The Cost of Health Insurance — Where You Live Matters
May 19, 2014
Under the ACA, it’s well understood that the cost of health insurance varies depending on your income, which determines how much of a government subsidy you qualify for, if any.
But that’s not the only variable: it also depends on where you live.
To give a sense of just how different the price can be, in the Minneapolis-St. Paul region, a 40-year-old will pay $154 a month for a PreferredOne plan, which is a silver-level plan on Minnesota’s state-run exchange, MNSure. Just across the border into Wisconsin, that same level plan — with a different insurer, doctors and hospitals — costs nearly three times as much.
Why such a difference?
According to Kaiser Health News, the least expensive areas “tend to have robust competition between hospitals and doctors, allowing insurers to wangle lower rates.” In these less expensive areas, doctors also tend to be salaried, rather than being paid by procedure. This removes the financial incentive to perform more procedures, saving money from the get-go.
Cost savings also come in areas with health systems that organize patient care in a cohesive way, rather than being a loose collection of specialists working in isolation. This type of health care network — sometimes called “integrated care” — fosters collaboration between all types of caregivers, from primary care doctors, to specialists, to nurses.
The most expensive areas for health care tend to be rural and isolated. These areas often have just one or two hospital networks, which allows a network to set prices without the price-controlling factor of competition.
Does high cost equal high quality?
Not necessarily. Higher cost, for example, does not guarantee higher quality. Consider areas such Aspen or Vail, Colorado, which are isolated and have just one hospital network. Residents of these areas will pay more due to the lack of competition, but that does not mean better care.
In fact, the best bet for affordability and quality lies in dense, populated areas where many insurers and provider networks exist — with lots of doctors and hospitals to support the population and which, therefore, must compete for business.
So while Aspen may be a good place to be a ski bum, it isn’t the best location for low-cost health care.