Minnesota’s individual insurance market is in danger of collapse, Commerce Commissioner Mike Rothman said Friday as he announced massive premium increases for 2017 plans.
Insurance companies on the individual market will increase their premiums between 50 percent and 67 percent, on average — among the largest increases in the nation. Meanwhile provider networks on those plans will shrink, and almost all the plans will put caps on the number of total customers they accept.
“These rising insurance rates are unsustainable and unfair,” Rothman said. “This is a real emergency situation.”
The increases apply to people buying individual health insurance — about 250,000 Minnesotans, or 5 percent of the state. Most Minnesotans get insurance either from an employer plan or from a government program such as Medicare, MinnesotaCare or Medical Assistance. These rates are similar to big increases that insurers proposed a month ago and follow double-digit increases last year.
Not everyone on the individual market will see their premiums skyrocket. People who buy insurance through the state-run MNsure exchange and earn less than $47,520 a year for an individual or $97,200 for a family of four will see their increases offset — or even eliminated altogether — by rising federal subsidies.
These subsidies aren’t available for customers who buy their insurance directly from insurers without going through MNsure.
Even as state officials touted the savings available on MNsure, though, they warned about the big costs faced by the many Minnesotans who don’t qualify for subsidies because their incomes are too high — but not high enough to pay their insurance costs.
“These are middle-class Minnesotans,” Rothman said. “They are getting squeezed, crushed, by these health insurance costs.”
Despite the huge increases, though, Minnesota still won’t have the highest insurance premiums in the country. In fact, it will likely be somewhere around the middle, said Cynthia Cox, an associate director at the Kaiser Family Foundation. That’s because four years ago Minnesota had among the nation’s lowest premiums. Even three years of double-digit increases have only brought Minnesota to the middle of the pack nationally.
WHY COSTS ARE RISING
All around the country, medical costs are rising sharply, driven in part by prescription drug costs.
Additionally, a federal subsidy to insurance companies meant to keep prices down is expiring. By itself this is causing around a 5 percent increase in rates around the country.
Compared to many other states, Minnesota has a relatively small individual insurance market. That means just a handful of sick people can hurt insurers a lot, driving up costs for everybody — and Minnesota’s individual market has an unusually large number of sick people in it.
A decision by major insurer Blue Cross Blue Shield to pull out of the market altogether is also affecting the increase. Blue Cross is believed to have had an unusually expensive customer pool, which means its exit is sending those customers to rivals and driving up the costs. Rothman said this prospect, combined with rising costs, led other insurers to threaten to pull out, too.
Those companies ultimately decided to stay in the market for 2017 but haven’t made any promises for 2018.
Cox said Minnesota has been one of the less stable individual health insurance markets under the Affordable Care Act.
PLANS TO CAP ENROLLEES
Most of the health plans remaining in the individual insurance market will stop accepting new customers after they reach a certain number of enrollees.
Medica’s two plans will stop enrollment at 50,000 combined customers, HealthPartners and Group Health at a combined 72,000 enrollees and UCare at 30,000. Only BluePlus will have no cap.
There appear to be no current figures on how many customers each plan currently has on the individual market as a whole. On MNsure, which accounts for about one-third of the individual market, Medica, HealthPartners and UCare all have between 20,000 and 25,000 enrollees.
Open enrollment for 2017 begins Nov. 1 and ends Jan. 31, 2017. But some plans may no longer be available by the end of January.
“People need to sign up early,” Rothman said.
Cox said Minnesota is the first state she’s aware of to see widespread use of enrollment caps in its individual market.
FIXES NEEDED — BUT WHAT?
Republicans, who have been sharp critics of both the federal Affordable Care Act and its implementation in Minnesota, called for urgent changes including health care tax cuts and efforts to let people access tax credits without going through MNsure.
“What is the Governor waiting for?” Republican House Speaker Kurt Daudt said of Gov. Mark Dayton, a Democrat. “Minnesotans need more affordable health care options, and they need them before the end of this year.”
Rothman floated merging the individual insurance market with the more stable small group insurance market — another 250,000 Minnesotans — to create a larger pool of customers. He also said he would like to restore a special program for high-risk insurance customers if the federal government would allow it but noted that Minnesota was denied that permission several years ago.
Legislative Democrats called for laws to lower the price of prescription drugs, a large component of health costs.
Members of each party accused the other of being the one standing in the way of health reforms.
Cox said many of those reforms could have an impact. Lowering the taxes that pay for MNsure could help consumers and/or tempt insurers to remain in the market, though it would also leave a hole in MNsure’s financing.
Merging the individual and small-group markets, too, could stabilize the market by creating a larger customer pool — effectively spreading the cost of the sickest individual market patients onto a larger group of healthy patients. On a bigger scale, Cox said Minnesota could institute a “reinsurance” program like Alaska recently did to spread the costs of the individual market over the state’s healthier large group market, too.
“What it will come down to is how strong enrollment growth is this upcoming enrollment cycle,” Cox said. “If the market continues to grow, that’s a sign there’s healthy people coming in, which would lead to stability. If the market does not grow, or shrinks, that would be a sign that healthy people are dropping their coverage, which could lead to more instability.”