Three years ago, premiums generated from state residents who buy health insurance on their own exceeded claims for medical care by nearly $130 million.
But the market for individuals and families — about 5 percent of state residents — changed significantly in 2014 with the federal health law, which stopped insurers from denying coverage to those with preexisting health problems.
In 2014, claims exceeded premiums in the market by some $9 million, state Commerce Department figures show, and the gap swelled in 2015 to more than $166 million.
The mismatch helps explain why the roughly 270,000 consumers in the market could experience sticker shock on Thursday with the expected release of preliminary rate requests for 2017.
“I know the cost is going to go up,” said Julie Larsen, a self-employed tax accountant in Golden Valley. “I’m just waiting to see how high the premiums will go.”
On Thursday, the federal government is expected to release information on preliminary rate requests for health insurers selling in Minnesota’s individual market, which includes the state’s MNsure exchange.
The announcement will launch a public comment period that leads up to the release of final rates on Sept. 30.
Across the country, while some health insurers have reported success in the individual market others have announced pullbacks due to mounting financial losses. Minnetonka-based UnitedHealthcare, for example, will leave 30 of the 33 states where it currently sells individual coverage through government-run health insurance exchanges.
Dropouts by all insurers from Minnesota’s individual market would be a worst-case scenario, said Bob Stein, president of the Minnesota Association of Health Underwriters, a trade group for insurance agents. Short of that, Stein expects to see big numbers for proposed premium increases.
“I think we’ll be lucky if it’s [only] 40 percent,” he said.
Self-employed people, and those who don’t get coverage from their employer, buy health insurance in the individual market, which does not include people covered through Medicare, Medicaid or MinnesotaCare.
Health insurers in Minnesota have been signaling for months that premium jumps are likely due to rising medical costs and the elimination next year of financial safety nets for health insurers that are part of the federal health law.
In June, Blue Cross and Blue Shield of Minnesota announced it would only sell limited network HMO health plans due to financial losses in the individual market — a move that will terminate existing coverage for about 100,000 people.
In the wake of the news, the Minnesota Department of Commerce let other health plans make revisions to their premium requests. When one insurer pulls back, remaining carriers might reasonably assume they will draw more customers with costly health problems, said Cynthia Cox, a researcher with the Kaiser Family Foundation.
“I’m expecting premiums to go up faster in 2017 in most states — faster than they have in past years,” Cox said. “And I don’t see any reason why Minnesota would be an exception to that.”
In 2014, individual market rates through MNsure in the Twin Cities were among the lowest in the country. The state has seen hefty premium increases since then, Cox said, but rates in the metro area are still below average.
The benchmark premium for a 40-year-old in the Twin Cities this year is $235 per month, according to the Kaiser Family Foundation, compared with the national average of $299.
Rates vary by region. In Rochester, the benchmark plan for a 40-year-old costs $335 per month, compared with $290 per month in Duluth.
If rates jump, MNsure officials want consumers to know that federal tax credits are available to individuals at certain income levels who buy coverage through the state’s health insurance exchange. That’s a message that will be more important than ever for 2017, said Dannette Coleman, a senior vice president with Minnetonka-based Medica.
“The reality is, these premiums for some families — it’s their family premium or their mortgage,” Coleman said. “These are becoming very challenging costs from a budget perspective. And some families will have to consider that trade-off.”
Currently, a majority of individual market shoppers are in health plans they purchased outside the exchange. Across the individual market, the mismatch between premiums collected and claims paid tells only part of the story about financial losses for health insurers, said Jim Schowalter, president of the Minnesota Council of Health Plans.
Beyond paying claims, health plans pay taxes and have overhead costs that also have driven red ink in the individual market, Schowalter said. Even after factoring the financial safety nets in the health law, the trade group estimates that most carriers in the state have collectively seen about $500 million in losses in the individual market in 2014-15.
The information released Thursday likely won’t include information about the geographic reach of health plan offerings, or how health plans are trying to control cost by limiting the network of doctors and hospitals that’s open to patients. So, the focus will be on the rates.
“I am expecting another painful set of discussions about how to pay for really expensive care,” Schowalter said.
“Everyone knew that the federal changes were going to create a long and bumpy road,” he said. “But it is much longer and a lot bumpier than anyone expected.”