Thousands of Minnesotans who buy health insurance on their own are bracing for final word on whether their premiums will spike next year.
On Thursday, the Minnesota Department of Commerce is scheduled to release 2016 rates for shoppers who buy individual policies.
Four insurers that collectively cover most people in the market are seeking average increases of more than 20 percent each, including a proposed jump of more than 50 percent for about 179,000 people with coverage from Eagan-based Blue Cross and Blue Shield of Minnesota — the state’s largest health insurer.
In ruling on the requests, regulators must walk a line between satisfying consumers who want low rates and insurers who say the business can’t be sustained at current premium levels.
“We are dying here under the weight of insurance premiums,” Kristi Nelson, 53, of Hastings, wrote Commerce Department officials in opposition to a possible rate increase. “It’s like being dropped off a cliff every year when the new premiums come out.”
The proposed rates apply to Minnesota’s individual market, where roughly 6 percent of state residents bought coverage last year. That market has changed markedly with the federal Affordable Care Act.
The health law abolished exclusions for pre-existing conditions that health insurers previously used to control costs in the individual market. It also created new online marketplaces like Minnesota’s MNsure exchange and extended subsidies to shoppers. Finally, the law called for public notice when health insurers seek rate increases in excess of 10 percent.
In June, the federal government released proposals for big average jumps in Minnesota not just from Blue Cross but also HealthPartners (23-24 percent), PreferredOne (49 percent) and UCare (12 percent). In July, UCare increased its proposed hike to 27 percent.
Medica changed its request this summer, too, and it is now seeking a 14 percent increase. The insurer’s earlier proposal fell short of the threshold for disclosure.
“As more time goes on, you’ve got a fuller picture of the risk that you’re managing,” said Dannette Coleman, a senior vice president with the Minnetonka-based insurer.
Insurers say rate increases are needed because of big losses in the individual market. The Minnesota Council of Health Plans tabulated losses in excess of $300 million in 2014, although insurers expect to recover roughly half of that amount through financial safety nets in the health law.
Blue Cross says it lost $135 million in the individual market in 2014. Company spokesman Jim McManus said last week in a statement: “A larger membership in 2015 is translating into even larger losses.”
In the past, proposed rate increases in Minnesota only became public once final rates were approved. With advance notice under the health law, Commerce Department officials this summer invited public comment and received about 50 written responses — almost all in opposition.
Employer health plans stable
Proposed premium jumps in the individual market contrast with findings from a national report last week that found premiums for people with employer health plans increased just 4 percent this year, continuing a decadelong period of relatively slow growth.
“Why are individual policyholders being singled out for huge rate increases, while employer-sponsored plans are not sharing the burden of increasing health care costs?” asked Laurie Casagrande, 63, of Minneapolis, in comments filed with the department.
Brian Freeman, 52, of Woodbury, told the department that the proposed increases aren’t sustainable. In an interview, Freeman asked why costs in the individual market aren’t being spread more broadly, and said that self-employed people are “at the mercy of the individual market.”
Premium increases could be offset for some by tax credits under the health law, but retired teacher Gail Dahl, 62, of Andover, told state officials that she doesn’t qualify.
“When you’ve worked hard and you’ve saved and you’re looking towards retirement, the fact that you can’t figure out exactly what your budget is going to be from one year to the next — because this keeps going up — that’s the frustration,” Dahl said in an interview.
Jeanne Edevold Larson, 52, of Bemidji, said her family is trying to recover financially from medical bills they accumulated during her husband’s recent bout with cancer. He’s cancer-free now, but the family is trying to make monthly payments of about $2,100 on medical bills just to stay out of collections. “That’s more than 3½ house payments a month,” she wrote to the department.
Health care more expensive
Commerce Commissioner Mike Rothman has read all of the submitted comments, said spokesman Ross Corson. They helped reinforce Rothman’s commitment “to squeeze out every penny of premium costs that was not justified,” Corson said.
Premiums for employer groups are more stable because the market is much bigger, and it hasn’t experienced as much change under the health law, said Jim Schowalter, chief executive at the Minnesota Council of Health Plans, a trade group for insurers. State law prevents insurers from taking money from the group market to subsidize individual health insurance premiums, Schowalter said.
Modeling that was completed for the state several years ago forecast that the individual market would grow to include 400,000 to 500,000 people by 2016, Schowalter said. But actual enrollment has fallen short — about 290,000 people at the end of last year — perhaps because many found coverage through the state’s public health insurance programs.
“That has a big impact in not diluting the cost and not spreading the cost,” he said. “It means higher rates.” Plus, medical claims have swallowed a much bigger share of premium revenue, he said.
Between 2010 and 2013, health insurers paid out between 82 cents and 91 cents in medical claims for every dollar of premium revenue in the individual market, according to Commerce Department reports. In 2014, premium revenue in the market grew significantly — from about $710 million to nearly $1 billion — but insurers paid out just over $1 in medical claims for every dollar of premium revenue.
“Health care is more expensive in the individual market than expected,” Schowalter said.
State is on ‘high end’
Compared with other states, proposals in Minnesota for 50 percent premium increases are “on the high end,” said Cynthia Cox, a researcher with the Kaiser Family Foundation. Proposed jumps of 20 percent to 30 percent, however, have not been uncommon.
Final rates aren’t yet available in most states. Regulators have ruled in 12 states and the District of Columbia, and the average increase for the lowest-cost “silver” health plan for a 40-year-old nonsmoker has been 4.2 percent, according to a Kaiser analysis. In most states, regulators have knocked down proposed increases, Cox said.
In Minnesota, PreferredOne offered some of the lowest rates in the country in 2014, but found the business unsustainable and dropped out of the MNsure portion of the individual market for 2015. That’s the sort of disruption regulators try to avoid, said Heidi Michaels Mathson, president of the Minnesota Association of Health Underwriters, a trade group for insurance agents.
“Honestly, I’m not surprised by the proposed increases,” Mathson said. “This market hasn’t been priced appropriately for the last two years.”
But Sarah Greenfield of TakeAction Minnesota said she questioned the increases, especially considering overall profits in the insurance industry. Collectively, nonprofit insurers and HMOs in Minnesota posted operating income of about $229.4 million on $23.7 billion in revenue last year, according to the Minnesota Council of Health Plans.
“The insurers and the HMOs are managing to do well,” Greenfield said, “but those folks in the individual private market are really getting squeezed.”