State Variations in Health Insurance Costs

It is widely recognized that there are significant differences in the cost of employment-related health insurance across the country.  The Agency for Healthcare Quality and Research put out a brief based on the current Medical Expenditure Panel Survey’s Insurance Component which examines those variations in health premiums and in how much an employee might have to contribute toward the total cost.  (AHRQ Brief) About half of the employees in the United States elect single coverage and half coverage for themselves and at least one other person. Florida had 55% select single coverage and Michigan only 48%.

The average health insurance premium in 2009 was $4,669 for single coverage, $9,053 for employee plus one dependent and $13,027 for family coverage.  Among the ten largest states, New York at $5,121 and Michigan at $4,916 had high single coverage costs, while Ohio ($4,261) and Texas ($4,499) had lower than average employee-only costs.  For family coverage New York is again highest at $13, 757, with Illinois close behind ($13,708) and Ohio is again low-cost ($11,870) as surprisingly is California ($12,631) but average family size in California may be smaller.  Another surprising fact is that over 20% of employees with single coverage make no premium contribution while 11% with family coverage don’t.  California leads with 28% of single-covered persons with no contribution while New York had 20% with family coverage and no contribution.  Lot of government employees in both states.  On average, including those with no contribution, employees put in 20% of the single premium and 27% of the family premium.

Some of the factors which AHRQ recognizes as contributing to the variation include the benefit design of the plan, including services covered and level of deductible, copays and coinsurance; the size and nature of the company offering the benefits; workforce characteristics; and state health insurance regulations.  AHRQ makes no attempt, however, in this brief to analyze or quantify these factors.  That would be a useful effort.  We suspect that there is clear relationship between restrictive state regulation and higher premiums and that provider market power and subsequent pricing power is another driver of more expensive insurance.