Robert Kraig, Ph.D.
Citizen Action of Wisconsin
Executive Summary
This is the 4th annual report on Wisconsin metro and regional health insurance costs.
Although there has been a great deal of attention to higher than average health insurance costs in Wisconsin, until we began this annual report there was very little analysis of relative cost between the regions and metro areas of the state. Since its inception in 2006, the annual Health Insurance Cost Ranking report has received a great deal of attention across Wisconsin because it provides such a measure. The report has consistently showed that although costs are high across Wisconsin, that some regions of the state pay thousands of dollars more for health insurance than others.
Beginning with the 2009 report, the annual Wisconsin Health Insurance Cost Ranking was enhanced with retrospective data which makes it possible to measure the rate of health care inflation in each metro area and region since 2000.
A new addition to the 2010 report is quality ratings of the health care plans available in each metro area of Wisconsin. This information makes it possible to examine the relationship between health insurance costs and the quality of insurance that is provided, as measured by key benchmarks such as consumer satisfaction, preventative care, disease management, mental health, and responsiveness to consumers.
Key Findings in 2010 Report (See ranking charts pp. 6-9)
1. There continue to be wide cost variations between higher and lower cost areas of the state. There is a 19% variation between the highest cost major metro areas and the lowest cost metro area (Madison), which amounts to a $1,608 difference for a single policy each year (see Chart 1, p. 6).
2. The regions with the highest costs have remained relatively constant over the past four years. Northwestern, West Central and Southeastern Wisconsin continue to be high cost regions. This year, for the first time in this report, North Central Wisconsin is the highest cost region, albeit by a small margin. The highest cost metro areas are Wausau, Stevens Point, Wisconsin Rapids, Kenosha, La Crosse, and Eau Claire. South Central Wisconsin remains the lowest cost region (See Chart 1, p. 6 and Chart 5, p. 8).
3. Wisconsin health insurance costs continued their rapid rise in 2009, rising 9% overall despite a very slow rate of general inflation for other consumer products. There was also a large gap in the rate of health care inflation between different parts of the state, with some areas increasing by 11% over the past year while others increased only 3% (See Chart 2, p. 6)
4. The geographic distribution of health insurance costs in Wisconsin has shifted substantially since the current health care cost run up began a decade ago. In 2000, Northeast Wisconsin was the lowest cost area, but has suffered from higher than average health insurance inflation this decade. Over the past decade Green Bay has had the highest rate of health care inflation of any major metro area in the state, followed by Appleton and Oshkosh. In 2000, Madison was in the middle of the pack but is now by far the lowest cost metro area (See Chart 3, p. 7 and Chart 1, p. 6)
5. Wisconsin health insurance rates have increased faster than the national average. While national employer-based single health insurance premiums have increased 120% this decade, they have increased 179% in Wisconsin. All Wisconsin regions and metro areas have suffered health insurance inflation above the national average (See Chart 3, p. 7).
6. For the first time this report provides health insurance plan quality measures. The report finds that there is not a strong correlation between quality and health insurance costs, with some of the low cost areas of the state having higher quality insurance plans and some higher costs areas having lower quality. Madison, the lowest cost area, is also high in quality, while Southeast Wisconsin is among the highest cost areas but has by far the lowest quality. However, the highest cost area, North Central Wisconsin, also has the highest quality. There is a strong correlation between type of insurance, with the national for-profit companies having the lowest quality and the regional non-profit provider-driven networks offering the highest quality plans. As a result, regions with a preponderance of for-profit insurance, such as Milwaukee, Racine, and Kenosha, have much lower quality (See Chart 8 and Chart 9, p. 9).
Introduction
Although health insurance hyperinflation is a national phenomenon, there is a substantial research indicating that the problem is even worse in Wisconsin.
• A November 2009 annual survey by Mercer Health & Benefits found Wisconsin health insurance costs to be 22% above the national average ($1,943 more per employee). The Mercer survey has found similar results for a number of years.
• According to a Families USA Report co-released by Citizen Action of Wisconsin, Wisconsin health insurance premiums have risen 4.8 times faster than wages since 2000.
• According to a 2009 report from the New America Foundation, the average family health insurance policy in Wisconsin will cost nearly $25,000 per year by 2016. Worker contributions to premiums will increase 106% for family policies and 119% for single coverage in Wisconsin by 2016.
• The 2005 Health Care Cost Quotient ranked Wisconsin second highest in the nation in employer health care costs.
