Premiums likely will increase next year for many small businesses in Minnesota, but it’s nothing like the jumps proposed for people who buy coverage on their own.
The biggest health insurers in the market are seeking rate increases for small business customers that range from 3 percent to 16 percent, according to filings released this month by the federal government.
The growth rates might sound high compared to wages or general inflation, but they’re a far cry from the individual market, where Minnesota carriers are asking regulators for jumps that range from 36 percent to 67 percent.
The contrast shows the relative stability of what’s called the “small group” market vs. an individual market that’s still undergoing big changes with the federal health law.
“The rules of how somebody buys their insurance, who can buy their insurance and what it might cover were completely rewritten” in the individual market, said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers. “That did not happen in small group.”
Small group health plans provide coverage for businesses with two to 50 full-time employees. Last year, about 262,000 people in Minnesota — roughly 5 percent of state residents — had health insurance through these policies.
The individual market provides coverage for self-employed people and those who don’t get health insurance from an employer. Currently, about 270,000 state residents buy policies in the market, which has been the focus of changes with the federal Affordable Care Act.
While the individual market last year saw an average increase of 41 percent, the small business market increase was just 1 percent.
Even at that low rate, costs were high enough that some small business owners questioned if they could afford to continue offering health plans, said Bentley Graves, director of health care and transportation policy for the Minnesota Chamber of Commerce.
The proposed rates for 2017 aren’t final, and could still be marked down through regulatory review. Final numbers are expected Sept. 30. But Graves said the proposed figures released this month struck him as higher than he expected — and possibly big enough to push some small businesses out of the health insurance game.
HealthPartners, one of the two largest small business carriers last year, is asking for average rate increases of 7 to 8 percent for 2017.
Eagan-based Blue Cross and Blue Shield of Minnesota, the other large carrier, wants average increases of 14 to 16 percent. Two midsize carriers are seeking average increases of 3 to 6 percent.
In general, the number of small businesses offering coverage has been declining for several years. The lack of benefits can make it hard for firms to recruit and retain talented workers, Graves said, so the trend threatens a key sector in the state’s economy.
“A lot of the economic energy and vitality comes from small business growth and expansion, and starting businesses,” he said.
In its filing with regulators, HealthPartners said increases were needed due to “worse than expected 2015 results” and “increased utilization and medical inflation.” Blue Cross cited higher medical costs and utilization trends as well.
“Blue Cross experienced a $16.7 million operating gain on our small employer risk pool in 2015, however we are projecting a small operating loss in 2016,” the company said in its filing. “The requested rate increase is necessary in order to ensure the rate is not deficient for the projected costs.”
For 2016, Blue Cross cut rates on average by about 5 percent for most small groups, according to Commerce Department data. So, with the 2017 rate request “they’re trying to recoup some of their expenses,” said Bob Stein, a benefits consultant who is president of the Minnesota Association of Health Underwriters, a trade group for brokers.
Stein said he’s telling clients they should expect increases in the neighborhood of 6 to 8 percent, which is simply a reflection of what’s happening to the underlying cost of health care. Many groups will find that by increasing deductibles, they can keep premiums pretty level, he said.
Medical cost trends have been picking up due to the growing cost of specialty pharmaceuticals, said John Naylor, a senior vice president at Minnetonka-based Medica. But the market has been stable for years, Naylor said, particularly in contrast to the individual market.
Medica is seeking average rate increases for small groups of about 3 to 4 percent.
“The small group market is a mature risk pool that health plans understand,” Naylor said. “And so, on average, the premium will likely increase with [medical cost] trend, which is somewhere in the mid-single digits.”
In the individual market “there was a transformational change in what makes up that risk pool, and how health plans price it,” Naylor said.
In 2014, the health law made it illegal for health insurers to deny coverage to people based on preexisting conditions. The change prompted the state to start shutting down a high-risk pool for people who previously couldn’t get coverage from insurers, since they could buy in the individual market.
The impact of the shift shows in per-capita claims.
Whereas the average person in the individual market during 2013 had claims of $2,336, the figure jumped last year about 81 percent to $4,239, according to a Star Tribune analysis of Commerce Department data. In the small group market, per-capita claims during the time period increased by 8 percent.
When individual market premiums were relatively low compared with small group rates in 2014, some people moved out of small business plans to capture the savings. Now, insurers are seeing a shift in the other direction.
“We have seen movement from individual plans back to small employer coverage,” said Jim McManus, spokesman for Blue Cross and Blue Shield of Minnesota, in a statement.