Big rate increases next year in the state’s individual market mean that Minnesotans who buy health insurance on their own will pay above-average premiums — a startling reversal from 2014 when individual market rates in much of the state were among the lowest in the nation.
A federal report this week looked at rates for “benchmark” plans across 44 states and found a family of four in Minnesota will pay $1,396 per month for the coverage. That’s about 28 percent higher than the average across most of those states at $1,090 per month.
The silver lining is that higher premiums mean bigger federal subsidies for those who qualify, with state officials suggesting there are about 100,000 people in Minnesota who haven’t been tapping tax credits even though they could get them.
“Premiums overall next year are going to be above average in Minnesota, whereas the last few years they’ve been below average,” said Cynthia Cox, a researcher with the Kaiser Family Foundation who tracks premium trends.
There’s a similar dynamic in Arizona and Pennsylvania, Cox said, where individual market rates also were low relative to the nation.
“In some sense, those insurers in those states are correcting,” she said.
The report from the U.S. Department of Health and Human Services looked at rates for policies sold through government-run health insurance exchanges like Minnesota’s MNsure marketplace, where people can obtain tax credits that discount their out-of-pocket premium costs.
The exchanges are an option for people in the individual market, which serves about 250,000 people in Minnesota. It’s the market for people who are self-employed or don’t get coverage from an employer or a government program such as Medicare.
Premium increases for individuals have been much bigger than in the larger and more stable group market, which is dominated by large employers and covers about 150 million Americans. Premiums for typical family coverage in the group market rose just 3 percent this year, according to the Kaiser Family Foundation.
Last month, the state Commerce Department approved average rate increases of 50 to 67 percent. Regulators also let four of five health insurers cap enrollment in the market as an emergency measure to guard against more financial losses. At one point this summer, the department said it looked like all health plans might abandon Minnesota’s individual market.
The new report looked at benchmark premiums, meaning the cost for a mid-grade policy, for consumers at different ages living in different parts of the country.
A Star Tribune analysis of the data suggests the Minnesota premiums will rank eighth-highest out of 44 states for a family of four, and 13th-highest for a 27-year-old buying the benchmark plan. The report defines a family of four as a 40-year-old, a 38-year-old and two children under age 21.
Across the 39 states that use the federal government’s HealthCare.gov exchange, the average benchmark premium for a 27-year-old will be $302 per month, according to the report. It lists the comparable rate in Minnesota as $340 per month.
Minnesota doesn’t use the federal exchange, so its figures aren’t part of the averages. But the report lists data from Minnesota and a few other states that operate their own health insurance exchanges. The statewide figures don’t necessarily represent the exact price a consumer will pay, since rates in Minnesota vary across nine geographic regions.
A separate study released this week by the Kaiser Family Foundation looked at large metro areas in 48 states plus the District of Columbia and found the cost of the benchmark plan for a single 40-year-old in the Twin Cities will be 19th-highest of those areas.
Most individuals who buy health insurance through the exchanges get tax credits that significantly discount their premium costs, although the share of Minnesotans who do so has been below average. One reason is that market prices for coverage have been low, so fewer have qualified for the break.
For those buying through MNsure, more should qualify for tax credits next year, Cox said, and the value of those tax credits should be much bigger.
Individual market shoppers have the option of buying directly from insurers, and that’s been a more popular route in Minnesota than MNsure. The big question is: What will happen as people in this “off-exchange” market size up 2017 premiums?
“Do they then go onto the exchange to see if they are eligible for financial assistance?” Cox asked. “Or do they drop their coverage?”
The individual market continues to undergo a transformation that started in 2014 when the federal Affordable Care Act stopped health insurance companies from denying coverage to people with preexisting conditions. The law also launched the government-run exchange marketplaces, where the upper-income threshold for tax credit eligibility will be $47,520 for an individual next year and $97,200 for a family of four.
“We have identified at least 100,000 Minnesotans who are potentially eligible for tax credits that are not taking advantage of them,” Allison O’Toole, MNsure chief executive, said in a statement.
“We don’t want consumers to leave money on the table,” she said. “MNsure plans to reach out to Minnesotans in every way possible.”
When major health law changes started in 2014, health insurers faced a new landscape for pricing their policies. In Minnesota, health plans wound up being underpriced because people buying insurance were sicker than expected, said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers.
As well, one of the key federal subsidies for health insurers under the health law didn’t deliver funds as expected, Schowalter noted. Minnesota’s plans also initially included relatively broad networks of doctors and hospitals, making it harder for insurers to control costs, he said.
Finally, insurers have seen evidence that some people with health problems obtained individual market policies even though they could get coverage elsewhere, Schowalter said.
“Those things all add up to pressure in the individual market,” he said.