Adjoining states face differences with health care law

Donovan Slack | Gannett Washington Bureau

WASHINGTON -- When Joe Atkins hunkered down to draft legislation outlining how Minnesota would implement the Affordable Care Act, he had no idea the results would be so dramatic.

The Gopher State is now enrolling individuals through its health-insurance exchange by the thousands and at premium rates that are among the lowest in the country.

Next door in Wisconsin, the numbers of Obamacare enrollees have barely hit the hundreds and rates are between 25 and 35 percent higher than in Minnesota.

"I wish that wasn't the case, but I'm sure glad," says Atkins, a Democratic Farm Labor Party state lawmaker. "Folks are thinking I'm pretty smart right now."

Minnesotans and Wisconsinites share a long-standing rivalry -- in politics, business, and, of course, on the football field. But the new health law has opened another front in the competition. And so far, Minnesota is ahead.

The reason for the large gap in rates is unclear but could be, in part, because of the more aggressive approach Minnesota has taken to implementing the law.

The most obvious difference between the two states is their exchanges. Minnesota has its own online marketplace where residents and small businesses can shop for and buy insurance, while Wisconsin is relying on the federal government marketplace, which has been plagued with bugs and technical failures and doesn't accommodate small businesses.

If and when the Obama administration fixes that, the rate differentials will remain. And they are stark.

A 50-year-old Minnesotan who lives just south of the Twin Cities in Dakota County can buy a mid-level, silver plan for $241 a month. Just 20 miles away, across the state line in St. Croix County, the lowest cost silver plan available to a 50-year-old Wisconsinite costs nearly three times that price -- $622 a month.

The statewide average for such a plan in Minnesota is $304, compared to $403 in Wisconsin, a Gannett analysis of federal and state data found. Those rates do not take into account the subsidies some lower-income consumers will receive.

The disparity carries through to younger consumers as well. Twenty-seven-year-olds living in Brown, Outagamie or Marathon counties, for example, have to pay roughly the statewide Wisconsin average of around $235 a month for the lowest cost mid-level plan. Over in Minnesota, individuals in their mid-20s can get those plans 36 percent cheaper for $150 on average.

Wisconsin's rates are not just higher than Minnesota's, they're 21 percent higher than the average across 34 states for which the federal government released detailed premium data.

Wisconsin officials acknowledged the rate disparities but said they are confident insurance companies in the state are not overcharging consumers. Deputy Insurance Commissioner Dan Schwartzer pointed to a requirement under the health law that carriers spend 80 percent of premium revenue on medical claims. That limits overhead costs, including administration, salaries and profits, to 20 percent.

"When they submit rates, they know that they've got to stay under the 20 percent cap or they're going to have to refund it back, anyways," Schwartzer said in an interview.

He also said premiums have historically been higher in Wisconsin, pointing to a 2012 Health and Human Services Department study that showed private employers in the Badger State paid premiums that were 7 percent higher on average than in Minnesota.

Analysts say premiums are based on a number of factors, from health costs and demographics to market competitiveness. But when it comes to Wisconsin and Minnesota, none of those appears to account for such a wide disparity.

The nonpartisan Kaiser Family Foundation found that health care costs in the two states are roughly the same. Per capita expenditures were $7,409 in Minnesota versus $7,233 in Wisconsin, according to the most recent data released in 2011 by the Centers for Medicare and Medicaid Services. And the costs have grown annually since 1991 at nearly the same rate -- 6.7 percent in Wisconsin and 7 percent in Minnesota.

As for competitiveness, there are only five insurers offering plans on the Minnesota exchange, while there are 13 carriers participating in the Wisconsin exchange.

Cynthia Cox, a policy analyst at the Kaiser Family Foundation, said regulation also plays a role in premium levels.

In Minnesota, regulators forced insurers in several cases to resubmit lower rates because they questioned the justifications for them. In Wisconsin, regulators took a more hands-off approach and let all the rates go through as-is after reviewing carriers' justifications.

