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Thursday, Dec. 26, 2013

Milwaukee's Insurance Rates Are High, And Policies Are Low Quality

New report shows insurance costs have tripled since 2000

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Residents of Milwaukee and Racine are paying 23% more or an extra $1,810 annually for large-group health insurance than Madison-area residents, according to a new analysis by Citizen Action of Wisconsin.

Even worse, southeastern Wisconsin has a high concentration of low-quality, for-profit insurers offering large-group plans, while the Madison area has more high-quality, nonprofit options.

Citizen Action cited quality ratings from the state Department of Employee Trust Funds (DETF), which gave its highest ratings to the large-group health plans of Group Health Cooperative of South Central Wisconsin, Medical Associates and Unity Health Insurance—none of which cover the Milwaukee area. On the other hand, DEFT gave low ratings to Humana Eastern, MercyCare Health Plans, WEA Trust PPO and United HealthCare, all of which have a presence in our area.

The disparity doesn’t end there, either. Since 2000, Madison’s large-group health insurance rates have increased 163%, while Milwaukee’s has more than tripled by increasing 222% during that period, higher than the state average of 201%.

About 77% of insured Wisconsin residents are enrolled in large-group policies, according to figures cited by Citizen Action.

Citizen Action Executive Director Robert Kraig said there’s a high correlation between high costs and the large, national, for-profit insurers that provide the majority of coverage in our area.

“Milwaukee up until now has exclusively had that,” Kraig said.

That could change with the introduction of the nonprofit Common Ground Health Care Cooperative. Right now, it’s only offering individual and small group policies on the Affordable Care Act health care marketplace.

Madison also has a competitive advantage in the large-group market because it can harness the purchasing power of public employees to spur competition and drive down costs. That said, Madison doesn’t have the lowest rates for individual and small-group insurance, which Citizen Action cites as more evidence that the area’s high concentration of public employees has kept prices in check for large-group policies.

 

Wisconsin’s Insurance Costlier Than the National Average

Gov. Scott Walker decided to reject expanded Medicaid funding and push low-income Wisconsinites onto the health care marketplace because Wisconsin has a high degree of competitiveness in the insurance industry.

But the Citizen Action report, and other studies, pushes back on the idea that competitiveness alone will drive down insurance rates.

According to data gathered by the nonpartisan Commonwealth Fund, Wisconsin’s average single and family health insurance premiums in 2011 ($5,481 and $15,539, respectively, for firms employing more than 50 people) were higher than the national average ($5,213 and $15,175, respectively). Wisconsin’s rates for singles were higher than those in Illinois, Indiana, Iowa, Michigan and Minnesota. Family rates in Wisconsin were higher than all of those states except for Minnesota.

That said, Dan Schwartzer, the state’s deputy insurance commissioner, isn’t buying the argument that the large, for-profit insurers are driving up costs in southeastern Wisconsin.

“It’s really kind of a convoluted argument,” Schwartzer said. “The reason [insurance] costs are higher in Milwaukee is because health care costs are higher in Milwaukee.”

Kraig said he knew of no data showing that Milwaukee had the highest health-care costs, and pointed out that Milwaukee’s small-group and individual market insurance rates weren’t the highest in the state, just the area’s large-group rates.

“There are distortions in the insurance market that we need to better understand,” Kraig said.

 

Lessons for Obamacare

The report notes that it’s difficult to make predictions based on these findings about our future under Obamacare. But it does state that if Wisconsin’s insurance exchanges are dominated by national for-profit insurers, we could expect high rates with poor-quality policies. And if the Walker administration—or any future administration—doesn’t utilize all of the tools offered under the Affordable Care Act and fails to provide much oversight of profit-seeking insurers, Wisconsin consumers will lose.

We are seeing this already. A previous Citizen Action report found that on the health care insurance exchanges, Wisconsin insurance policies are 79%-99% more expensive than Minnesota’s. Kraig argued that Minnesota is taking a more aggressive approach to monitoring insurance companies’ rates, administrative costs and profit margins, which are capped by the Affordable Care Act. Walker’s Wisconsin, on the other hand, has taken a more hands-off approach to overseeing insurance rates on the exchanges, Kraig argued. And, of course, Minnesota has set up its own exchange, while Walker refused to do so and pushed Wisconsin onto the federal exchange.

Kraig told the Shepherd that only states with their own exchanges can offer large-group policies, while states like Wisconsin on the federal exchange cannot.

But Kraig said the state could do what’s called a more robust rate review, in which the insurance commissioner provides a more skeptical view of the rate increases proposed by private insurers.

Schwartzer said the best way to bring down the cost of insurance is to bring down the cost of health care, such as reforming the health provider payments so that they are based less on a fee-for-service system and more on an outcomes-based system.

“We do need health care reform,” Schwartzer said. “What we received with the ACA was not health care reform, it was more health insurance changes. You have to get at the root cause of premiums, which is health care costs.”

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