Age Related Pricing Of Health Insurance Premiums And The Human Rights
Friday, March 23rd 2001, 11:54AMThe Human Rights Commission has released a public statement (attached) pursuant to a consent order of the Hight Court resulting from Proceedings Commissioner v Aetna Health, National Mutual and Southern Cross Medical Care Society.
The statement describes the outcome of proceedings relating to age related pricing of health insurance premiums. The release of the public statement is part of the agreement reached between the parties to those proceedings.
While discrimination on the grounds of age is generally unlawful, the Human Rights Act 1993 contains an exception in relation to insurance, where health insurers are allowed to increase premiums for older people provided the increases are reasonable, having regard to actuarial data and other relevant factors.
PUBLIC STATEMENT PURSUANT TO SECTION 5 OF THE HUMAN RIGHTS ACT 1993
This is a public statement pursuant to s.5 of the Human Rights Act 1993. It is also made in accordance with the consent order in Proceedings Commissioner v Aetna Health, National Mutual Health and Southern Cross Medical Care Society which was settled in March 2000.
The Human Rights Act 1993 prohibits discrimination on grounds of age and, over recent years, the Human Rights Commission received a large number of complaints from people who claimed that health insurance premium increases, at age 65, were discriminatory.
Age related pricing seems, on its face, to be inconsistent with the prohibition on discrimination on grounds of age. But the Human Rights Act contains, in section 48, a specific exception relating to insurance. What it means, broadly speaking, is that health insurers are allowed to increase premiums for older people provided the increases are reasonable having regard to actuarial data and other relevant factors.
It was unclear to the Human Rights Commission whether three insurers; namely, Aetna Health New Zealand Limited, National Mutual Health Limited (now AXA) and Southern Cross Medical Care Society's pricing arrangements were covered by this exception or not. The companies all believed that their pricing arrangements were covered and therefore lawful. In order to clarify this point, the Commission referred the complaints to the Commissioner responsible for legal proceedings. The Proceedings Commissioner then commenced declaratory judgment proceedings in the High Court against the three insurers. The case was set down for hearing in the week beginning 6 March 2000.
When the complaints were being investigated by the Human Rights Commission the insurers had given the Commission information intended to show that their pricing practices were based on sound actuarial data. In the week before the trial was due to begin, however, one of the insurers, Aetna, filed Affidavits containing some new information. The evidence showed that the case was likely to fail against National Mutual and Aetna because they would be able to show that their pricing structures had a reasonable actuarial basis and thus came within the section 48 exception.
The approach of Southern Cross to pricing was different to that of the other defendants. In assessing the risks of litigation the Proceedings Commissioner noted that it appeared that Southern Cross members under 45 years of age tended to subsidise older members. There was a risk that the outcome of litigation would result in younger members paying less and the subsidy to older members would cease. The result of that might have been adverse to the people who had complained to the Commission. The Commission notes that Southern Cross has since changed its pricing structure.
The overall position called for a reconsideration of whether the trial should go ahead. The Proceedings Commissioner took advice from the Government Actuary and experienced independent Counsel. In the event, the trial did not proceed and, instead, a judicial settlement conference was held on 7 March. The settlement conference was presided over by Justice Dame Silvia Cartwright. At the conference, counsel for all the parties presented an abbreviated outline of their arguments. The parties agreed that the setting of premiums in health insurance is a complex matter and the issues would best be progressed through the development of guidelines. The Government Actuary, Grey Power North Shore and Age Concern all spoke at the judicial conference. The latter two organisations made clear the concerns of many older New Zealanders concerning the cost of health insurance and the misunderstandings which often arise about premium increases.
The outcome of the judicial settlement conference was that the parties negotiated a settlement of the proceedings. The Court made, by consent of all the parties, a number of orders, which embody that settlement. The main features of the settlement are:
1 The Proceedings Commissioner withdraws the case against all three insurers and acknowledges that National Mutual and Aetna have not breached the Human Rights Act 1993.
2 Aetna, National Mutual and Southern Cross all agree to co-operate with the New Zealand Society of Actuaries and the Government Actuary in developing actuarial guidelines regarding health insurance.
3 Each insurer will also co-operate in developing health insurance guidelines to be formulated by the Human Rights Commission. These guidelines will include the actuarial guidelines and will be developed in consultation with the Health Funds Association of New Zealand, Age Concern and Grey Power.
4 Compliance with the guidelines will be treated as prima facie compliance with the Human Rights Act.
Justice Cartwright described the settlement as a "useful and appropriate resolution of the issues".
It will be recalled that the exception in the Human Rights Act which relates to insurance means that, broadly speaking, older people can be charged higher prices to the extent that there is an actuarial basis for doing so and the higher prices are reasonable having regard to that data and other relevant factors. The proposed guidelines cannot alter that. They will only ensure that age-differentiated pricing has an appropriate actuarial basis. If age related price increases are consistent with the guidelines that probably means that they are consistent with the Human Rights Act, i.e. the age discrimination is lawful.
What the case makes clear is that the general problem of increasing health insurance costs for older people cannot be overcome under the Human Rights Act. Provided there is an actuarial basis for increased premiums and the higher prices are reasonable having regard to that data and other relevant factors, the Act allows age related premium increases.
The Human Rights Commission fully realises that the rising cost of health insurance for older New Zealanders is a burden, which often causes hardship. This general problem however, cannot be resolved by the Human Rights Act.
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