Widely varying benefit costs influence business strategy across U.S.
Alaska and Hawaii aren’t just separate from the 48 contiguous states; they’re also ground zero for the most expensive and affordable employer-sponsored health insurance, respectively, according to a survey of more than 11,000 employers by United Benefit Advisors.
Rounding out a list of the five most costly states are Wyoming, New York, Vermont and New Jersey, while Idaho, Utah, Arkansas and Mississippi are the five least expensive.
There was a nearly 7% decrease in the cost of single coverage in Hawaii last year, but in New Mexico, monthly premium costs soared 22% for individuals and almost 30% for families, according to UBA’s 2016 Health Plan Survey.
In fact, the latter development knocked New Mexico off the list of states with the cheapest coverage. A similar story unfolded in Wyoming, where monthly premium increases of nearly 24% in single coverage and about 10% in family coverage gave that state the distinction of being among the most costly states.
Upon announcing the findings, UBA CEO Les McPhearson noted that “benchmarking by state, region, industry and group size is critical.” To some of his advisers, that assessment helps manage client expectations at renewal time, but it also raises key questions about state rights and the effectiveness of health insurance sales without borders under the Trump administration.
When examining regional price differences, employers acquire a basis for comparison that helps them make adjustments from a plan design or cost-containment perspective, as well as determine if they’re at, above, or below the benchmark. So says Bonnie-Lee Pang, SVP of employee benefits for the UBA partner firm Atlas Insurance Agency, Inc. in Honolulu.
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While dirt-cheap prices in her home state are the envy of the industry, she says they’re unrealistic for employer clients in California and Nevada where regional benchmarks can serve as “a very valuable tool” in setting expectations when renewing group health plan coverage.
This sort of analysis also can be helpful from a general business standpoint, according to Jennifer Bundy-Cobb, director of health and welfare service for UBA partner firm Wilson Albers, who divides her time between offices in Tacoma, Wash., and Anchorage, Alaska.
For instance, advisers could suggest to employer clients looking at expanding their business to steer clear of the most costly states and instead invest “in places that are the least expensive from a healthcare standpoint, because it’s a significant part of your bottom line.”
Within a larger political context, she’s hopeful for a rollback of regulatory requirements that force employers to buy health insurance they can’t afford. Bundy-Cobb strongly believes these issues must be handled at the state level rather than adding federal oversight that will serve to exacerbate existing problems.
However, she has a different view than President Trump on the issue of allowing health insurance sales across state lines to boost competition and eventually lower prices.
“You can lift the barrier to allowing people to purchase insurance in other states,” Bundy-Cobb says, citing arrangements in New England and elsewhere. “It doesn’t really matter that I buy my insurance from Blue Cross of Alaska or Blue Cross of Idaho. My cost of care here is a certain dollar amount, and Blue Cross of Idaho better charge me a correct premium to reflect my cost of care, or all that they’ve accomplished is allowing the good people of Idaho to pay for my care.”
In her home state of Alaska, she cites several culprits that contribute to the nation’s highest employer-provided health insurance costs. For example, the absence of a medical school in the state means all doctors must be recruited from elsewhere.
Other reasons include adamant opposition to managed care in the 1980s and 1990s, as well as anti-HMO legislation. In addition, insurance carriers are reluctant to cap provider reimbursement levels. “As a friend of mine says, we’ve taken the reasonable out of ‘usual, reasonable and customary,’” Bundy-Cobb says.
In Hawaii, which enjoys the nation’s lowest prices, there are other extenuating circumstances that explain sharp regional differences. Pang cites the Hawaii Prepaid Health Care Act of 1974, an employer mandate that dictates the level of coverage and amount employees pay. Another reason: “We are one of the healthier states,” she says. One explanation is a nice climate that she says allows residents “to be more active all year round.”