The dominion of Tennessee's largest health insurer is reflected in its headquarters' lofty perch above downtown Chattanooga, atop a hill that during the Civil War was lined with Union cannons to repel Confederate troops.
BlueCross BlueShield of Tennessee has used its position to establish a similarly firm foothold in the first year of the marketplaces created by the Affordable Care Act. The company sold 88 percent of the plans purchased by Tennessee individuals and families. Only one other insurer, Cigna, offered policies in Chattanooga, and the premiums were substantially higher than BlueCross's.
Though insurers have been regularly vilified in debates over health care prices, BlueCross's near monopoly here has been unusually good financially for consumers. Its reduced-rate, exclusive deal with one of three health systems turned Chattanooga into one of the 10 least expensive insurance markets in the country, as judged by the lowest-price mid-level, or Silver, plan. The premium for a 40-year-old under that plan is $181 a month, 30 percent less than for the median cheapest Silver plan nationally.
BlueCross has employed a similar narrow-network strategy elsewhere in Tennessee. Its lowest premium Silver plan in Knoxville, built around the University of Tennessee Medical Center, costs the same as in Chattanooga. BlueCross's least expensive Silver plan in Nashville is cheaper than the cheapest parallel plan in the biggest city in every state except Minnesota and Hawaii.
"Providers are concerned about getting shut out of narrow networks," said John Graves, a professor at Vanderbilt University School of Medicine in Nashville.
Premiums are not low in Chattanooga because people do not require much medical care. Obesity, smoking and hypertension are more prevalent in Hamilton County than they are nationwide, according to the Institute for Health Metrics and Evaluation, a Seattle-based research center. Yet insurance prices are in line with some of the nation's healthiest places: Minneapolis, Salt Lake City and Honolulu.
Chattanooga's lowest-cost Silver plan gives people access to Erlanger Health System. In exchange for lower premiums, consumers choosing the narrow network, labeled the "E" network, have access to 1,257 doctors and medical providers who work with Erlanger, according to the latest figures from BlueCross.
David Yoder, CEO of American Exchange, a Chattanooga insurance brokerage, said the average client on that network pays premiums of about $40 a month, with the government subsidizing the rest. "For most people, unless they are really tied to a doctor, the E network is fine," he said.
BlueCross offers another set of policies that include both Erlanger and Catholic Health Initiative, which runs Memorial Hospital, for 11 percent more than the Erlanger-only network, which still puts the costs well below the national median. The wider network has 3,502 providers -- nearly three times the number in the Erlanger-only network.
Eric Logue, a vice president for the Denver-based Catholic system who oversees the region, said low premiums in Chattanooga and Tennessee generally were made easier by the long history of narrow networks here.
Logue said some insurers elsewhere "just come and say, 'For our exchange product we're going to roll out the same network.' They're not taking an approach to change the cost curve and, expectedly, you're seeing the premiums being extremely high."
Those who want the option of also going to the area's third health system, run by for-profit HCA and including Parkridge Medical Center, can buy a wide-network policy. However, premiums are 30 percent higher than for the Erlanger-only policy.
BlueCross has proposed a 19 percent increase in its health exchange plans next year. Andy Figlestahler, a broker in Cleveland, Tenn., noted that premiums in neighboring Georgia are twice as high and will remain above the Tennesee rate even after the proposed rate increase for 2015.
"Somebody's got it mis-priced," he said. "Either Georgia is too high, or Tennessee is too low."
The low premiums in the Erlanger network have put additional pressure on the health system to lower its costs.
Erlanger system CEO Kevin Spiegel has outsourced the food service and cleaning operations. Surgeons have spearheaded other changes, such as reusing blades and other equipment they can sterilize. Big hazardous waste garbage bins in the operating room, which are costly to discard, have been swapped out for smaller ones in an effort to get medical staff to take more care and not put routine waste products with hazardous materials.
"The days of the operating room being like a grocery store -- What's on the shelf? Anything you want! -- are over," said Dr. Benjamin Dart, a trauma surgeon and Erlanger's chief of surgery.