• A 2005 U.S. Government Accountability Office (GAO) Study found that out of 319 metro areas, 8 of the top 10 cities in the nation for physician costs, and 2 of the top 10 cities for hospital costs, are in Wisconsin.
• A 2006 study commissioned by the Greater Milwaukee Business Foundation on Health found Milwaukee’s per unit hospital costs to be 14-26% higher than other Midwestern cities.
• A 2005 study concluded that Milwaukee’s medical service costs were 27% higher than other Midwestern cities.
• According to a 2006 Greater Milwaukee Business Foundation on Health study, specialists in Milwaukee charge 30-40% more for the same procedures as their counterparts in Cincinnati, St. Louis, and Kansas City.
• A 2004 GAO Study found Milwaukee metro area health care costs are 27% above the national average.
• According to a December 2008 survey by Bizjournals.com, Milwaukee family physicians are the 4th highest paid in the country.
Health insurance hyperinflation is placing severe stress on Wisconsin’s employer-based health insurance system. Laura Dresser and Joel Rogers in The State of Working Wisconsin (September 2008) document the precipitous decline of employment-based health insurance coverage in Wisconsin. In 1979, 73% of Wisconsin workers had health insurance through their jobs, but by 2006 the share had dropped to 58%. The most current and reliable national research shows that most of this decline in employer-based coverage has occurred during this decade, mostly among employers with less than ten workers. The highly respected Kaiser/HRET 2009 survey (September 2009) concludes that high health insurance costs are the primary reason employers do not offer coverage.
It is widely recognized that spiraling health insurance costs are endangering access to affordable health care for a rising share of the population, and increasingly discouraging the underinsured from seeking needed preventive care or chronic disease management. In addition, there are mounting concerns that Wisconsin’s relatively high health insurance costs are damaging the state’s ability to create and attract family supporting jobs by making job creation much more expensive.
While there has been an increasing focus on relatively higher costs in Wisconsin, there had been until recently little attention to health care cost differentials between the various regions of the state. The first three Wisconsin Health Insurance Cost Ranking reports showed that there are indeed substantial geographic differences in Wisconsin’s health insurance costs. If these differences persist, some regions of the state may have a competitive advantage over others. In addition, if some regions and metro areas are having more success in containing health insurance costs, they may present useful lessons for the rest of the state.
The 4th annual Wisconsin Health Insurance Cost Ranking report contains substantial enhancements. The first two reports provided a ranking of health insurance costs between regions and metro areas in a given year. This report, like last year’s report, adds retrospective data which makes it possible to measure the rate of health care inflation in each city, county, and region since 2000.
Also for the first time, the 2010 report provides measures of quality in addition to cost. This information makes it possible to examine the relationship between health insurance costs and the quality of insurance that is provided, as measured by key benchmarks such as consumer satisfaction, preventative care, disease management, mental health, and responsiveness to consumers.
Methodology
This analysis compares the relative health insurance costs across regions and metropolitan areas of Wisconsin by analyzing the 2010 rates paid by the State of Wisconsin’s Group Health Insurance Program (GHIP) for state employees, a model program administered by the Wisconsin Department of Employee Trust Funds (ETF). In 2006, the program covered over 194,000 individuals, including state employees, state retirees, some local government employees and retirees, and their immediate families and dependents. There are 24 participating private health insurance plans in the program covering 70 of the state’s 72 counties.
The GHIP’s uniquely competitive bidding process, geographic breadth, and uniform benefits package make it a useful surrogate for regional and metropolitan private health insurance markets. In 2003, the State of Wisconsin switched to a three-tiered bidding process, which requires members who select higher cost Tier 2 and Tier 3 plans to pay substantially higher premiums. Plans in all three tiers provide uniform benefits, with plans which score higher on several quality indicators receiving extra credits in the scoring process. As the boundaries between the tiers are not set in advance of the process, insurers have a strong incentive to bid as low as possible. Tier 2 and Tier 3 plans attract far fewer participants during the annual Open Enrollment process due to the higher premiums charged to enrollees. As the tiered system creates a powerful incentive to make the lowest responsible bid, the rates that GHIP is able to obtain through this annual process is a barometer of the private health insurance market in each region. In addition, as the program requires a uniform benefits package across all 24 participating health plans, it offers a rare opportunity to compare relative costs for the same bundle of services.
