California Health Exchange Premiums Vary By Geographic Region
With insurers on the health exchanges no longer allowed to use underwriting rules like policyholder's weight, blood pressure, medical history and physical fitness, geography will now be the primary factor used to set prices.
By Jim Sanders
For the same health coverage from the same insurer, a 40-year-old Sacramentan will pay $78 more per month than a Los Angeles County resident through the state's new insurance exchange.
In rural Mono County, the disparity will be even larger: $150 per month, nearly 60 percent higher than for identical benefits and co-pays offered in Los Angeles County.
The premiums provide relatively basic coverage from Anthem Blue Cross, but similar regional differences exist in plans proposed by other insurers. The numbers reflect new rate-setting standards: How sick you are no longer matters, but where you live does.
"This is a huge change from the current marketplace, where people are rated individually based on their health status," said Anthony Wright, director of Health Access California, a nonprofit advocacy group.
Regional differences always have been weighed for insurance underwriting, but it was only one of many factors, including a policyholder's weight, blood pressure, medical history and physical fitness as well as whether the person smokes or engages in other risky behavior.
For the first time, Californians soon will be able to compare regional pricing because federal law requires insurers selling policies on state exchanges to offer identical benefits with rates based only on age, location and household size.
A key factor in premium price differences, within a region or in comparison to other California communities, is the provider network created by each insurer, officials said.
The willingness of doctors or hospitals to join a network can be affected by rates that insurers agree to pay them. Those are negotiated privately and tend to vary based on the number of health care providers within a region and the intensity of competition for patients.
"Places where there are provider shortages have higher costs," said Charles Bacchi, executive vice president of the California Association of Health Plans.
California's health care exchange, which will begin selling policies Oct. 1, has chosen 13 insurers to compete in all or parts of California -- including three of the state's largest insurers, Anthem Blue Cross, Kaiser and Blue Shield of California.
The firms will sell on the individual market to people not offered coverage by employers. About 5.3 million people are eligible.
All policies sold on the exchange must cover preventive care, prescription drugs, laboratory tests, medical screenings and "other essential benefits," including pediatric, mental health, maternity and rehabilitation services. Plans are sold as "bronze," "silver," "gold" or "platinum" based on the extent to which buyers are willing to pay higher premiums for lower co-pays -- or vice versa.
Kaiser, for example, plans to offer a basic silver policy for a 40-year-old person at premiums of $294 per month in Los Angeles County, $332 per month in Santa Barbara County, and $383 per month in San Francisco, San Mateo and Santa Clara.
Blue Shield's silver coverage will be $333 for 40-year-old residents of Sacramento, Placer, Yolo and El Dorado counties -- $58 less per month than in San Mateo but $69 more than in Riverside.
The trend also holds true for other age groups and other policies to be sold on the exchange: A 25-year-old can buy the least expensive level of coverage -- bronze -- at prices ranging from $147 to $274 per month, depending on location.
Even within a single region, premiums often differ from one company to another.
Imperial County's 40-year-olds, for example, can buy silver coverage from Kaiser for $316 per month, from Blue Shield of California for $396 per month, or from Anthem Blue Cross for $404 per month.
Price variations can stem from whether services are delivered by a preferred provider organization, an exclusive provider organization or a health maintenance organization. The latter, for example, generally does not cover out-of-network care except in an emergency.
For all policies sold through the state-operated exchange, federal subsidies are available on a sliding scale, extending to families of four earning up to $94,200.
Families may opt to choose one plan over another largely because it contains their favorite doctor or hospital. In Sacramento, for example, Sutter hospitals are part of Blue Shield's plan and UC Davis Medical Center is affiliated with Anthem Blue Cross. A complete list of networks is not yet available.
Networks are required by law to be adequate, so in some communities, key health care providers have leverage to negotiate higher reimbursement rates because insurers consider them essential for providing coverage, Bacchi said.
Tom Epstein, vice president of public affairs for Blue Shield of California, said costs for medical care generally are higher in Northern California than in Southern California.
"There are a number of large hospital systems that dominate the Northern California market, whereas there are many smaller hospitals and hospital systems in Southern California that compete," Epstein said.
Attempting to keep premiums low, some insurers are creating smaller provider lists for policies sold on the exchange than they offer elsewhere. Officials of Blue Shield and Anthem Blue Cross said their exchange networks are about 30 percent to 40 percent smaller than their largest networks.
Betsy Imholz, of Consumers Union, said the key issue is quality, not quantity. "Something has got to give -- they've got to keep costs down, as long as the networks are adequate," she said.
State regulators will opine on whether rates are reasonable, but they can't raise or lower them.
Covered California, which operates the state exchange, estimates that the 13 participating insurers will encompass 80 percent of practicing physicians and 80 percent of acute care hospitals in the state.
In years past, Bacchi said, premiums were affected substantially by geographic region, but a healthy person with a clean medical record could mitigate that by qualifying for preferred rates.
"In some respects, you'll lose that advantage now because nobody gets preferred premiums," he said.
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