Earlier this month, NerdWallet, a company that offers online price estimations for insurance, housing, education, and travel, among other things, released an analysis of health-insurance plan prices on the marketplace. The study looked at silver plan prices (the step up from the cheapest bronze plans, and the most-selected plan type) for a 30-year-old non-smoker in the 15 most-populated counties in Tennessee.
The lowest-cost plans found ranged from $160 to $190 per month, and the highest-cost plans were generally about $50 to $120 more expensive. In the study, Blue Cross Blue Shield tended to offer the cheapest prices, and Tennessee's new state insurance cooperative, Community Health Alliance, offered the most expensive plan in all but four of the counties studied.
"We're seeing an average variation of about $100. I think that for having a low-cost plan of $160, to add $100 to that is kind of a big jump," says Napala Pratini, the analyst who ran the numbers for NerdWallet.
The prices offered by insurance companies vary from county to county based on factors like hospital prices, overall health and age of people in the county, and the rate of uninsured people in the county. The prices are set by actuaries who run models based on these factors to set prices. Pratini calls the pricing process "kind of a black box," since pricing negotiations with hospitals aren't public. There are also only four insurance companies offering plans on the marketplace. Blue Cross Blue Shield is the only company that offers plans in every county in Tennessee, and in Knox County, the only companies offering policies are BCBS, Humana, and CHA. Cigna offers plans in other counties.
"Basically, the fewer the companies, the lower the competition. I would imagine if there were more companies, there would be more competition, and therefore lower prices," Pratini says.
And the fact that the state co-op's prices are generally the most expensive did not escape Pratini.
"My understanding is that insurance co-ops are intended to drive lower prices, and I've seen some pretty high prices for co-ops in other states as well. This might be due to the fact that these are new organizations," she says. "They had to go and negotiate rates with hospitals. Established companies already have that done."
CHA spokesperson Ranee Randby confirms that guess, saying that the higher prices offered by the co-op are to be expected, since the company is brand new.
"The situation was not unlike a traditional insurance company that enters a new market for the first time. Sometimes the pricing is under-estimated and renewals include increases and sometimes the pricing is over-estimated and the renewal includes a decrease," she says.
In this case, Randby says she expects the prices offered by CHA will eventually go down.
"As claims data comes in, there should be more stabilization in the pricing with less of a spread from one company to the other," she says. "We think this stabilization will happen in approximately three years."
The Kaiser Family Foundation found that, compared to most of our surrounding states, Tennessee has slightly lower average premium prices. KFF estimates the average premium price per month in Tennessee is about $204. The average price in Georgia is $220, and $240 in Virginia. But Alabama's average price is $136. The average across all 50 states was about $215.
KFF's average estimates combine prices for children and adults, so some premiums will be cheaper, and some will be more expensive, typically based on age and tobacco use.
Erin Hill, the executive director of Knoxville Area Project Access, says that in her experience, age is the main factor in price variation.
"If you're talking about price variation in premiums based on age, yes, there is quite a bit of variation. Based on location? It's pretty similar. Age and tobacco use are the two main contributors in price variation," she says, though she isn't sure how much tobacco use impacts prices.
Hill also added that having three insurance companies offering policies is "pretty nice."
Tobi Johnson, director of Get Covered America's Tennessee office, says that she meets a lot of people who don't know that there is financial help available to make insurance premiums even more affordable. Tax subsidies are available to people whose income puts them between 139 and 400 percent of the federal poverty level. And though people's past experiences with plans that cost upwards of $1,000 can make them skeptical of the marketplace, Johnson says, "They don't call it the Affordable Care Act for nothing."
"We know that half of people under age 35 can get a plan for less than $50 a month," she says.
Johnson also adds that part of the ACA's rules state that most of the premium that people pay must be used to pay for patient care. That means that even though a 50-year-old man's health insurance is legally required to cover maternity care, for example, he won't be spending money unnecessarily.
"The difference with the ACA is that they have the 80-20 rule. Eighty percent of premiums have to go to medical care, and 20 percent can be medical loss ratio. There's protection that the majority of your premium is going to be used for your coverage," Johnson says.