Minnesotans who shop on the state's new health insurance exchange will see some of the lowest premiums in the nation, state officials said Friday, with the vast majority of residents having a choice of at least three insurance companies.
The online marketplace, known as MNsure, will be "undeniably competitive," said Minnesota Department of Commerce Commissioner Mike Rothman, whose agency approved the rates. "It's good news for Minnesota consumers."
But experiences will vary widely, and many will still feel sticker shock when the MNsure exchange launches for open enrollment in October.
Monthly insurance premiums will depend on a myriad of factors — how old you are, where you live, whether you smoke and whether your income qualifies you for tax credits that can lower the cost.
Consumers' delight or dismay will depend in large part on how MNsure's offerings compare to current plans, which may not provide as much coverage or may come with deductibles that are much higher than the federal law will allow starting in 2014.
"Beware of averages," cautioned Scott Keefer of Blue Cross and Blue Shield of Minnesota. "Each person needs to weigh the options. Some people will see a picture that is better; for some, it will be worse."
Still, Friday's announcement provided the clearest picture yet for Minnesotans of the costs on the exchange, a key element of the federal health law commonly known as Obamacare.
Shopping on the exchange will enable consumers for the first time to make apples-to-apples comparisons among a variety of options to pick the plan that best fits their pocketbooks and medical needs, according to MNsure officials.
The exchange will serve those on public programs, individuals and small-business owners.
Those who get coverage at work or through Medicare won't need to use it.
National studies released in recent weeks have shown premium prices on exchanges across the country coming in much lower than forecast due to added competition or aggressive state regulators.
Twin Cities premium rates are as much as a third lower than 11 other metropolitan areas around the country that have released premium rates on their exchanges, according to state officials.
To keep premium prices low on MNsure, some consumers may have to live with fewer choices of clinics or doctors. And they may have to pay higher out-of-pocket costs.
Tax credits on sliding scale
Under the federal law, total out-of-pocket costs, including deductibles and copays, are generally capped at $6,350 for individuals and $12,700 for families starting in 2014.
To make premiums more affordable for middle-income earners, the federal government will provide immediate discounts on premiums in the form of a tax credit, based on household income. Tax credits will be available to individuals earning between $22,980 and $45,960 and a family of four with income from $47,100 to $94,200. The higher your income, the less help you'd get.
All of the Minnesota plans that submitted rate proposals to sell on the exchange were approved, Rothman said.
Blue Cross Blue Shield of Minnesota, HealthPartners, Medica, PreferredOne and UCare will sell plans to individuals through the exchange. Blue Cross Blue Shield of Minnesota, Medica and PreferredOne are offering plans to small businesses.
Residents in 85 percent of counties across the state will have three or more choices of health plans. In southeast Minnesota, there will only be two choices.
"MNsure is off to a decent start," said Steve Parente, a health care economist and professor at the University of Minnesota's Carlson School of Business, who noted that the level of competition is relatively healthy, given that there are five major players in the state.
"It was a logistical challenge to move as quickly as they did and get the level of engagement from the health plans," he said. "The real test is three years out. That's when you'll see if this thing is really bulletproof, with high levels of competition and good rates."
Gov. Mark Dayton issued a statement praising the health insurance companies for "engaging in this historic undertaking for making it possible to accelerate the release of today's information by almost a month."
The House Republican Caucus expressed frustration that state officials didn't provide rates for plans sold outside the exchange, and raised concerns about the $330 million price tag for MNsure through 2016.
"Today we learned that hardworking Minnesotans will be forced to pay more for health insurance under Minnesota Democrats' Insurance Exchange than they do on the private market here in Minnesota," said Rep. Joe Hoppe, R-Chaska, who leads the House Commerce and Consumer Protection Committee, in a statement. "How does making health insurance more expensive encourage more people to get insured?"
Based on results from other states, older adults who have chronic conditions or are currently only able to buy insurance through the state's high-risk pool, could see their monthly premiums decline.
Meanwhile, young men and healthy people who now are covered under high-deductible, bare-bones health plans likely will see the highest jump in premium prices.
James O'Connor, a consulting actuary with Milliman, said about 40 percent of individuals won't qualify for subsidies and could see significant increases.
He highlighted a list of unknowns for insurers in setting prices this first year when no one knows how many healthy people will use the exchange and whether those currently uninsured are healthier than average or sicker.
Health insurers may have been forced by states to keep rates low this year, or they may be pricing lower to aggressively court market share. They also may be setting rates lower than they otherwise might because the federal government will kick in some extra money this year to help ease the transition of taking on sicker consumers.
"It's good news for consumers in 2014," O'Connor said. "It's hard to say what'll happen in 2015 and later, especially if the original rates would have been more appropriate to charge."