One of the challenges that AIM faces in its campaign to reduce health insurance premiums for Massachusetts employers is the lack of reliable information about the health- care market. A study released this week by the Kaiser Family Foundation comparing health insurance premiums in all 50 states illustrates the problem perfectly.
The study confirms that Massachusetts employers and their workers pay by far the highest insurance premiums in the country at an average of $437 per person per month. That’s more than twice the national average of $215 and more than three times the average in states such as Alabama, California and Arkansas.
No surprise here for Bay State business people. Ninety-seven percent of employers who responded to an AIM survey last fall citied rising health insurance premiums as their primary concern. Add those expensive health premiums to the highest-in-the-nation electric rates and soaring unemployment insurance costs and Massachusetts companies face an uphill battle every day competing in an unforgiving global marketplace.
The Kaiser study cites a variety of reasons that health insurance premiums vary among states - the cost of living, health-care costs, the age distribution of the population, the benefits mix of health plans offered in the market, the level of patient cost-sharing, and the ability of health plans to control provider costs.
“Also, states that have instituted reforms in their insurance markets to make coverage more accessible – such as Massachusetts, Vermont, New York, and New Jersey – may have higher average premiums because people with pre-existing health conditions are able to enroll. Conversely, states that permit medical underwriting may have average premiums that are low because the risk pools include a healthier than average population,” the study concludes.
The Kaiser authors suggest that national health-care reform law will narrow the variation of insurance costs among states. Reform will require insurers to cover a standard essential package in all states and to use defined tiers of cost-sharing.
Here is where the frustration begins. The report does not quantify the factors it suggests may be responsible for health insurance premiums doubling in Massachusetts since 2001. Employers are thus left to wonder how much of the increase comes from factors they can control – such as health plan design – and how much comes from demographics and other factors they cannot influence.
State officials have their own theories about what lies behind premium increases.
Massachusetts Secretary of Health and Human Services JudyAnn Bigby estimates that approximately 15 percent of increased health costs are attributable to the high cost of living in Massachusetts. She told a legislative committee this week that Massachusetts has historically had higher health care costs than the nation – long preceding a 2006 health care reform – because of a relatively high rate of insurance.
“We’re in a high-cost region,” Bigby said.
Attorney General Martha Coakley believes that health-care price variations within Massachusetts help to explain some of the price variations outside the commonwealth. The attorney general concluded in a report issued in June that the Massachusetts health care market operates with a wide variation in payments to physicians and hospitals for similar services – a variation that is not adequately explained by differences in the quality of care provided.
Costs increase quickly, Coakley says, because hospitals paid more than average rates are gaining patients while hospitals paid below average rates lose customers.
One key question remains – If you remove all of the cost of living, demographic and plan-design factors, is health care still more expensive in Massachusetts than in any other state? And if so, why is it more expensive?
The answer to that question will ultimately determine the ability of employers and consumers to solve a problem that continues to hinder job creation at a time we need it most. It’s up to all the players involved – employers, doctors, hospitals, policymakers and insurance companies – to agree on a set of facts and then hammer out a solution.