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Health Care Reform:

Health Insurance & Affordable Care Act

Where You Live Determines Health Insurance Costs

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Insurance, Like Politics, Is Local

An estimated 7 million people in 2014 are expected to buy coverage through the new markets, which open for enrollment on Tuesday. The majority of states, including Pennsylvania, defaulted to the federal government to operate their marketplaces or are partnering with the federal government. 

“They say all politics is local, and insurance and healthcare are local as well,” said Larry Levitt, senior vice president of the Kaiser Family Foundation, a nonpartisan health policy group. (Kaiser Health News is an editorially independent program of the foundation.)

Insurer competition correlates strongly with lower prices, federal data show: Georgia’s highest-price region, for instance, has only one insurer -- Blue Cross Blue Shield of Georgia, Custer said. In other parts of the state, different insurers are offering different prices even for the same type of coverage, he said. 

Insurers say they set premiums based on expectations about who will enroll: Will newcomers be generally young and healthy or older or sicker? Other factors include what they pay for labor costs and whether they’ve been able to negotiate favorable rates with hospitals, doctors and other medical providers.

Some insurers may price low to attract market share.  Others are creating insurance plans that limit the network of doctors or hospitals to keep premiums low.  Cost-of-living variation also plays a role.

Philadelphia has both the highest costs in Pennsylvania and the highest utilization of medical care, which accounts for much of the higher premiums, said Brian Lobley, senior vice president of marketing and consumer business for Independence Blue Cross, one of the area’s two major insurers.  The insurer does not sell in the Pittsburgh region.

But something else besides Philadephia’s higher costs is at play, said Mark Pauly, professor of health care management at the Wharton School, University of Pennsylvania.

That something is likely market competition between insurers and rival hospital systems, he said.  That dynamic can spur tougher negotiations between insurers and hospitals, which might agree to lower charges.  And regions with competing insurers often see lower premiums.

“There is something of a price war right now” in Pittsburgh between insurer Highmark and the University of Pittsburgh Medical Center, which also has its own insurance plan, said Joel Ario, a managing director with consultant, Manatt Health Solutions, and a former state insurance commissioner. “They’ve got the ideal situation, with competing insurers and competing hospital systems.”

Sun, Sep 29 2013

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