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Why patients in Montana pay lower health insurance premiums than their Wyoming neighbors

Differences among midwestern states -- including Iowa, Nebraska and North Dakota -- shine a light for hospital executives and policymakers alike.

Jeff Lagasse, Associate Editor

When it comes to the individual insurance market in so-called "farm states," not all markets are created equally. Western and midwestern states such as Nebraska, Iowa and Montana are the country's agricultural nucleus, but many of their individual markets don't function as well as they could. 

Simply put: the 2018 plan year is an ominous one for the unsubsidized. But hospital leaders and health care advocates looking to affect change in their regions or expand into new states would be smart to understand why such differences exist.

[Also: Montana insurers deny market 'collapse' but say Medicaid cuts in GOP bill would ensure it]

Katherine Hempstead, a senior advisor at the Robert Wood Johnson Foundation, said the farm operators in these states are largely self-employed, oftentimes necessitating individual coverage. In 2015, 15 percent of them were uninsured, and 17 percent purchased insurance in the individual market.

Other farm states, such as Montana and North Dakota, have much greater participation and lower premiums than states such as Nebraska, Wyoming and Iowa. A Nebraska farmer, for instance, can sometimes pay twice as much for the cheapest bronze plan than a comparable farmer in Idaho.

[Also: Wyoming lawmakers gut millions from bill to fund critical access hospitals]

"One of the factors is some of the decisions that states make about how they want to regulate their markets," she said. "Some states put policies in place that sort of protect the risk pool for this market by not creating other coverage opportunities, and other states haven't."

In states like Iowa, grandmother plans can potentially pull a lot of people out of the risk pool. When the Affordable Care Act was first implemented in 2010, some plans that had existed beforehand were grandfathered; others, the grandmother plans, were transition plans, and states had some discretion about whether to keep or eliminate them. Generally, states that have stronger markets ditched the grandmother plans entirely. 

"Another issue, which kind of has the same result, is whether states have stricter or laxer positions toward short-term plans," said Hempstead. Also known as limited coverage products, these plans are cheaper, but don't offer as much coverage and aren't part of the same risk pool. In fact, they "prick little holes" in the risk pool, said Hempstead, and aren't good for the market.

"You look at a state like New Jersey, it's sort of an expensive part of the country," she said, "but the individual market isn't really worse than the group market, because they've done things to protect the risk pool. They don't sell long-term plans. And they've expanded Medicaid. States that have well-functioning markets have expanded Medicaid, don't let people into short-term plans and don't sell long-term plans."

The prescription, said Hempstead, is one that involves policy. A possible approach would be to go back to a national reinsurance program that would allow premiums to go down across the board.

"There are structural factors that make healthcare cost more in some places than in others," she said. "In really rural areas there are not many providers so insurers can't create networks. Those tend to be places where healthcare is expensive. But given that, there's a lot of impact made by state policy decisions. Not all of these rural states are the same. Some policies have made the risk pool stronger, some have made it weaker."

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com

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