This methodology was first used in the 2007 Wisconsin Health Insurance Cost Ranking report (released in 2006). The methodology is comparable to that used by the GAO’s 2005 national study of variations in physician rates between metropolitan areas. Previously, there had been a great deal of research into geographic differences in health care utilization, but very little into geographic cost differentials. The GAO study analyzed regional cost variations accrued by the Federal Employee Health Benefits Program (FEHBP). FEHBP is the largest private health insurance program in the country, with over 8 million enrollees.
One of the criticisms of the GAO study is that because it looked at retrospective FEHBP Preferred Provider Organization (PPO) claims data, its results may have been out of date. The following analysis of GHIP, like the 2007, 2008, and 2009 reports, does not have the same weakness, as it examines 2010 insurance rates rather than retrospective cost reports. On the other hand, because it examined actual claims, the GAO study was able to break down its analysis into various cost centers, something that cannot be presently done with aggregate GHIP rates.
In addition to examining the 2010 rates for GHIP, this report looks retrospectively at rates back to 2000. This permits an analysis of the relative rate of health insurance inflation in every metro area and region of Wisconsin. As the data allows a measure of the cost of competitive regional rates for a relatively uniform benefit over time, it offers a unique window into the rising cost of health insurance in Wisconsin. The data presented in this analysis is descriptive rather than predictive.
Finally, Wisconsin Department of Employee Trust Funds (ETF) now publishes a quality report card for all insurance plans that participate in GHIP. The measures rank health plans based on Wellness and Prevention Services; Behavioral and Mental Health, Disease Management, and Consumer Satisfaction and Experiences. Out of these 4 measures, ETF created an overall quality score. This data set permits a comparison of the cost and quality of health insurance plans available in each metro area of the state.
Results
Wisconsin 2010 Group Health Insurance rates reflect wide cost variations between the regions and metro areas of the state for the same health insurance benefits package. The range of cost differential is 19% between the highest and lowest cost major metro areas. Although there has been a great deal more attention paid to higher than average health insurance costs in Milwaukee and in Southeastern Wisconsin, as it did the last three years, this report finds that costs are highest in the Northwestern, North Central, West Central, and Southeastern portions of the state. The highest cost metro areas, Wausau, Stevens Point, Wisconsin Rapids, and Kenosha are 19% higher than Madison, which is the lowest cost metro area. La Crosse and Eau Claire are 18% more costly than Madison. The percentage gap between Wausau and Madison translates in dollar terms into a $1,608 difference for a single policy each year (see Charts pp. 6-9).
The retrospective data used in this report permits an analysis of the differential impact of health insurance inflation in different regions and metro areas of the state. The data shows that the health insurance hyperinflation that began in 2000 has changed the regional distribution of health insurance costs in Wisconsin. Whereas the highest cost and lowest cost areas have been relatively stable over the past four years, there have been some substantial changes since 2000.
First, in 2000 the lowest cost region was not South Central Wisconsin but Northeast Wisconsin. While the Northeast is not one of the highest cost regions in 2010, it is now about average. As a consequence, Green Bay, Appleton, and Oshkosh have suffered the highest rates of health insurance inflation this decade for major metro areas. Also, Madison has had the lowest rate of health insurance inflation since 2000. This more moderate health insurance inflation in Madison has firmly established it as the lowest cost metro area over the past decade (See Chart 3, p. 7)
Second, health insurance inflation over the last year has been uneven across Wisconsin, with North Central Wisconsin (Wausau, Stevens Point, Wisconsin Rapids) suffering the highest rate of inflation (11%). As a result, this area has replaced Northwestern Wisconsin as the highest cost, although that area is still much higher than average as well. (See Chart 2, p.6)
Third, over the past decade Wisconsin health insurance rates have increased even faster than the national average (179% vs. 120%). Every region of Wisconsin has had health insurance inflation above the average including Madison, the lowest cost area. (See Chart 3, p. 7)
Fourth, there is not a strong correlation between health insurance costs and quality. Southeast Wisconsin has by far the lowest quality health plans, as measured by quality measures and consumer satisfaction. Madison is near the top in these same quality measures, despite being by far the lowest cost area of the state. On the other hand, higher cost areas such as North Central, West Central, and Northwestern Wisconsin are somewhat compensated with relatively higher quality insurance plans. There is a very strong correlation between quality rating and type of health plan. The large national for-profit health insurance companies (UnitedHealthCare, Humana, and Anthem Blue Cross) measure very poorly in quality while the regional non-profit plans rank near the top. It is the predominance of national for-profit insurance companies in Milwaukee, Kenosha, and Racine that drives down the average quality of the available insurance options (See Charts 8 and 9, p. 9).
