Health & Fitness
March 28, 2014 • 11:44:05 a.m.

The states of insurance: Are the least expensive health insurance markets that way for a reason?

By Jordan Rau Kaiser Health News

People in much of Minnesota, northwestern Pennsylvania and Tucson, Ariz., are getting the best bargains from the health care law’s new insurance marketplaces: premiums half the price or less than what insurers in the country’s most expensive places are charging.

The 10 regions with the lowest premiums in the nation also include Salt Lake City, all of Hawaii and eastern Tennessee. This ranking is based on the lowest cost of a “silver” plan, the mid-range plan most consumers are choosing.

The cheapest regions tend to have robust competition between hospitals and doctors, allowing insurers to wangle lower rates. Many doctors work on salary in these regions, rather than being paid by procedure, weakening the financial incentive to perform more procedures.

Health systems focus on organizing patient care rather than let specialists work detached from each other.

The lowest monthly silver premium in the country is offered in the Minneapolis-St. Paul region, where a 40-year-old will pay $154 a month for a PreferredOne plan. Just across the Wisconsin border, that same level plan – but with a different insurer and other doctors and hospitals – costs nearly three times as much.

Insurers were able to negotiate low rates with hospitals and doctors in the Twin Cities because they could choose among four major health care systems. Both Fairview Health Services, which runs the University of Minnesota Medical Center and is included in the lowest plan’s network, and Allina Health, the largest system in the Twin Cities and operator of Abbott Northwestern Hospital, have been in the vanguard of experimenting with more efficient ways to care for patients, such as accountable care organizations and putting doctors on salary, said Stephen Parente, a health economist at the University of Minnesota.

“Minnesota has had years, if not decades, of experience with managed care,” he said.

Most counties in central and northern Minnesota also have premiums that are among the lowest in the nation. Michael Rothman, commissioner of Minnesota’s Department of Commerce, which regulates insurers, said the state moved early to enact cost-control measures such as restricting how much insurers can spend on things other than medical care and requiring annual insurance rates to go through state review.
Several of the other lowest-cost areas, including the Salt Lake City region and Hawaii, also have major hospitals and health systems that have been at the forefront of integrated care, in which rules, payment methods and the bureaucracy are designed to foster collaboration among primary care doctors, specialists and nurses. But people who buy the cheapest Salt Lake City plan will not have access to Intermountain Healthcare, the most prestigious system in the area.

Innovative hospital practices do not guarantee cheap insurance. In Rochester, Minn., the home of the Mayo Clinic in the southeastern portion of the state, the lowest-priced silver premium is $305, which is above the national median. Although Mayo’s doctors are salaried and the system practices integrated care, its prices are higher than in Minneapolis, said Dannette Coleman, an executive at Medica, the insurer that offers the lowest priced silver plan in that area. Given Mayo’s extensive network of clinics in the region, “you really cannot be in that area in that state if you don’t have the Mayo Clinic Health System in your network,” she said. Mayo officials did not respond to a request for comment.

In eastern Tennessee, cheap premiums are notable because many residents face chronic health issues. Obesity and smoking are common.

“We’re the buckle of the stroke belt,” said Kevin Spiegel, president of Erlanger Health System, which is included in the network of the least-expensive silver plans in Chattanooga.

Blue Cross and Blue Shield of Tennessee was able to offer the lowest silver premiums in the Knoxville and Chattanooga regions – $180 a month for a 40-year-old – by cutting deals with just one hospital system and their doctors in each region, said Henry Smith, the insurer’s chief marketing officer.

“There are competing systems within those two regions to price against,” Smith said. These lowest premium plans are “the narrowest network we have by far.”

Likewise, in western Pennsylvania, Highmark was able to offer the low premium – $164 for a 40-year-old – by omitting nine hospitals and about 3,000 doctors who charge higher prices, spokeswoman Kristin Ash said. Consumers wanting a wider network will have to pay Highmark 38 percent more a month.

These competitive markets are quite different than in southwest Georgia, the second-most expensive region in the country. Blue Cross Blue Shield of Georgia had no choice but to include in its network the Phoebe Putney Health System, which controls 86 percent of the market. The lowest premium in southwest Georgia is $461, two-and-a-half times the rate in Chattanooga.

This story was produced in collaboration with NPR. Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communications organization not affiliated with Kaiser Permanente.


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