Mountain resorts pay up for health coverage

Colorado’s mountain resorts made the news last winter for reasons unrelated to snowfall; instead, Kaiser Health News reported that a four-county region – from Breckenridge to Vail, and from Aspen to Glenwood Springs – had the highest health-insurance costs in the country.

It wasn’t a shock. Aspen and Vail have some of the highest real estate prices in the world. Why would insurance be different?

Yet the story that emerges is a microcosm of our difficulty with health care. The Affordable Health Care Act (a.k.a. Obamacare) didn’t cause the problem, nor does it solve what is essentially the struggle of middle-income workers.

The heartburn story about high-priced insurance emerged because of a redrawing of boundaries. Before, high-priced resort communities had been pooled with other counties of the Western Slope. The re-design smoothed out the big bump of insurance in the resort areas.

COST CONSIDERATIONS

Why does health care cost so much in these locales? Land costs are high due to relative scarcity. Competition is limited. Business is uneven. December is crazy and May is lazy. In Vail, for example, 61 percent of sales tax collections came during 33 percent of the year, the four key months of ski season. In a sense, the local Vail Valley Medical Center was built for Easter Sunday – except, in fact, it’s Christmas week.  All the hospitals seek to offer a robust range of services, despite uneven demand. Finally, people who live in mountain communities tend to be a different breed. They see doctors more frequently when in good health. Active lifestyles also result in more visits to high-priced emergency rooms.

Triggered by ACA requirements, Colorado insurance commissioner Marguerite Salazar adjusted boundaries of regions used to set insurance costs, culling four counties from the 20 counties of the Western Slope. In February, Kaiser Health News proclaimed the resort region highest in the nation. A 40-year-old person purchasing the lowest-priced, mid-level “silver plan” could expect to pay $483 per month for insurance. Incongruously, the No. 2 spot was a region in a not-so-affluent part of Georgia at $461 per month, followed by rural Nevada at $456 per month.

Garfield County was outraged to be grouped with the resorts. Although many residents from Carbondale, Rifle and New Castle work in the resorts, it is more of a bedroom community, and largely driven by oil-and-gas development. County commissioners threated a federal lawsuit.

Whereas meetings called by state insurance agencies might normally draw a few handfuls of people, last winter they drew hundreds. In response, Salazar restored the resort region to the Western Slope, as well as several counties on Colorado’s far-eastern plains. People in Durango and Julesburg are, in effect, now helping pay insurance costs of Frisco and Eagle. In interviews in May, Salazar estimated the shifting would lower rates 4 percent to 8 percent in resort counties and increase 4 percent to 6 percent in other places. Salazar’s office did not respond to a request for an interview.

BUSINESS IMPACT

Larger businesses were unaffected by the controversy; nearly all are self-insured. They work with insurance companies, but in a different way. However, like everybody else, they’re concerned about health-care costs. Aspen Skiing Co., for example, has 600 to 700 year-round employees, peaking at around 3,400 in mid-winter. It’s the largest employer in Pitkin County, followed by the school district, the local hospital, the City of Aspen and Pitkin County government.

These five organizations have banded into the Valley Health Alliance in an effort to contain costs that have been rising 10 percent to 16 percent annually. “We are hoping to flatten the curve, to have no increases within a three-year period,” said Martie Wisdom Edwards, interim director. “Some of our members actually think they may have flattened the curve already.”

Wisdom Edwards believes the use of specialists must be better managed. “We need to find a way to control unnecessary utilization without lowering quality of care, while still giving people reasonable wait time and freedom of choice,” she says. “It’s tough.”

In Vail, other than Vail Resorts, there are no large employers and only a few mid-sized businesses of roughly 100 employees. Most have 50 employees or fewer. Antlers, a slope-side lodge with 40 employees, has had what long-time general manager Rob LeVine describes as a “fairly generous” benefits package. Costs vary depending upon claims, which means they have been managed well. The arrival of Obamacare, he says, has not produced a major change. “We do think we pay somewhat more than if we were in a larger market, such as in Denver. That’s just the nature of the economics.”

A few blocks away, at the Vail Municipal Building, Krista Miller is trying to figure out ways to lower costs. She’s the director of human resources, safety and risk management for the town, which has 230 year-round employees.

The new law also redefines full-time employees as those working more than 30 hours a week. The Town of Vail has 100 people working seasonally or part time. This new definition will saddle the town with $540,000 in added costs next year.

LOOKING AHEAD

Come 2018, Obamacare’s so-called Cadillac tax will force more decisions yet. The excise tax will be levied on benefits that surpass the federal limit of $10,200 in insurance for individuals and $27,500 for families. The Town of Vail is already paying close to that in benefits. The town government is weighing whether to give employees incentives to figure out lower-cost alternatives. The town may also directly negotiate with health-care providers.

In effect, says Miller, the new federal law has intensified the need to figure out how to decrease costs.

Across Vail Pass, Summit County Commissioner Dan Gibbs, a former aide to U.S. Sen. Mark Udall, says the insurance story highlights the tightening squeeze on the middle class in Summit County. For the wealthy, insurance costs pose no great challenge. And for people bumping up against the poverty line, Obamacare provides generous subsidies.

“But if you’re a family of four and make over $60,000, you aren’t eligible (for subsidies). “You’re paying as much for health insurance as you are for your mortgage. That is killing the middle class,” says Gibbs. And the middle-class squeeze, in turn, squeezes the smaller businesses that employ them.

Eagle County Commissioner Kathy Chandler-Henry similarly sees a middle-income squeeze – especially on older people who are still too young for Medicare. “We’re gaining people on the lower end of the income scale who may not have been covered by insurance before, but we are losing insured residents from the middle income sector, especially those earning 400 percent to 600 percent above the federal poverty limit. That’s above the limit for any subsidies, but in a range that makes it extremely difficult to pay premiums,” she says.

COLLABORATIVE SOLUTIONS

“I do think this whole process is bringing some transparency to the health care and health insurance maze,” Chandler-Henry says. While Salazar’s redrawing of the insurance-rating pool has helped, the long-term solution must include bringing the big ski companies, school districts and governments into the pool for insurance calculations.

“The harder fix is to tackle health-care costs themselves,’ she says. “We’re too small to have competition in the hospital arena, and our out-of-town consumers of health care drive costs up in our resort towns.”

Health co-operatives are another opportunity. The Affordable Health Care Act provides long-term, low-interest loans for several dozen across the country. Here, the Colorado HealthOP has 16,000 members.

The model is the co-operative’s, created in the 1930s to deliver electrical power to rural areas in which investor-owned utilities had no interest. Like those power lines, health care costs in rural areas are more expensive because the necessary infrastructure is pricier when people live farther apart, says Juilia Hutchins, the chief executive of Colorado HealthOP.

But sending everybody to Denver isn’t necessary the answer, either, she believes, because that leaves local hospitals with fewer patients. The co-op seeks to put the discussion into the hands of consumers, to help craft collaborative local solutions. “And there certainly is a lot of low-hanging fruit in health care,” she adds.