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Feb. 24--People buying coverage through the new health care exchanges in East Tennessee are paying nearly a third less than the national average and less than half what's being charged in the nation's most expensive markets, including South Georgia.
A new study by the Kaiser Family Foundation ranked Chattanooga and Knoxville among the 10 cheapest markets to purchase individual plans offered through the Affordable Care Act, also known as Obamacare.
A 40-year-old buying the most popular "silver" plan offered through BlueCross BlueShield of Tennessee can get it for $181 a month, $78 a month less than the U.S. median price for such coverage. Chattanooga's price is $280 a month cheaper than the lowest-cost plans available in South Georgia.
"We're seeing some of the lowest rates anywhere in the country here in Chattanooga," said David Yoder, co-founder of local health insurance broker American Exchange, which is helping to market exchange policies in 42 states.
The Kaiser study found that only a few markets in Minnesota, Pennsylvania, Arizona, Utah and Hawaii were cheaper than the lowest-cost plan in East Tennessee. The median price was $259.
"We've always known that premiums vary geographically, but we weren't previously able to make these kinds of apples-to-apples comparisons that we can now with these more uniform plans," said Cynthia Cox, a senior policy analyst for Kaiser. "We found in the most expensive areas of the country, the lowest-price silver plan for a 40-year-old was about three times more expensive than that very same plan in the lowest-cost market."
The key drivers of health care costs vary geographically according to the overall health of the population insured, how much such people use health care services and what hospitals, doctors and other providers charge for their care.
The lowest-cost plan in East Tennessee is offered by the Chattanooga-based BlueCross, which is using a narrower provider network than most plans to get better prices from providers.
"We did not go out with the strategy of just trying to have the lowest prices in the market," said Henry Smith Sr., vice president of operations and chief marketing officer at BlueCross BlueShield of Tennessee. "It just sort of worked out that way."
But as the state's biggest health insurer, BlueCross did want to offer attractive plans and prices to help expand the number of Tennesseans with health insurance and thereby reduce the amount of indigent care costs shifted to other BlueCross commercial customers, Smith said. BlueCross also restricted its provider network -- only Erlanger is included among local hospitals -- to use its buying power to gain better pricing.
As a nonprofit company with healthy reserves, Tennessee's BlueCross plan also is positioned to take a bigger risk with its initial prices in the still untested market.
"There is a lot of uncertainty about who will sign up and what the composition of these new subscribers will be, so we saw different insurers take different approaches with their plans and prices in this first year," Cox said.
Under ACA rules, insurers that charge too much relative to their actual medical claims will have to refund some of their premiums back to customers.
Insurers in Tennessee also must submit by April their projected pricing for the second year of the health exchange plans, even though they expect many people will still sign up over the next six to eight weeks for coverage in the current year. If claims prove greater than expected, premiums could increase significantly next year.
For now, the initial health exchange prices vary by state. Yoder said prices for BlueCross plans in Georgia are significantly above what Tennessee's BlueCross plan is charging. In Chattanooga, BlueCross of Tennessee and Cigna Health and Life Insurance Co. are offering plans.
Georgia's BlueCross plan is only offering a health maintenance organization in North Georgia. Alliant is offering a preferred-provider organization plan in North Georgia.
"The BlueCross plans in Tennessee and Georgia have taken very different approaches to the market and come in with very different prices and options as a result," Yoder said.
For a 35-year-old man with a $30,000-a-year income in Walker County, Alliant has the best offer at $200 a month. A comparable plan through BlueCross in Tennessee is $168 a month.
The lower prices in East Tennessee are surprising considering that the region's residents suffer from abnormally high rates of obesity and strokes.
"We're the buckle of the stroke belt," Erlanger CEO Kevin Spiegel told Kaiser Health News in its study of geographic differences in the new plans.
Insurers had to make a lot of untested assumptions about who would sign up for the new policies and how many new subscribers who previously may have been uninsured might initially need more health care services.
"We did not know where others would price this product, but we did a lot of research before we did any pricing," Smith said. "Were we surprised that two of our regions were in the top 10 [cheapest areas]? Quite frankly, yes."
Kaiser found that the cheapest-cost regions tend to have robust competition among hospitals and doctors, allowing insurers to obtain lower rates.
Contact Dave Flessner at [email protected] or at 757-6340.
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