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Brief Finds Health Insurance Premiums Vary Considerably Across State Lines

Friday, August 12, 2011

Posted by Sung Yoo – Last week, Jaime and I attended a hearing about prior approval for health premiums, as covered in a previous blog post. During the hearing, Democrats and Republicans remained split on the reasons for rising health care premiums and how to combat them. While Democrats wanted prior approval in order to give states the right to enact rate-review mechanisms, Republicans claimed Democrats were shifting the blame to insurance companies instead of acknowledging the Affordable Care Act's failure to reign in health care premiums. 

Timely enough, a rather interesting brief was just released by the Kaiser Family Foundation: It appears that how people perceive premium rate changes in the future will depend significantly on how the premiums compare to what they are buying today.

Nationwide, the average monthly premium per person in the individual market in 2010 was $215, but the state-by-state range was substantial. While states like Vermont and Massachusetts had average per member per month premiums of over $400 per month, states like Alabama and California had averages in the mid-$100’s. According to the Kaiser Family brief, there are a variety of reasons for why premiums might vary, including adjustments for cost of living, the actual costs of providing care, state demographics and the actual benefits offered by the plans.

Interestingly, the report also said states that have instituted reforms in their insurance markets to make coverage more accessible – such as Massachusetts and Vermont – may have higher premiums because people with pre-existing conditions are able to enroll. Conversely, states with low premium rates such as Alabama and California may have healthier-than-average risk pools and thus, lower premiums. However, the Kaiser report did not make conclusive claims about the reasons for the variance in health care premiums, since the main purpose of the report was to analyze the variance in premium costs, not to find the reasons for the variance. For a full list of average per person monthly premiums in the individual market by state, click here.

In our 2008 survey of micro-business perceptions on health coverage, 49.9% of respondents indicated that they get health insurance through individual plans. Starting 2014, these self-employed members will be able to buy coverage through health market exchanges as part of the Affordable Care Act. The Kaiser report says that though the exchanges will help narrow differences in the variance of health premiums, the costs are likely to continue varying considerably due to geographical differences in the cost of living and health care.

We would love to hear your experiences with the cost of health premiums. How does your state stack up in health care premiums compared to others? Are you satisfied with the level of coverage you receive now? Do you think health market exchanges will lower premiums for you? Feel free to comment below, or find us on Twitter or Facebook. We look forward to hearing from you! 

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