4 posts from June 2012

Health insurance: Minnesota leads the high-deductible trend

Over the past decade, high-deductible health insurance plans have caught on with firms as a way to reduce the costs of providing health care benefits—primarily by shifting a larger share of medical expenses to employees. These plans include health savings accounts, tax-exempt funds owned by employees that can be used to pay for medical care.

A recent annual survey by America’s Health Insurance Plans, a national trade association, found that HSAs provided coverage for more than 13.5 million people in the United States—about 8 percent of total private insurance enrollment. That’s a marked increase since 2008, and most states in the Ninth District mirror the trend (see chart, at bottom).

The recession and a tepid recovery have had something to do with those increases; cash-strapped employers have turned to high-deductible health plans as an antidote to rising insurance premiums. But the AHIP data reveal considerable variation among Ninth District states in participation in such plans—differences that are difficult to attribute to the downturn or a general rise in premiums.

As of January, 487,000 Minnesotans—roughly 14 percent of private insurance enrollees in the state—were covered by an HSA. In Minnesota and Montana, HSAs accounted for a bigger share of private health insurance coverage than in the country as a whole. However, in other district states, HSA participation rates were lower than the national average.

Some of the divergence in HSA uptake among district states may be a statistical fluke; in this year’s survey, over 2.7 million people nationwide were not assigned to any state because some health plans missed AHIP’s reporting deadline. But health care experts point to differences in health care models and average business size across states as possible explanations.

“Minnesota was an early proponent of high-deductible health plans” in the early 2000s, giving it a head start in HSA growth, said Stephen Parente, a professor of health finance at the University of Minnesota. And Parente notes that a large share of Montana employers are small businesses with fewer than 50 workers. Small firms paying relatively high small-group premiums tend to offer less comprehensive health coverage than big firms.

Less aggressive marketing of HSAs by insurers and a greater emphasis on managed care in clinics may partly account for lower participation rates in Wisconsin and the Dakotas.

HRAs in 9th D -- 6-13-12

CRP: Production potential trumping conservation

Critics of farm subsidies often say the programs “pay farmers not to farm.” While that isn’t a fair characterization of most ag policy, it is literally true of the Conservation Reserve Program, where farmers can collect rental payments from the federal government for voluntarily pulling certain acres from production and returning them to a more natural state.

While that might sound like a can’t-lose business model, farmers across the country and Ninth District have been pulling acreage out of CRP at a fast pace since the recession. From 2000 to 2006, the program saw little fluctuation in enrolled acres. But starting in 2007, district states saw a steady outflow of enrolled acres (see Chart 1). Montana and North Dakota each lost almost 1 million CRP acres over this period (about 29 percent of enrollment), while Wisconsin saw the biggest percentage drop (39 percent), but has easily the smallest enrollment among district states.

CRP acres -- 6-20-12

The decline in district states reflects—and is a big contributor toward—a broader decline in acreage nationally because the district has nearly 30 percent of all CRP acres. So what’s behind the decline? Simple cost-benefit analysis. Over the past few years, prices for corn, wheat and soybeans have been at sustained highs.

CRP rental rates are determined through a bidding process, whereby interested farmers submit a price at which they will remove acreage from production for 10 years, and the USDA picks which contracts it will purchase. Contract prices have been rising, but they haven’t kept up with crop prices—which, not coincidentally, started rising in 2007. So the fall in CRP acreage simply means farmers believe these acres will be more profitable in production than conservation.

In aggregate, CRP payments might seem big; farmers in each district state have received hundreds of millions of CRP dollars since 2007. But as Chart 2 shows, these payments are tiny relative to overall farm income, and they are likely to decline further if more land exits the program, as many expect. The fact that acres are enrolled under 10-year contracts has probably prevented a faster decline. Those contracts can provide some idea of where the program is heading, which will be the subject of a future Roundup post.

CRP payments -- 6-20-12

Homeownership is so … 2006

The struggling housing market—still facing ubiquitous “for sale” signs and dour reports on home prices and foreclosures—is now facing yet another, more fundamental challenge. Whether or not by choice, a growing percentage of households are becoming renters.

At the state level, not all district states are seeing quite the same shift, however. Renter households ticked notably higher in Minnesota and Wisconsin from 2006 to 2010, but in Montana and North Dakota, not so much, and South Dakota was in the middle, according to the American Community Survey, conducted by the U.S. Census Bureau (see Chart 1).

Renter HHs Ch. 1-- 6-12-12

But that covers up a lot of variation among the Ninth District’s larger cities, both in the proportion of renter households and in the change seen in recent years. Data for 19 cities in the district show that most (15) saw renter households increase their market share from 2006 to 2010, but four saw a decrease. The city-level renter ratio differed widely, from a decrease of 5 percentage points in Bismarck, N.D., to an increase of almost 10 percentage points in Kalispell, Mont. More than half of the cities (10) saw the share of renters increase by at least two percentage points.

Of the four cities where renters lost household share, three were in Montana. The other was Bismarck (see Chart 2). It’s hard to say exactly what’s behind these outliers. Regional housing markets are not always synchronized with each other or with national housing markets. Bismarck has been booming of late, thanks to the oil boom in the western part of the state, and is reportedly a preferred location for professional firms servicing the oil patch. These well-paid workers may prefer ownership over renting.

Great Falls and Missoula (Mont.) saw a dearth of new rental units during this period, which might have kept a lid on would-be renters. During this five-year period, for example, Great Falls permitted only about 150 new multifamily units, compared with 700 units of single-family housing. Missoula permitted fewer than 600 multifamily units compared with almost 1,600 single-family units.

These figures for renter-occupied housing, now roughly 18 months old, have likely risen further, as rental vacancy rates have been shrinking across much of the Ninth District, a topic that will be featured in depth in the July fedgazette.

Renter HHs Ch. 2-- 6-12-12

In the state-economy race, it’s North Dakota, and everyone else

Everyone loves a good race, except when it’s a runaway, a laugher. In the case of gross domestic product at the state level, nobody’s much enjoying the race, save for North Dakota.

In recent data published by the Bureau of Economic Analysis, North Dakota had easily the highest gross state product in the country, at 7.6 percent, almost 3 percentage points higher than next-place Oregon. Among Ninth District states, Michigan’s economy appears to be finding some footing, thanks to a resurgent auto industry, ranking sixth in the country last year at 2.3 percent (see Chart 1). No other district state managed to outperform the national average of 1.5 percent.*

Maybe more impressive has been the Peace Garden state’s economic stamina. Since 2008, the state has seen its economy grow by 19.7 percent. Only one other state (Louisiana, at 11.9 percent) saw a growth rate even half as fast as North Dakota’s over this period.

There was also some shuffling among district states in their economic performance over this longer period. For example, Minnesota and Wisconsin economies both outperformed the national average since 2008, while Michigan went from the top quintile last year to bottom quintile for this longer period (see Chart 2).

*One methodological note: U.S. GDP values listed here may differ from the National Income and Product Account (NIPA) values because of revisions to both NIPA values and GDP-by-state accounts, which exclude federal military and civilian activity located overseas, which cannot be attributed to particular states.

 State GDP -- 6-6-12