Insurance exchange shoppers ask: What will it cost?

With less than two months to go before Minnesotans can begin shopping for health insurance on the new MNsure exchange, one of the most pressing questions remains: How much will coverage cost?

Driving down premiums through open competition is an important goal of the exchanges, which are a central piece of the federal health law. But while a few states have started releasing prices, Minnesotans won't know what they'll be paying until Sept. 6, when health plans will voluntarily release their rates.

"I'm already getting a lot of calls from my clients asking, 'What am I going to do?' " said Linda Sanocki, an insurance broker with the David Martin Agency in Edina. "Once we know what's out there and available, I'll be able to have meetings and say here's the situation. But it's going to hit like a typhoon — all at once."

St. Paul architect Tim Fuller is in wait-and-see mode. After more than two decades with a larger firm that covered the bulk of his health insurance costs, Fuller struck out on his own last fall.

His wife gets coverage through her workplace, but Fuller and their two daughters are covered under a COBRA plan, a stopgap measure that sunsets after 18 months.

"I'm hopeful, but I'm anxious to know what I am going to be paying out each month — and whether there will be savings or just an arrangement where the providers quote the same old standard rates," said Fuller, 57. "I've been quite excited about the prospect of some sort of clearinghouse, thinking the state could create more buying power and save people money."

Though he's got a year to see how the insurance market shakes out before needing to buy coverage, Fuller plans to log on to the MNsure site on opening day just the same.

"It's not a done deal that I'll purchase through MNsure," he said. "If I can get a better rate from a private carrier, I'll do that."

Premium costs could prove critical to the success or failure of the exchange, an online marketplace that 1.3 million Minnesotans and small businesses are expected to eventually use.

Some fear that "rate shock" over sky-high premiums will scare healthy consumers away from buying on insurance exchanges. Insurers need the young and healthy to spread out the risk at a time when the federal health law forces them to cover more sick people, ditch extra-high deductible plans and pony up additional taxes.

If premiums are too high, more people might choose to go without insurance and pay a fine — which at $95 or 1 percent of earnings could be significantly less than the thousands that will be needed to buy insurance.

"It's going to be a hard message," said PreferredOne CEO Marcus Merz. "For anyone under 50 who now has good health status, you're going to pay more."

Maisie Boe of Minneapolis hasn't heard of the MNsure exchange and doesn't know how the federal health law will affect her family. But she has two wishes: that it be simpler to sign up for Medical Assistance through the state and that she and her 3 ½-year-old daughter, Ma'Nyah, who has asthma, be able to see the doctors of their choice.

"I can't see my primary-care doctor because it's not covered now," Boe said. "That would be nice."

'Opening bids'

Alan Weil, executive director of the National Academy for State Health Policy, urged caution on reading too much into initial exchange prices in a recent Health Affairs blog post headlined, "The pointless search for meaning in exchange prices."

Premium prices now being offered on various insurance exchanges are merely "opening bids in a not-yet-existent marketplace," Weil argued, akin to a company making an initial public offering on the stock market.

"They tell us nothing about the ultimate prices in the exchange or the ability of competition within the exchanges to drive improvements in the health care system," Weil wrote.

Tax credits will take the bite out of premiums for some low- and middle-income earners. Subsidies of varying degrees of generosity will be available to an individual making up to $45,960 and a family of four earning up to $94,000.

But subsidies won't close the gap for many. Analysts predict that premiums will go up for younger, healthier people but could fall for those who are older or already sick.

"You're taking a wide variety of people — young and old, insured and uninsured — and you're pushing them to the middle," said Geoff Bartsh of insurer Medica. "Up front, some will have to pay more. But over time the shock disappears."

Minneapolis business owner Chris Hanson is eager for a better way, but wary of the realities ahead.

He's fresh off negotiating a new contract with yet another health insurance company for his 14 employees, after facing a 14 percent increase in premiums this year.

"Every three or four years we find ourselves in the same position," said Hanson, co-founder of Thedatabank Inc., a software firm that works with government organizations and nonprofits. "Our options are to reduce benefits or play the game and find new insurers."

Though generally supportive of health care reform, Hanson's questions lingered even after hearing from MNsure officials at a recent event sponsored by MetroIBA, a small business group for which he is on the board. Because his company currently offers a generous health package, Hanson's broker is preparing him for significant increases next year.

"I understand how it benefits us as a society," Hanson said, "but I still question how it will benefit us as a company. I'm still not sure that it will. There are some signs that overall this will start to bring down health care costs. But I'm concerned that it isn't going to bring down health care costs for everybody."

Early indicators

So far, signs elsewhere are encouraging. The U.S. Department of Health and Human Services, which won't release rates for the federal exchange until Oct. 1, recently reported that premiums on exchanges in 10 states and the District of Columbia are running about 18 percent lower than previous federal and congressional estimates.

In Washington, D.C., and a handful of states that have publicized premium rates, some insurers have dropped their prices — though others raised them. And last week Aetna pulled out of the Maryland exchange after the state said it needed to lower rates as much as 29 percent.

Minnesota, one of 16 states and the District of Columbia to build an exchange, may not feel the widespread jolt in prices that might happen in other states, predict some analysts and insurance executives.

Historically, the state has some of the lowest premium increases in the nation. And it long ago adopted the same "age rating" standard that now is part of the federal health law, which is expected to cause rates to spike in states that don't currently have it.

One study projects that premiums for Minnesotans buying their own coverage will likely rise an average of 29 percent — but could go as high as 42 percent — but that the hikes will be offset by tax credits available through the MNsure exchange.

Overall, 64 percent of Minnesotans buying individual policies will pay less than they do now, while 30 percent will pay more, accounting to the analysis prepared for the state by MIT economist Jonathan Gruber and Gorman Actuarial.

"The people who are going to do well under the Affordable Care Act are people where someone else is paying part of the premium," said Scott Keefer of Blue Cross and Blue Shield of Minnesota. "If you get a subsidy and the government's paying, you'll probably like it. If you're buying health insurance as an individual now and you're not subsidized under the Affordable Care Act, you're probably not going to like it."

Jackie Crosby • 612-673-7335