Changing Age Rating Bands in America's Healthy Future Act of 2009

The health care reform legislation under consideration in the Senate Finance Committee (the "America Healthy Future Act of 2009" Chairman's Mark) includes health insurance reforms that would discontinue rating on health status, eliminate the use of gender and several other rating factors, and set limits on age rating.

In the original Chairman's Mark, age bands were limited to a 5:1 age band (i.e., the rates for the oldest person in the pool would be no more than five times higher than for the youngest person), but the Mark was revised to include a 4:1 age band.

Oliver Wyman has developed an actuarial model to study the impact of different reform proposals on the individual and small employer health insurance market.

The model is based on a database of actual claims, premium and underwriting information representing over 375,000 small groups and 1.24 million individual policies.

These data are representative of states which today permit different levels of rating flexibility, allowing the model to provide insight into the impact of reform in states with different rating laws today.

Actuarial analysis is used to determine the impact of changes in rating regulations and the differential impact depending on current regulation. The model estimates premium changes and migration among coverage categories over a five year period.