Discussion
Large regional variations in health insurance costs raise critical public policy questions. Although the data presented here is not sufficient to ascribe causation, it does reinforce several significant conclusions reached in other recent studies.
First, the relatively lower cost of health insurance in the Madison area suggests the possibility that greater buying power, when combined with a competitive bidding process, may leverage lower costs. This is highly significant for the debate over national health care reform, where the creation of greater buying power through Health Insurance Exchanges is a major feature of the leading reform proposals Congress is debating. The finding in this study that Madison’s cost advantage has only emerged during the health insurance hyperinflation that began in 2000 suggests that buying power and competitive bidding may have become more important over the last decade. The Group Health Insurance Program has by far the most bargaining leverage in Dane County, where over 81,576 of its 194,192 members reside. This of course was also the case at the beginning of the decade. What has changed is the competitive bidding process that was added in 2003, combined with a larger pool. The Wisconsin Health Plan, a bi-partisan proposal crafted by David Riemer and introduced by Rep. Jon Richards (D-Milwaukee) and Rep. Curt Gielow (R-Mequon) in 2006, relied on a bidding process similar to the state plan and large buying pools to lower health insurance costs. Healthy Wisconsin, the health care reform plan passed by the Wisconsin State Senate in 2007, adopted the same process. The Health Insurance Exchanges included in the U.S. Senate and House health care bills now under consideration may have somewhat comparable features, depending on the outcome of the final stages of the legislative process. Relatively lower health insurance costs in the Madison area lends empirical support to this approach to cost containment.
Second, the quality measures included for the first time in this year’s report, when overlaid with cost trends, are highly significant for the national health care reform debate. This report finds that there is no clear correlation between the cost of health insurance plans and overall quality. In fact, Southeastern Wisconsin, which has the lowest quality plans by far, is one of the highest cost regions while the lowest cost area (Madison) has among the highest quality plans. The report does find a strong correlation between quality and type of health plan, with the national for-profit insurance companies offering by far the lowest quality plans, and non-profit provider networks offering the highest quality plans. This strongly suggests that national reform that only offered a choice of national for-profit insurance plans would deliver much lower quality insurance than a plan that offered other options. This finding is also reinforced by additional research conducted last year by Citizen Action of Wisconsin which found that the large for-profit insurance companies in Wisconsin spend much less on medical care than the regional non-profit plans.
Third, this analysis reinforces the conclusion of previous research by the GAO and the Milwaukee Business Foundation for Health that cost shifting from Medicaid and Medicare does not appear to be a major factor in health insurance cost variations. If cost shifting were a controlling variable, one would expect to see the highest health insurance costs in metro areas and regions of the state with much higher than average Medicaid utilization, poverty rates, or proportions of individuals without health insurance. Yet the fact that the highest cost regions, North Central, West Central and Northwestern Wisconsin, have higher costs than the Southeast, does not fit this pattern. The retrospective data in this report makes this case even stronger, as the gap between Medicare and Medicaid reimbursements and medical inflation has widened this decade. Despite this, Southeastern Wisconsin has not had higher health insurance inflation than the other high cost regions of the state.
Fourth, the data in this report continues to reinforce the conclusion reached by GAO and the Milwaukee Business Foundation for Health that the geographic distribution of health insurance costs reflects the structure of competition within regional health care markets, and especially that the market predominance of large health systems is a dominant health insurance cost driver. The regional cost variations reflected in this analysis correspond to the regional footprints of the major health systems in Southeastern, West Central, North Central, and Northwestern Wisconsin. The high rate of insurance inflation in the Northeast part of the state may reflect the expansion of Southeastern Wisconsin health systems into the region during this decade. Madison, which has the most competitive health care provider market, has by far the lowest health insurance rates.
CHARTS
Citation for this Report: Robert Kraig, “Wisconsin Health Insurance Cost Rankings 2010,” Citizen Action of Wisconsin, December 22, 2009.
About the Author: Robert Kraig is the Executive Director of Citizen Action of Wisconsin. In 2009 he was awarded the Health Care Consumer Advocate of the Year Award by Families USA, the leading national voice for health care consumers. Kraig holds a Ph.D. from the University of Wisconsin-Madison, and M.A. from the University of Georgia, and a B.A. from the University of Pittsburgh.
