Tuesday, October 9, 2018

Health Insurance Cost Vary by Where You Live

Most of us would expect that no matter where you go, the cost of health insurance would stay relatively the same. Unfortunately, that’s not the case at all.

Where You Live Can Cost You

To give you an idea of how pervasive this problem is, take a look at this example: In 2009, citizens of the District of Columbia spent twice as much on their health care, at $10,349 per capita the highest cost in the nation, than Utah, which spent just $5,031 per capita.

So, what’s contributing to the cost disparity?

A Lack Of Insurers

One problem The Affordable Care Act (ACA) has made clear is that in some parts of the country, there just aren’t that many insurers. For example, according to a May 2014 New York Times article, “One Reason Health Insurance Premiums Vary So Much,” in the government exchanges for the city of Tucson, Arizona, there are at least eight insurers looking to earn the business of citizens. In the city of Jackson, Missouri, there’s just one.

It’s not really clear why, or how, this happens. Some areas just simply have an overall lack of insurers, which means less competition and as a result, higher health insurance costs.

A Lack Of Hospitals

In some parts of the country, there’s a grand total of one hospital. That has many disadvantages, as you might guess, but one of the major ones is that this hospital pretty much sets the prices for any medical procedures in the area. And, just like any other market where a business has a de facto monopoly, they’re not usually inclined to keep the costs low.

As a result, premiums are driven up simply because the insurers don’t have a lot of leverage. It’s not like they can send some of their policyholders to a competing hospital, after all.

Cost of Health Insurance Premiums Vary Wildly by Where You Live

Can This Problem Be Fixed?

The problem of fewer insurers will hopefully be fixed by the free market. After all, if somebody can come in and offer the same insurance at a better price, that’s going to drive down the overall cost of insurance in exchanges.

But the problem of fewer hospitals is a stickier one. How do you encourage competition in an expensive industry with relatively little medical need? It’s a question we’ll have to figure out the answer to.