Health insurers are hiking premiums and limiting enrollment in Minnesota’s individual market next year, with regulators saying the emergency measures were needed to avert a market collapse.
The moves are a clear sign that the market for some 250,000 people who buy coverage for themselves is dysfunctional and needs reform, said Commerce Commissioner Mike Rothman during a Friday news conference.
While rate increases of more than 50 percent aren’t fair to consumers, Rothman said, things could have been worse. He described a period this summer when all health insurers in the state seemed prepared to abandon that segment of the market.
“We tirelessly worked, together with the insurers, to pull the market back from the brink with temporary solutions for this year,” Rothman said. “We succeeded in saving the market for this year, but the result is not pretty.”
The premium jumps and enrollment caps are confined to the individual market, where about 5 percent of state residents buy coverage. The market includes the MNsure exchange and has undergone significant changes with the federal Affordable Care Act.
Minnesotans covered by employer plans, Medicare and other government programs aren’t affected. For those in the individual market, the premium increases announced continue the pain after two years of rate hikes.
Premiums will jump by an average of 50 percent to 67 percent, depending on the insurer. Regulators also are taking the unusual step of letting most health plans limit the number of enrollees they’ll cover.
The caps will pressure consumers to shop early during the coming open enrollment period, since some plan options could disappear once insurers hit their limits. And regulators say the policies being sold for next year will feature tighter controls on the doctors and hospitals that enrollees can use.
The premium hikes and enrollment caps amount to a “finger in the dike” that’s meant to buy time while the state figures out what to do, said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers.
“What I think no one really appreciated until today was the trouble that the insurance market is in,” Schowalter said. “This announcement is another sign that how people are getting their own insurance isn’t working.”
Insurers across the country have proposed large rate increases or have dropped out of the market for 2017, due to mounting losses. In Minnesota, Blue Cross announced in June that it would drop policies that currently cover about 103,000 Minnesotans, citing projected losses of more than $500 million over a three-year period.
It had been rumored for months that the Blue Cross pullback prompted other insurers to consider doing the same, but Rothman on Friday offered the first accounting of how close the market came to collapse.
“For Minnesotans who needed to buy their own insurance, we all were faced with the prospect that there would be nothing available — nothing,” Rothman said.
“The rate increases are higher than anyone would like,” he said. “The options will be more limited than anyone would like. However, there are options — when two or three months ago, it looked like we wouldn’t have any options at all.”
The troubles in Minnesota’s individual market are a mix of factors affecting all carriers, and some issues that are state-specific.
After offering in 2014 some of the lowest premiums in the country, insurers in Minnesota’s individual market have struggled to set premiums that cover their costs, Rothman said. The market is small, he added, and apparently has taken on a disproportionate number of people with high-cost health problems.
Financial safety nets for health insurers in the federal health law are going away next year, another factor pushing up rates, Rothman said. And higher rates reflect growing medical costs, he said, such as expensive pharmaceuticals.
Rothman said premiums in the individual market are now somewhat comparable to rates in the small group market. That could be a sign that future rate spikes won’t be needed. And with the rate increases, more Minnesotans should qualify for federal tax credits if they purchase coverage through MNsure.
But rate increases could continue, Rothman said, and not all individuals will qualify for subsidies. He pressed lawmakers to act on reform proposals such as merging the individual and small group market to better spread costs, or provide a state-financed safety net for carriers that could stabilize rates.
“These rising insurance rates are unsustainable and unfair,” Rothman said. “Middle-class Minnesotans, in particular, are being crushed by the heavy burden of shouldering these costs.”
The benchmark premium for a 40-year-old in Hennepin County will increase from $235 per month to $366. Benchmark premiums in St. Louis County will increase from $290 per month to $444, and they’ll jump in Olmsted County from $335 to $555.
Currently, the national average benchmark premium for individuals is just under $300, and most states are seeing premiums increase at double-digit rates for 2017, said Cynthia Cox, a researcher at the Kaiser Family Foundation who tracks all 50 states.
So, even with the increases, Cox said: “I wouldn’t be surprised if Minneapolis’ premiums are still close to what the national average premium turns out to be.”
But the premium jumps in Minnesota for 2017 are among the highest in the country, Cox said. And the widespread use of enrollment caps is particularly unusual, she said.
Bloomington-based HealthPartners will limit enrollment to 72,000 people, while Minnetonka-based Medica will have a cap of 50,000. Sign-ups at Minneapolis-based UCare will be capped at 30,000, while Golden Valley-based PreferredOne will limit coverage to 1,700 people.
The only carrier that won’t have a cap is Blue Plus, the HMO operated by Blue Cross and Blue Shield of Minnesota.
“People need to shop early so they can get the choice that they want,” Rothman said. Open enrollment starts Nov. 1.
Rothman said consumers must also be wary of significant changes to the doctor and hospital networks in health plans.
House Republicans on Friday pressed DFL Gov. Mark Dayton for action on a federal waiver that would allow Minnesotans access to tax credits when buying outside MNsure.
“This is particularly urgent given that 53 counties will have just two MNsure provider options during the next open enrollment period — one capped, one uncapped,” a spokesman said via e-mail.
Rep. Paul Thissen, DFL-Minneapolis, said in a statement that the rate increases show the importance of tax credits via MNsure.
“The problem is that health care costs are simply too high,” he said.