NC health insurance rates vary widely, depending on where you live

Published December 7, 2014

by John Murawski and David Raynor, News and Observer, December 6, 2014.

A smoker of two packs of cigarettes a day, Karen Carlton is looking at a $684 monthly health insurance bill starting in January. Her affection for Misty Menthol Silvers will cost Carlton $114 a month more than a nonsmoker would pay for the same health plan under the Affordable Care Act.

As steep as that may seem for a single 51-year-old woman who works for a nonprofit, Carlton has a golden address as far as health insurance costs go. Raleigh happens to be in the cheapest part of the state for individual health insurance sold by Blue Cross and Blue Shield.

If Carlton lived in western Watauga County, the same Blue Cross policy would cost $837 for a tobacco user around the same age. In coastal Dare County, the cost would be $821 – about $1,800 more per year.

“Holy cow,” Carlton said when presented with these scenarios. “That’s so wrong.”

North Carolina’s rates for individual insurance vary significantly across the state and are among the highest in the nation. The state’s high insurance costs have been blamed on a grab bag of causes, including entrenched market dominance by Blue Cross, the state’s decision last year not to expand Medicaid, and a decades-long race among hospital companies to build one of the nation’s best health care networks.

The Affordable Care Act has been blamed and credited for lots of things, but one of the legacies of the federal health law is greater transparency for insurance costs, which for years had been treated as a closely guarded secret. Today anyone with Internet access can get on  healthcare.gov and compare rates within their own state or with other states.

The federal data troves contain some revealing patterns in North Carolina. The state’s insurance costs tend to be highest in areas with fewer doctors, higher poverty levels, lower rankings in health statistics and greater concentrations of uninsured residents.

What’s more, pockets of the state have the distinction of being among the most expensive 10 percent of U.S. counties for individual health insurance, said Cynthia Cox, a senior policy analyst at the  Kaiser Family Foundation.

The ACA prohibits insurers from pricing health insurance by the health risk of their customers, such as charging extra for someone with diabetes. But insurance costs end up reflecting geographic differences in health care costs anyway, because insurers base their prices on the claims they pay for their customers and on the reimbursements they pay to doctors and hospitals.

As a result, people in economically distressed areas who can least afford health insurance are often charged more. However, low-income people get relief from much of the costs because their premiums are offset by federal subsidies.

Carlton, for example, earns too much to qualify for federal subsidies. But she is doubly lucky: Her employer, a nonprofit foundation, pays her entire monthly premium for her ACA individual policy.

Restrictions on some plans

At the county level, North Carolina’s price disparities can be pronounced. Insuring a family with three children could vary by more than $200 a month for the same health plan, depending on where the family lives.

The costliest counties are in the northwestern corner of the state, the Charlotte region and along much of the state’s eastern coast, depending on the insurer and health plan. There are significant variations within individual insurance companies; the area with the most expensive Blue Cross “silver” plans, the Fayetteville rating area, has the state’s cheapest “silver” plans from UnitedHealthcare .

North Carolina’s costs are higher than many other states. Of the 34 states that are not running their own health insurance exchanges, only four – Alaska, Maine, New Jersey and Wyoming – have equal or higher monthly 2015 premiums among average lowest-priced “silver” plans.

The analysis by  Kaiser Health News, an independent news organization, shows that North Carolina’s average monthly premium is $315 among the lowest-cost “silver” plans offered throughout the state. Actual premiums for a single, 40-year-old nonsmoker will range from $267 to $351 a month across the state’s 16 rating areas next year.

On average, that’s 8.5 percent more expensive than North Carolina’s ACA rates this year.

Patrick Getzen, Blue Cross vice president and chief actuary, said the company’s rates reflect the reimbursement rates Blue Cross has negotiated with doctors and hospitals. Blue Cross pushes down costs on some health plans by restricting provider networks, Getzen said.

The company’s restricted Blue Value plans in the Triangle, for example, exclude Duke University Health System from the network. In the Charlotte area, Blue Value plans exclude Carolinas Health System.

But Blue Cross’ restricted network in the Triangle includes UNC Health Care, Rex Healthcare and WakeMed Health & Hospitals. In other states, where ACA rates are markedly lower, a restricted network can be limited to a single hospital system.

Setting rates involves guesswork and risk, Getzen said, because legions of uninsured people can now buy coverage under the ACA; state insurers are still experimenting to get rates set at the proper level. As of Sept. 30, Blue Cross had signed up 258,000 customers through the ACA marketplace. Getzen predicted it could be several years before insurers get a better handle on costs and for rates to stabilize.

