Health Care

September 22, 2013

Zip code can affect insurance rates under health law

Where you live in Kansas could impact your insurance rates under provisions of the Affordable Care Act.

Where you live in Kansas could impact your insurance rates under provisions of the Affordable Care Act.

Among the myriad of factors – past and present – that go into setting rates for health insurance, some are being eliminated under the federal health care law and others are being created or given new emphasis.

For example, an individual’s pre-existing conditions can no longer be a factor in the cost of an insurance plan. Starting in 2014, insurance companies can set an individual’s rates based on age, family size, tobacco use and location. And there are limits on how those factors can be used.

As another example, the law puts a cap of a 3:1 ratio on how much more older adults can be charged for insurance than younger adults. Most analysts think that means health plans will be less expensive for older adults and more costly for younger adults.

But the area that is the least clear is how location will impact rates, in part because insurance companies will make their own determinations on how different regions compare.

“Geography is a big piece of this,” said Linda Sheppard, special counsel and director of health care policy and analysis for the Kansas Insurance Department. “Depending on where a person lives in the state, it can be used to calculate the cost since the cost of health care varies in different parts of the state.”

Kansas has been divided into seven regions. Sheppard said the federal government asked states to determine the geographical areas, with a maximum of seven regions.

“Blue Cross Blue Shield of Kansas was the carrier that had the most experience doing business across the entire state,” Sheppard said. “They had the proposal and shared it with other companies and that will work for us.”

According to Mary Beth Chambers, corporate communications manager at Blue Cross Blue Shield of Kansas, the regions were set based on care patterns in different regions. A number of factors can influence the cost of care in a particular region of the state.

Influences in the care provided in these areas could be population differences, environmental issues, socioeconomic factors, etc.,” she said.

Population health factors in a region, such as obesity rates, could affect rates.

Another example she used was how doctors in some parts of the country are more likely to perform certain procedures over others, like more cesarean sections than natural births, which could lead to higher rates.

The way different insurance companies set prices for those regions and how they compare to one another will vary, and will be based on the company’s data and contracts with providers within that region, Chambers said.

“As we looked at that, we really saw where there were localized centers of care,” Chambers said. “For example, the cost of care on average is a little less in Wichita and a little higher in northwest Kansas.”

Based on Blue Cross’ claims data, part of the reason the cost of care is higher in northwest Kansas is because those residents are more likely to go to Denver for care.

The location factor will vary less than 10 percent from region to region for Blue Cross customers, Chambers said.

Chambers did not release detailed information about how regions in the state compare with one another under Blue Cross.

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