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Are Utahns subsidizing other states' sweeter insurance rates?

Published June 18, 2014 3:02 pm

Health • State residents get a pretty good deal on federal marketplace, but other states fare better.
This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Utah shoppers on the federal health insurance marketplace got a pretty sweet deal — but not the sweetest deal, when compared with other states.

Eighty-six percent of Utah shoppers received tax credits to put toward their purchase, bringing their average monthly insurance premium to $84, according to a new federal report. Thirty-six percent had premiums of $50 or less, and 69 percent spent $100 or less after tax credits, the report shows.

The Obama administration touts the numbers as proof that HealthCare.gov is working as intended to make insurance more easily comparable and affordable.

"Where there is choice and competition, everybody benefits," said new Health and Human Services Secretary Sylvia Burwell in a prepared statement.

But the data also tell a different story: Residents of states with traditionally low-cost insurance, like Utah, are subsidizing insurance for residents of high-cost states like Mississippi.

That's because the tax credits are based on the second lowest-priced silver plan in each state and calculated so that the premium that a person pays does not exceed a specified percentage of their income.

Poorer people get bigger tax credits, which means states with high poverty rates benefit most. But so do states with high insurance prices.

Utah, for example, has the lowest per capita health spending in the country and it boasts the lowest insurance rates on the Affordable Care Act's health exchange — $242 a month on average for a silver plan, well below the national average of $345.

But the average monthly premium paid in Utah after tax credits is $68, which is middle of the road. Eight states have lower post-subsidy premiums, the lowest being $15 in Mississippi, where the average premium before tax credits is $434.

Critics have suggested this amounts to a redistribution of wealth from states with lower health costs to states with higher health costs.

"It's weird the way they did the subsidy, in my opinion," said Rep. Jim Dunnigan, R-Taylorsville, an insurance broker. "We get penalized because we have lower rates to start."

But insurance is always about winners and losers. The young subsidize the elderly and the healthy subsidize the sick.

Utahns who work for large multi-state companies often shoulder an unfair share of the health benefits for fellow employees who live in pricier health care markets, acknowledges Dunnigan. The Affordable Care Act does it on a grander scale, he said.

The law also sets up an incentive up for insurers to jack up prices knowing the effect on consumers will be blunted by tax credits.

"It's a risk," said Lincoln Nehring, a health policy analyst at Voices for Utah Children. But he added market and regulatory control exist to limit that risk.

Insurers have to be careful to not over-price their policies and alienate consumers who don't qualify for subsidies, Nehring said.

In addition, the federal health law empowered states to create more robust rate review rules requiring insurers to publicize and justify rate hikes, he said.

Utah has taken steps to make rate hikes more transparent in the small group market, he said. "But they haven't taken the same steps in the individual market."

That could mean higher rates for 2015.

Dunnigan wouldn't speculate on whether Utah will see a huge increase. But he said setting prices will be a challenge for carriers, which are going into this second year blind.

"Because of the lag time for claims to be filed and paid they only have a few months of claims to base rates on," he said. "So either they build in a cushion and rates come up or they keep rates low to compete."

And consumers won't know what to expect until sometime this fall. Rates for 2015 are being filed and vetted now by the Utah Department of Insurance, but they aren't published until they're approved, providing consumers no chance for protesting them. —

How Utah ranks

Utah boasts the lowest average monthly premium for a silver plan on the federal insurance marketplace, before tax credits. But after tax credits, residents of other states ended up paying less.

Cheapest before tax credits:

Utah, $242

Arizona, $257

Idaho, $274

Tennessee, $281

Kansas, $289

Cheapest after tax credits:

Mississippi, $15

Georgia, $39

Missouri, $45

Florida, $50

Kansas, $50