The Free Press, Mankato, MN

November 7, 2013

Zip code factors into health costs

MNsure exchange shows prices highest in southeast Minnesota

By Dan Linehan

---- — MANKATO — If you’re buying health insurance on Minnesota’s new exchange, the lowest monthly cost for a 40-year-old in the Mankato region is about $148. Depending on your income, you might pay less, but that’s about how much an insurance company is charging.

That same 40-year-old will pay a bit less in the metro area, about $115 a month, but a lot more in the Rochester region, about $238 a month. Those estimates are for the lowest level of coverage, a so-called “bronze” plan, which covers about 60 percent of a customer’s health care costs.

Why does it cost more to treat people in Mankato than Minneapolis?

“It’s not new,” said Mankato Sen. Kathy Sheran, a longtime nurse and health care educator. “It’s something I’ve been trying to get a handle on for a long time.”

The exchange, called MNsure, has made those costs more transparent, she said, while the Affordable Care Act limited the factors that can be used to set rates. Starting Jan. 1, insurance companies can only take age, location, tobacco use and family size into account when setting premiums.

These geographical disparities could be caused by differences among the people getting treated (perhaps southern Minnesotans are simply older, for example) and by different medical providers. In other words, either the people who live in the Mankato area are more costly to treat than metro patients, or the medical providers do the same work more expensively, or some combination of the two.

One possibility Sheran mentioned is a lack of competition locally.

"If you have fewer competitors, then there's less motivation to negotiate rates," she said.

The Mayo Clinic's dominance, especially in southeastern Minnesota, means that its generally higher prices are reflected in the area's premiums. That may also be the case, to a much lesser degree, in the Mankato region.

A Mayo spokesman, Bryan Anderson, said Mayo tends to treat sicker patients requiring more costly treatment. And patients in smaller cities tend to be older, and also costlier to treat, than their metro counterparts.

Sheran also said Mankato's hospital is reimbursed by government programs such as Medicaid at a lesser rate than metro area hospitals, so it may have to charge higher prices to insured patients to make up the difference.

"Those lost dollars get shifted over and built into the pricing for the private marketplace," she said.

These geographical disparities are also apparent in the small group market, typically used by employers. A Blue Cross and Blue Shield of Minnesota rate map, which calculates prices based on average medical costs in an area, shows that the Mankato region pays the fourth-highest of the state’s nine regions.

It also shows the Rochester area pays the most, about 30 percent more than the metro area.

Sheran said she is interested in figuring out where and why the highest premiums are paid to figure out how to bring them down.

"Many people in southern Minnesota will be looking at this issue," she said.