Individual health insurance premiums are flat or going down across most of Minnesota next year, but that won’t be true in the southeast corner of the state — a region that already has the highest rates in the market.
In Rochester and across southeastern Minnesota, a 40-year-old who buys the “benchmark” policy in the state’s individual market will see a sticker price in 2018 of about $596 per month, up about 7 percent from the current price. That contrasts with a premium of $327 for a comparable consumer buying the benchmark plan in the Twin Cities, where prices will be down nearly 11 percent on average.
The gap between the two regions points to what insurers say is an enduring contrast in the cost of health care. “Premiums in that part of the state are so expensive because the cost of care there is so expensive,” said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for health insurers.
Southeastern Minnesota is home to the world-renowned Mayo Clinic. The health system’s network of satellite hospitals and clinics makes it the dominant provider of health care across the region.
But Schowalter added: “Just to say it’s Mayo is, I think, not fair.”
The state’s individual market primarily serves people under age 65 who are self-employed or don’t get health benefits through their employer. Last week, the state Commerce Department published 2018 rates for the market, which has been heavily scrutinized since 2014 when major changes kicked in with the federal Affordable Care Act (ACA).
About 166,000 people buy individual health plans in Minnesota, which makes it a relatively small source of coverage overall. The health law shed light on regional differences in the cost of individual coverage by requiring states to be broken up into geographic “rating areas” and standardizing health insurance benefits according to different “metal” levels.
The benchmark plan in each region is the second lowest cost “silver” plan, which is mid-level in terms of both premium costs and deductibles. Premiums vary by age in the individual market, so premium comparisons typically involve picking one point, such as the benchmark plan for a 40-year-old.
Mayo Clinic officials say their health system has a complicated connection to the regional premium differences.
Prices are higher at the clinic in Rochester, they say, but that fits with the medical center’s status as an academic medical center that provides sophisticated care with higher overhead costs. Premiums are higher in all regions of the state outside the Twin Cities, Mayo officials add, pointing out that there’s more competition among health insurers in the metro.
Mayo rejects any suggestion the premium difference suggests the clinic is providing excess services or using its market power in a way that’s different from other health systems and insurers. Patients who need complex, extended care sometimes move to Rochester for extended periods of time and become part of the region’s premium calculation, said Dr. Robert Nesse, professor of family medicine at the Mayo Clinic.
“It’s a complex conversation that sort of defies a single answer,” Nesse said. “There’s no other rural area that has one of the world’s largest medical centers plopped right in the middle of it, that’s for darn sure.”
David Martin, an executive vice president with Associated Benefits and Risk Consulting, said Mayo Clinic certainly is a factor in southeast Minnesota’s higher health care costs, but he agreed it’s not the only driver. Other health care providers in the region can set “shadow prices” that might be somewhat lower than Mayo, but also are higher than what they might get elsewhere, Martin said.
“Pricing is never an absolute,” he said. “It’s always relative to something else.”
Minnetonka-based Medica currently sells the benchmark plan for individuals in the Rochester area and will have that status again in 2018. Premiums in the Twin Cities are different not just because of competition among health insurers but also hospital systems, said Geoff Bartsh, a vice president with the health insurer.
To some extent, it’s difficult to compare premiums in the two regions, Bartsh said, because carriers in the Twin Cities have more options to try controlling costs with selective networks of competing doctors and hospitals. Changes in the benchmark premium don’t tell what’s happening to every consumer’s premium in the individual market.
While rates generally will be down for plans in the Twin Cities and up for those in southeastern Minnesota, the precise rate of change will vary by plan and there are some exceptions. And considering various market subsidies, premium changes often don’t describe what people are paying.
Many who buy individual policies through Minnesota’s MNsure exchange receive federal tax credits that largely blunt the impact of market prices and regional differences with premiums. Yet consumers who make too much money for subsidies are in a tough spot, particularly in southeastern Minnesota, said Chuck Moline, an insurance agent with AdvisorNet Financial, the MNsure broker enrollment center in the region.
The benchmark premium in southeastern Minnesota is increasing by 7 percent thanks in part to a short-term state “reinsurance” program that’s keeping a lid on prices. Even so, the increase will feel painful to many consumers, Moline points out, because one-time 25 percent premium rebates for many in the market are clicking off at the end of 2017.
“For us down here in southeastern Minnesota, that’s particularly important because our health care costs down here are significant compared to anywhere else in the state,” Moline said.