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Does Massachusetts Have the Nation’s Highest Health Insurance Premiums? It Depends.

Posted by John McDonough  November 7, 2011 02:10 PM

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I hear it so often, it must be true. All over the nation, everyone seems to know that Massachusetts has the nation's most expensive health insurance. It usually is brought up as a way to criticize Massachusetts health reform: "Yes, you may have covered nearly everyone, but what about your out-of-control high insurance premiums?"

So is it true?  Do we have the most expensive premiums in the U.S.? The answer may surprise you.

Let's start with the data most people know: average family health insurance premiums, state-by-state, 2009. See that state way over on the right? That's Massachusetts, and the data are federal (courtesy of the Commonwealth Fund) showing our premiums #1, the most costly in the nation (Arkansas is the cheapest). Guilty as charged.

Unadjusted family premiums 1.jpg

Some things help to explain the difference. Massachusetts health insurance tends to include lower deductibles and other kinds of cost sharing which are much higher in most other states, a difference that inflates MA premiums as compared with those in other states. Massachusetts has the highest proportion of physicians, nurses and many other health professional categories than all other states.  And our costs have always been the highest, not just since the Massachusetts health reform law passed in 2006.  But still, guilty as charged.

There are other key differences, and the most important one is income. Massachusetts had the 4th highest median household income among the 50 states in 2010 (after Maryland, New Jersey, and Connecticut). That accounts for a big part of the difference. The raw (unadjusted) premiums shown above don't take into account ability to pay. For example, assume Ms. M lives in Massachusetts and has $100 in income and health insurance premiums costing $20. Then assume Mr. A lives in Arkansas, has income of $50, and health insurance premiums costing $15. Even though Mr. A pays less, he is paying 30% of his income and Ms. M is paying 20% of hers. Who is worse off? I think Mr. A from Arkansas.

So is this how it really plays out? Yes, see this next chart (courtesy of Commonwealth Fund):

Figure 6.jpeg.png

When we look at employer health insurance premiums as a share of household income, in both 2003 and 2009, we find Massachusetts is among the least expensive states when considering the proportion of one's income required to pay for health insurance (and Arkansas is among the most expensive).

So should we ignore the first set of data?  No. Both perspectives matter in understanding what's going on. For example, the second data set is important in understanding what is happening in states regarding lack of health insurance. As we know, rates of uninsurance vary widely state by state. In Massachusetts, about 5% of adults under age 65 lack insurance while in Texas (to pick a random example) the number is around 33% (yikes!).

So does either of the two data sets above help in explaining different rates of uninsurance state by state? With help from Miguel Marino, a crack biostat post-doc at my employer, the Harvard School of Public Health, we compared the two data sets with state-by-state uninsurance data from the U.S. Census. First, we compared the unadjusted family premiums with state uninsurance levels, and here are the results:

insurance_premium-4.jpeg

To summarize, it's a mess, a whole lot of nothing. No relationship at all between the two sets of data, as evidenced by the teensy R-squared measure of 0.07 (a measure of 1 would indicate a complete explanation). While unadjusted family premiums give us information that certainly looks shocking, it does nothing to explain why states have the uninsurance rates they do. Now let's look at the results when we compare insurance premiums adjusted by state household income with state uninsurance rates:

family_premium-3.jpeg

Houston, we have a relationship! The results do not explain all, or even most, of the variation among states, though it surely explains a lot more than the unadjusted prior set of numbers.  In this case, 0.34 explains a lot more than does 0.07.  And, it makes sense to boot. The raw, unadjusted number tells us a lot less than does the number based upon ability to pay.

Some of my colleagues in the world of Massachusetts health policy don't like to talk about the income adjusted numbers much, fearing they will be used by some to undermine the case and need to address our state's high health costs in general, and payment reform in particular.

I'm looking at these numbers, though, from a national context. It seems like at least once a week, the Wall Street Journal editorial page needs to publish at least one op-ed kicking the stuffing out of Massachusetts health reform (because if MA health reform is any good, that lends credibility to the federal Affordable Care Act). I give speeches around the country about the ACA and always get challenged about MA's high health care costs, as if we were the only state facing the problem of high health care costs.

It's not that our costs are low; they are not, especially when compared with costs in any other advanced nation. The essential point is that the burden of high health care costs is not just a problem for Massachusetts. Most other states, based on real affordability, are in even worse shape, not better.  And it's a big part of the reason why they have so many uninsured who need the help promised by the Affordable Care Act.

So kudos to Massachusetts political leaders in the Patrick Administration, Senate, and House for tackling this challenge head on; and kudos to our health care community for facing up to it as well. There is no state in the nation confronting the problem of rising overall health care costs as much as is Massachusetts.

It's the rest of the nation that needs to wake up.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »

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