Why do health premiums differ?

FRIDAY, OCTOBER 14: The BHeC (Bermuda Health Council) and the Bermuda Sun have teamed up to answer your questions about the island’s healthcare system.

Visit www.bhec.bm to submit your queries and look for our response in each Friday’s Bermuda Sun and on bermudasun.bm.

This week’s question focuses on what is covered by health insurance.

Q: Why are insurers allowed to charge different premiums for men and women?

A: In Bermuda health insurance premiums are made up of two components: (1) the Standard Premium Rate (SPR), which is set by Government and is exactly the same for everyone; and (2) the supplemental premium, which is set by each insurer based on a range of criteria including healthcare inflation, and the claims experience and demographic characteristics of a group or individual.

So, to answer your question, Bermuda health insurers don’t charge different premiums for men and women for the minimum mandated package — the Standard Hospital Benefit (SHB), which covers your hospitalization costs.

This is because the price (the SPR) is set using a “community rating” methodology, by which the whole insured population is pooled together to calculate the claims experience and premium. This enables cross-subsidizing of the healthy and sick, young and old, etc. so that the populations with greatest health needs are not financially disadvantaged.

Everyone pays the same for this basic cover (currently $252.27 shared equally between employer and employee).

It ensures a basic measure of equity in our health system.

However, the Health Insurance Act 1970 is silent on the content or pricing of policies beyond SHB, so health insurers use traditional, recognized methods to price policies, which take into account the risk an individual presents to the insurer.

To answer your question specifically, for supplemental benefits women are charged different premiums from men because women of child-bearing age are considered a higher “risk” to the insurer.

This is because they could incur health expenses related to prenatal and obstetric care — whether planned or not.

Hence women have higher risk-rated premiums.

Currently, the content of the SHB is being revised, and as changes are made to it in the coming years, some of the premium differences you observed will likely be reduced.

For more information go to www.bhec.bm.