The state's individual health insurance market got even smaller last year, according to a new state report, but the annual rate of decline slowed significantly.
The figures are another hint of relative stability in a market that has undergone big changes with the federal Affordable Care Act (ACA), including a period of premium spikes and plummeting enrollment followed by rate declines the past two years.
The report issued this month by the state Commerce Department said that 141,110 people bought individual policies during 2018, down from about 300,000 people during 2015.
"We want the market to be stable for consumers, for the carriers," said Grace Arnold, the deputy commissioner of insurance at Commerce, in an interview. The latest numbers make state officials "cautiously optimistic that we're turning the corner on instability and getting into a more stable market."
The report comes a few weeks before state insurance regulators are scheduled to release, on July 9, requested rate changes from health insurers for 2020. Final rates will be released in early October.
The ACA brought sweeping changes beginning in 2014 to the market where individuals buy health insurance. The market is a key source of coverage for people under age 65 who are self-employed and those who don't get health plan benefits from their employer.
The federal health law made it illegal for health insurers to deny coverage to people based on pre-existing health problems. It also created government-run health exchanges like MNsure in Minnesota where people could shop for coverage and qualify for tax credits that lower premium costs.
Insurers guessed wrong, however, in setting rates for 2014 and 2015 and racked up big losses as claims outpaced premiums. The dynamic between premium revenue and claims expense is expressed in terms of the "medical loss ratio," or MLR. Every year in June, Commerce publishes a report on the ratio in Minnesota.
From 2014-2016, the MLR across Minnesota's individual market was so high — 101%, 116% and 105%, Commerce said — that carriers overall were paying out more money for medical bills than they collected in premium revenue. With premium hikes, however, the ratio plummeted to 75% in 2017. The new report showed the ratio in 2018 was just 63%.
The lower the ratio, the greater the chance that health insurers are turning a profit.
"The loss ratio is a measure of how much premium revenue collected by a health plan company was spent on medical care," the report said. "Revenue not used to pay medical expenses is used for health plan administration, marketing, taxes, other expenses and net income."
A Star Tribune review of annual MLR reports from Commerce showed enrollment in the individual market declined by more than 54,000 people from 2015 to 2016, and declined by another 87,000 people the following year. The new report showed enrollment in the market declined by about 8,000 people, or 6%, between 2017 and 2018.
On a per-person basis, annual premiums in the individual market declined from $6,533 in 2017 to $6,177 last year, according to the Star Tribune analysis of Commerce data.
The continued enrollment decline at a time when average premiums got smaller isn't surprising considering how costly the coverage remains, said Patsy Riley of the Minnesota Council of Health Plans, a trade group for insurers. In addition, 2018 saw new co-op health plans emerge for farmers who previously bought in the individual market, Riley said in a statement.
"Even though Minnesota's premiums are some of the lowest in the country, premiums are still so expensive because care is still so expensive," Riley said.
Another possible explanation is that unemployment in the state has been very low, which means more workers may have the chance to work for a company that offers health benefits.
"If individuals are offered group coverage, then they will often take it," said Arnold, the deputy commissioner of insurance.
As the individual market has gotten smaller, enrollment via MNsure has increased as more Minnesotans take advantage of tax credits made possible by the health law. In May, just over 100,000 people were buying individual policies via the state's health exchange, according to materials presented this month to the MNsure board of directors.
The Star Tribune analysis showed that per-person claims in the individual market peaked in 2016 at more than $5,000. They have since fallen to $3,911 per person last year — a rate that's more comparable to per capita claims among people covered by employer groups in Minnesota.
The peak likely fits with national studies, Arnold said, showing that the individual market saw more claims due to pent-up demand for services among consumers who previously didn't have coverage. Once consumers got those health care needs taken care of, usage has fallen back to more normal levels.
In addition, since 2016 insurers have created smaller networks of doctors and hospitals in their health plans, which has the effect of lowering claims costs for carriers. Insurers also eliminated individual market health plans with low deductibles, which means people in the market are paying more out-of-pocket for care. That also has the effect, Arnold said, of lowering claims paid by insurance companies.
Currently, four health insurance companies actively market individual health plans in the state: Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and UCare. Instability in the individual market has been on display through wild premium swings as well as big changes over the years in the number of carriers that compete in the market.
Golden Valley-based PreferredOne largely dropped out of the market after 2014. Going into 2017, Eagan-based Blue Cross eliminated its most popular health plans in the individual market and steered consumers to HMO policies with more limited choices in doctors and hospitals.