Monthly premium rates for an Arizona health insurance policy depends upon where in Arizona you live. For example, Blue Cross Blue Shield of Arizona has three different rate areas for their HMO plan. If you are a male, aged 25 and live in Tucson, your monthly rate is around 9% lower than for the exact same policy if you lived in Phoenix. If you lived in Flagstaff or Yuma, that same policy would cost you over 40% more than the Tucson rate!
On the popular Blue Cross Blue Shield of Arizona BlueOptimum PPO plans, they have two sets of rates – one for Pima County, and another for the rest of the state. The rate difference between these two is approximately 10%, with Pima County having the lower rates.
Some health insurance companies selling plans in Arizona actually base their rates upon your Zip Code. Your friend living a mile from you might be paying less than you pay, even if you are the exact same age and have the exact same policy.
Each health insurance company utilizes a group of people called actuaries, and it is these actuarial people that compute what the insurance carrier should be charging. To quote Wikipedia, “Actuaries mathematically evaluate the likelihood of events and quantify the contingent outcomes in order to minimize losses, both emotional and financial, associated with uncertain undesirable events.” What this means, in English, is that the actuaries come up with the rates, based upon past experiences and best guess estimates, for what the insurance company may have to pay out in claims. But this is not the only factor that is used to calculate what your rate should be.
Another factor is the actual number of medical providers, such as doctors and hospitals, located where you live. If you live in Phoenix, you have scores of hospitals to choose from. Even in Tucson, there are lots of hospitals and over a thousand doctors. But if you live somewhere like Flagstaff or Yuma or Bullhead City, you may have only one hospital, and only a handful of doctors. These smaller-town providers can, and often do, charge more for a doctor visit or a hospital stay. Supply and demand comes into play, and these providers end up costing the health insurance companies more for claims. The actuaries compute this into their calculations, and eventually come up with different rates for different areas in the state.
