Geographic rating areas in health insurance aren’t new
As people have begun shopping for health insurance for 2014, questions have come up regarding regional differences in the cost of health insurance. As the Colorado commissioner of insurance, I welcome the opportunity to explain this important topic.
Premiums, Health Costs and Utilization
Because many considerations go into the development of premiums, such as the health of current and expected enrollees and a company’s business operation, it is expected that cost of health insurance will vary among insurance companies. But what causes differences between regions? There are two key factors: 1) health care costs in that region; and 2) the utilization, or how much the health care is used. The ACA required geography to be one of the few factors used by insurance companies to vary premiums.
Differences Not New
Geographic rating areas have been in use in Colorado for many years. For the small group market, they have been used since 1992 when state law required their establishment by the Division of Insurance (DOI). In the individual market, they have been around for much longer. Carriers were allowed to use different methods for defining the areas, such as ZIP codes or counties, and could establish different premiums for different areas, based upon health costs and utilization. The differences in premiums had to be justified to the DOI.
New to the insurance shopper is the transparency brought about by the ACA. People can browse on Connect for Health Colorado and compare premiums from different areas.
Options for Coverage
Colorado is fortunate to have 18 insurance companies offering health insurance in 2014, with 15 of those offering plans through Connect for Health Colorado. We have a competitive market, with many choices for consumers, both on and off of the exchange. The DOI encourages consumers to take the time to shop around to find a plan that meets their needs.
Committed to Review for 2015
I understand the frustration as people see these price differences. However, the areas, plans and premiums are set for 2014. Yet, the DOI is committed to reviewing geographic rating areas for 2015 to see what, if any, changes need to be made. We are developing a stakeholder process that will include members of the community, the health providers and the insurance companies.
The questions concerning regional differences in the price of health insurance are serious concerns. But the topic should also include regional differences in health care costs, and more importantly, the differences in the health outcomes for citizens. Why does one area have higher health care costs than another? Why would one area have better outcomes for health care services than another? And what can areas do to get better outcomes at lower costs?
It would be ideal if one law could fix all of the problems with health care in our country, but that isn’t possible. The goal under the ACA is to improve the quality of health insurance and the access to that insurance, while trying to make it more affordable. However, one of the more important results of the law is that the discussions that have been occurring will lead to a deeper, more meaningful understanding of insurance.
— Marguerite Salazar is Colorado commissioner of insurance.
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