“It’s really about our expectations of what the claims are going to be,” Getzen said. “The pool is very volatile right now.”

Under the ACA, insurers won’t be allowed to over-collect from their customers. The law requires an insurer to spend at least 80 percent of collected premiums on medical care. If the insurer spends less, the company has to issue refunds to customers.

Another approach to holding down rates, favored by UnitedHealthcare, is to require that a patient can’t see a specialist without a referral from a primary care physician. In this model, the doctor acts as a gatekeeper to limit unnecessary costly tests and other procedures.

Using that approach, UnitedHealthcare offers the cheapest plans in 44 North Carolina counties for 2015, while Blue Cross is cheapest in 48 counties. Coventry Health Care of the Carolinas is cheapest in eight counties.

Better facilities, higher costs

North Carolina’s high insurance costs stem from multiple causes.

Supporters of the ACA have long said that uninsured populations drive up health care costs because low-income people rely on hospital emergency rooms for preventable treatments. The hospitals pass along those losses through their charges to insurance companies.

When Republican leaders decided in 2013 not to expand Medicaid here, that left as many as 500,000 people without coverage. About 200,000 of those who would have qualified for Medicaid qualify for heavily subsidized private insurance. This group is most likely to be in poor health and require expensive medical treatment, which drives up insurance rates.

It’s not clear how many signed up for coverage this year, but 91 percent of ACA enrollees in North Carolina qualified for subsidies, one of the highest rates in the country.

The rise in insurance costs here can be traced to the 1970s, when the state began emerging as a modern Southern economic powerhouse.

As part of that transformation, North Carolina very rapidly began building a world-class health care system, on par with those in large metro areas. This development is still underway, with intensive capital projects adding new hospitals and facilities throughout the region, said Thomas Ricketts, professor of social medicine and health policy at UNC-Chapel Hill.

“You’re paying for quality and you’re paying for quantity,” Ricketts said. “Very complex care, very high-cost procedures and services.”

North Carolina’s  16 rating areas were set in 2013, based on metropolitan statistical areas. The federal Center for Consumer Information and Insurance Oversight rejected a proposal from the N.C. Department of Insurance and insurance companies to create 100 rating areas, one for every county.

According to October 2012 minutes of a Department of Insurance workshop on rating areas, insurance industry officials contended that creating 100 rating areas would expose the true cost of health care disparities – pressuring local doctors, hospitals and health officials to do something about runaway health care costs.

Other workshop participants said the insurers would focus on the most profitable counties and price insurance out of reach in poor regions, the minutes show.

North Carolina’s rating areas turned out favorably for Amarbir Bakhshi of Durham. Because of his low income, Bakhshi said he will pay $12.80 a month for a subsidized Blue Value 3000 insurance plan in 2015. However, the same plan would cost him $78.80 a month if he lived in Fayetteville, according to healthcare.gov.

Bakhshi, 35, is a personal trainer and coach who runs a boxing studio in Raleigh. He has gone without health insurance for five years.

“When I broke my finger, I fixed it myself,” the pugilist said. “It grew back a little crooked, but it’s stronger now.”

He’s been living with an untreated hernia for four years, a condition marked by a bulbous protrusion in his midsection.

He’s proud of his resilience and confident he could absorb higher health-insurance costs if he lived in a higher-cost rating area. He would fall back on his time-tested money-saving technique: sleeping at his gym to save money on gasoline.

Because his gym lacks a hot shower, Bakhshi has devised a method to adapt to cold showers in mid-winter. But it’s not an approach his new doctor will endorse.

“Last winter, I went outside and ran until my lips were numb, so that I could barely even talk,” he said. “Then the cold water didn’t feel cold. It actually felt warm. I felt like I was a piece of frozen meat thawing out.”

http://www.newsobserver.com/2014/12/06/4382363/in-nc-health-insurance-rates-vary.html?sp=/99/102/

December 8, 2014 at 1:58 pm
Richard Bunce says:

The condensed version...

"...insurance costs end up reflecting geographic differences in health care costs anyway, because insurers base their prices on the claims they pay for their customers and on the reimbursements they pay to doctors and hospitals."

"Setting rates involves guesswork and risk, Getzen said, because legions of uninsured people can now buy coverage under the ACA; state insurers are still experimenting to get rates set at the proper level"

and you forgot something...

"When [Democratic leaders in Congress in 2010 decided to add a minimum income requirement to the ACA Marketplace tax credit/subsidy and CSR and] Republican leaders [in NC] decided in 2013 not to expand Medicaid here, that left as many as 500,000 people without coverage."