How will health costs change from one region to the next?

The cost of healthcare for a typical American family varies from one location to the next. Here is the most recent comparison of those costs across 14 geographic areas, according to the Milliman Medical Index.

How will this regional variation be affected by health reform?

The new underwriting and rating restrictions that will be imposed on individual and small employer group plans in 2014 will have different implications depending on a family’s location. The changes will require that insurance be guaranteed issue (i.e., applicants cannot be turned down), and that it be offered at adjusted community rates that do not allow carriers to “rate up” premiums based on the health status or claim experience of applicants.

Current underwriting and rating rules vary by state, so the effects of these changes will also vary by state. Minimum loss ratio requirements (80% for individual and small group and 85% for large group) may affect insurer rates. The U.S. Department of Health and Human Services (HHS) rule that any rate increase of 10% or more is deemed to be “excessive” will affect rate increase actions. Because states vary in their rate review practices and approval authority, the effect of these changes will also vary from state to state. Further, the Patient Protection and Affordable Care Act (PPACA) encouragement of the development of accountable care organizations (ACOs) and consumer operated and oriented plan (CO-OP) arrangements may affect the way care is coordinated and financed—with differences from state to state. As a result of all these things, the relative cost of care by state may look very different in a few years than it does today.

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