This column has more questions than answers. However, one thing is certain. As states and cities try to attract top notch employers, one of their highest priorities is making their health care costs competitive.

Table 1 is compiled from E-Healthinsurance.com data for a hypothetical family with parents born in 1970 and 1972 and two children born in 2000. None are smokers or enrolled in college. For each state, a random zip code was picked in the state’s capitol city for the family’s address.

Table 1; Health Insurance Costs

The federal government designates policies as Platinum, Gold, Silver, Bronze and Basic. The plan for this column was to compare Gold and Silver policies in a number of markets and have uniform comparisons. This isn’t possible. While Gold policies in each market were superior to Silver policies, there is almost no uniformity for Gold policies in different markets. There are large variations in deductibles, co-insurance and maximum out of pocket costs.

All policies have prescription drugs included. Because of close similarity of these plans, drug copays aren’t listed. Silver policies were also calculated. Since the results mirrored the Gold level policies, the Silver data isn’t included.

States are listed in order of their monthly premium cost. The “Maximum patient out of pocket annual” value includes 12 monthly premiums, the annual deductible and co-insurance. The “Annual deductible” are the first dollars paid for health care. Some policies have “Co-insurance”. In the Kansas example, after the deductible is paid, the patient pays 20% of medical costs up to the “Annual out of pocket maximum for the family”.  Summarizing the Kansas policy, the patient pays the first $3,500 of medical costs. Then the family pays 20% of their next costs until they have paid $10,000. After that, their policy covers the rest of the family’s medical expenses for that year.

The Minnesota policy has a $2,000 deductible and then pays all costs. The only way to reach their policy’s “Annual out-of-pocket maximum is to have dozens of doctor visits and prescription copays. Few families will reach the “Maximum patient out-of-pocket annual costs”.

While policy variations make it difficult to do city-to-city comparisons, the goal here is not to split hairs on features. The most important question is why insuring a family in St. Paul, Minnesota costs less than half as much as if the same family lived in Madison, Wisconsin or Indianapolis, Indiana; cities with similar climate and demographics.

According to the Department of Commerce, the Twin Cities market has the nation’s lowest health insurance costs. Minnesota officials credit two things for their ranking. First, competitive markets bring lower rates. St. Paul and Minneapolis have many providers and lower rates than Rochester, Minnesota where the Mayo Clinic dominates the insurance market. Second, Minnesota officials point out that they are one of sixteen states that can regulate their market and not allow selling what they believe are overpriced policies.  They have used this power to disallow sales of some plans.

As far as competition, Madison and Indianapolis both have highly competitive health insurance markets with a number of HMOs. Madison’s is not exactly a tight clique working in concert. Physicians Plus is struggling and is in almost open warfare with Unity Health Insurance. All the other cities in Table 1 had relatively few options on the e-healthinsurance.com website.

What may have more impact is the states with a * did not take advantage of the federal government’s offer to cover 100% of Medicaid costs. With the exception of Kansas, states that accepted the Medicaid expansion have significantly lower insurance costs.

Medicaid was originally a state funded program that over time was taken over by the federal government. Unfortunately, their funding has not kept pace with costs and many low-income people aren’t covered.

Health care providers typically pass on 30 percent of uncollected costs of treating Medicaid patients to their state government. The rest is absorbed and eventually passed on as higher health insurance costs.

Even with these advantages, many hospitals in states accepting the federal government’s Medicaid expansion are not expecting a huge windfall. They are assuming previously uninsured people will now see doctors and find undiagnosed health issues that aren’t covered by Medicaid. Hospitals will treat these and absorb some of the costs the Medicaid expansion covers.

What else?

Looking at the list of premiums and out-of-pocket costs, competition and taking advantage of the Medicaid expansion seem to have significant impacts on health insurance premiums. Yet, these can’t explain all the cost differences. Some other factors that may play into the costs:

• Are Minnesota residents healthier and require less health care than people in neighboring states?
• Is Minnesota’s health care system more efficient?

The differences in health care costs are real and significant. Obamacare has forced transparency and high cost states will need to figure out how to match Minnesota’s rates. For a company paying employee health insurance costs considering expansion or relocation in the Midwest, states like Wisconsin and Indiana drop right off the radar.

While these states focus on nickel and dime tax cuts, the 800-pound gorilla in the kitchen are their exorbitant health care costs. Becoming competitive means turning the questions in this column into solutions and implementing them.