Endnotes
1. Kaiser Family Foundation and Health Research & Educational Trust, Employee Health Benefits 2009, (September 2009), 1, 32,
http://ehbs.kff.org/pdf/2009/7936.pdf
2. Rick Romell, “State firms pay 22% more for health insurance than U.S., survey shows,” Milwaukee Journal Sentinel, November 19, 2009,
http://www.jsonline.com/business/70370992.html ; “Editorial, Health Insurance Cost Trends Bad for Our Health,” Appleton Post Crescent, December 15, 2009,
http://www.postcrescent.com/article/20091215/APC0602/912150458/Editorial--Insurance-cost-trends-bad-for-our-health
3. “Premiums versus Paychecks: A Growing Burden for Wisconsin’s Workers,” Families USA Report co-released by Citizen Action of Wisconsin (September 2008), 1,
http://citizenactionwi.org/images/stories/Reports/wi%20premiums%20vs%20pay%20final%20updateemb.pdf. Also see Ellyn Ferguson, “Rising Health Insurance Costs Outpace Income: Report,” Appleton Post Crescent, September 22, 2008.
4. Sarah Axeen and Elizabeth Carpenter, The Cost of Doing Nothing: Wisconsin, New America Foundation (March 2009), 3,
http://citizenactionwi.org/images/stories/cost_of_doing_nothing_wisconsin2.pdf
5. Michael Keating, “Health Care Expenses are a Key,” Expansion Management (February 2005): 26.
6. US Government Accountability Office, Federal Employee Health Benefits Program, Competition and Other Factors Linked to Wide Variation in Health Care Prices, August 2005, 14.
7. Keith Kieffer and Clark Slipher, Factors Contributing to Higher Hospital Inpatient Payment Levels in Milwaukee, Greater Milwaukee Business Foundation on Health, April 26, 2006
8. Greater Milwaukee Business Foundation on Health, The Cost Efficiency of Milwaukee Health Care, 2001-2003, March 17, 2005.
9. Merton D. Finkler and Wayne Wendling, The Physician Marketplace - A Comparison of Central USA Metropolitan Areas, Greater Milwaukee Business Foundation on Health, September 21, 2006.
10. U.S. Government Accountability Office, Milwaukee Health Care Spending Compared to Other Metropolitan Areas, August 2004.
11. Corrine Hess, “Areas Family Doc Salaries High,” Milwaukee Business Journal, December 29, 2008.
12. Laura Dresser and Joel Rogers, The State of Working Wisconsin 2008, Center on Wisconsin Strategy, September, 2008, 34, 42.
13. Kaiser Family Foundation and Health Research & Educational Trust, Employee Health Benefits 2009, p.37.
14. Data from Wisconsin Department of Employee Trust Funds, February, 2006.
15. US Government Accountability Office, Federal Employee Health Benefits Program, Competition and Other Factors Linked to Wide Variation in Health Care Prices, 6.
16. Wisconsin Department of Employee Trust Funds, “Health Plan Report Card,”
http://etf.wi.gov/publications/dc_content/dc_2010/report_card_state_2010.pdf
17. Kaiser Family Foundation and Health Research & Educational Trust, Employee Health Benefits 2009, (September 2009), 1, 32.
18. The finding of the last three Wisconsin Health Insurance Cost Ranking studies which show that Madison has lower health insurance costs has entered the national debate. See John Reichard, “The Exchange Equation: Avoiding a Death Spiral with a Balancing of Risks,” CQ Health Beat News (December 18, 2009).
19. Darcy Haber and Robert Kraig, “A Heavy Burden: The Hidden Cost of Health Insurance in Wisconsin,” Citizen Action of Wisconsin, October 2008,
http://citizenactionwi.org/images/stories/Reports/citizen%20action%20wisconsin%20insurance%20report%20final.pdf
20. Finkler and Wendling, The Physician Marketplace - A Comparison of Central USA Metropolitan Areas, 14; GAO, Federal Employee Health Benefits Program, 9-10, 18.
21. GAO, Federal Employee Health Benefits Program, 4, 8, 18. Also see Kieffer and Slipher, Factors Contributing to Higher Hospital Inpatient Payment Levels in Milwaukee, Greater Milwaukee Business Foundation on Health, April 26, 2006.
