Age Tax Is Unfair and Unaffordable

If you are 50 to 64 and need health insurance, federal law gives you a critical protection that may be saving you thousands of dollars a year.

But this safeguard is now being threatened by legislation in Congress.

This new bill — the State Age Rating Flexibility Act of 2017 — is Washington-speak for an age tax that would let insurance companies charge older Americans as much as five times what they charge other people for the same coverage. On average, adults age 60 and older would have to pay $3000 more a year for their health care coverage.

Insurers have long been allowed to charge older consumers more for premiums. This discriminatory practice has been especially harmful to people not yet eligible for Medicare, who are often juggling caring for their parents and their children, and struggling to save for retirement.

But the Affordable Care Act imposed a limit: Insurers may not charge older adults who need individual policies more than three times the amount they charge other people for the same products.

That’s why the new bill is unfair and unaffordable. If Congress imposes an age tax, doctors’ bills and insurance costs could go up for many older people, who would have to dig much deeper into their own pockets just to get care they need.

Older persons in the individual insurance market have median incomes of only $20,000.  Hiking premiums is a tremendous financial burden that will eat into older Americans’ retirement savings. According to a recent Federal Reserve report, the median retirement savings for households headed by people ages 50 to 64 is only about $12,000. And seniors already spend one of every six dollars on health care.

Not only is an age tax unfair, it is bad policy. AARP researchers found that charging older Americans five times the rate for other people would cost taxpayers an extra $6.7 billion in subsidies to help them afford coverage.

Instead of increasing insurance company profits, Washington should focus on reducing health care costs for everyone, such as by cracking down on drug companies’ high prices. For example, Congress could pass legislation to allow Medicare to negotiate with drug companies for lower drug prices. And legislators could reduce barriers to global price competition by allowing for the safe importation of lower-priced drugs. There is no reason for Americans to continue paying the highest prescription drug prices in the world.

These commonsense measures would save billions and would be a fair way to lower costs for everyone.

The current limit on how much insurance companies may charge older adults has helped safeguard people’s access to affordable health care. This critical if little-understood reform has helped keep quality care in reach of millions. Hiking premiums for older Americans to put more money in the pockets of insurance companies is not the way to lower health care costs.

Join the fight at aarp.org/noagetax.