Liberal advocacy group Citizen Action Wisconsin pointed to another possible factor in a report it released a few weeks ago: Gov. Scott Walker's decision not to expand Medicaid as much as other states and to transition some 77,000 people off Badgercare and force them to buy insurance on the federal exchange.

The group pointed to an analysis by the nonpartisan Rand Corporation that predicted failing to expand Medicaid would increase rates by 8 to 10 percent for insurance sold on individual exchanges. That's because lower-income individuals tend to be less healthy -- with higher health care costs -- and forcing them onto the exchanges would make the pool of prospective insured less healthy,driving up premiums.

"The fundamental difference between the two states, which are similar geographically and demographically and have very similar underlying medical costs, is that Minnesota has embraced the national health care reform law and is using the tools it provides to deliver more affordable health insurance, while the Walker administration has tried to undermine the law at every turn," Citizen Action CEO Robert Kraig and researcher Kevin Kane wrote in a scathing op-ed recently.

But Schwartzer, the Wisconsin deputy insurance commissioner, dismissed that argument, said there is no evidence that the 77,000 individuals leaving Badgercare are unhealthy.

And he said the state's rate-review process was sound. Schwartzer said that actuaries reviewed the rates insurers submitted and didn't find any that appeared out of whack. And he said the Walker administration didn't see any point in brow-beating insurers into offering lower rates when market forces are in play.

"We let them beat each other up versus us beating the insurer up," he said. "Let them beat each other up being competitive against each other."

Schwartzer pointed to another potential factor in insurers setting higher rates in the state -- the dissolution of the state's high-risk pool, where some 22,000 Wisconsinites with pre-existing conditions and therefore higher health care costs had been getting insurance.

"From an insurer's perspective, the other major factor, other than uninsured population would be those in the high risk pools going into the private market," Schwartzer said.

Over in Minnesota, state officials are keeping their high-risk pool open for another year.

Minnesota officials happily point to several other decisions they say resulted in low rates. After the health law passed in March 2010, the state acted quickly to form a task force on implementation and decided to expand Medicaid and set up its own exchange.

"The first motivation is I didn't want the federal government imposing one on us," Atkins, the author of Minnesota's implementation law, said in an interview. "Quite frankly, I expected we would have lower rates if we did it ourselves. And finally, when one has a problem, I prefer to dial a 651 area code rather than a 202 area code."

Minnesota Commerce Department Spokeswoman Anne O'Connor also points to the rigorous review process that insurers had to go through before Commerce Commissioner Mike Rothman approved plans offered on their exchange.

"In this case, the rates Commissioner Rothman approved for the 141 plans available through MNsure were 4 to 37 percent lower than had originally been filed," O'Connor said.

The White House is hoping that Wisconsin and other states will change their minds and join Minnesota in expanding Medicaid. When the program funding health care for the poor and disabled was first passed in 1965, only 26 states initially agreed to participate, but within five years, 48 states had opted in.

"It is our belief that expansion is going to grow because as governors and hospitals and others in respective states look at it, it just makes sense to do it, and it is the right thing to do," top Obama aide David Simas said.

Wisconsin officials say revisiting that decision is unlikely.

"The decision's been made," Schwartzer said, "and what we're trying to do is move forward, directed by the governor, with making this work as best as you can make it work for consumers in Wisconsin."

Whatever the case, some Wisconsinites say the state's entire health care system needs to mount a better challenge to Minnesota.

"I don't want to lose this race," said Bob DeVita, CEO of Common Ground Healthcare Cooperative in Brookfield, Wis. "But I fear we may if we don't get our act together and compete and do it effectively."

In the meantime, Atkins is ready to erect a billboard at the Minnesota state line taunting Wisconsinites in their own language: Green Bay Packer talk.

" 'You may have Aaron Rodgers, but we have the lowest health insurance rates in the country,' " he says it would say. Atkins quickly added: "We'd be happy to take Aaron Rodgers, too, with the little quarterback issues we're having these days with the Vikings. But that's a different discussion."