Upstart PreferredOne scored big gains in the first season for individual Minnesotans to buy health insurance under the Affordable Care Act, a new market analysis shows.
The state's fifth-largest insurer by revenue, PreferredOne signed up about six in every 10 consumers shopping on the state's new insurance exchange, MNsure.
Using low premium rates to drive business, the insurer enrolled about 50,000 new individual customers, half on the exchange and half through agents, brokers or directly through its website.
Many people left their individual plans with Medica and HealthPartners and moved to PreferredOne, a shift that surprised the report's author, independent analyst Allan Baumgarten.
"That loss of market share by HealthPartners and Medica is significant," he said. "It's about pricing, it's about marketing, it's about networks."
The report offers a window into the impact of the various approaches insurance companies used during the first year of the health plan law, in which a primary goal was to use a combination of market forces to help those who don't get insurance through their workplaces.
In Minnesota, the individual market is about 10 percent of the population under age 65, with the vast majority of people who are insured getting coverage through their employers.
Under the law, known informally as Obamacare, insurance companies could no longer discriminate against people who had pre-existing conditions. It also forced insurers to expand their benefits to include such things as maternity care and preventive office visits, and it capped how much they could charge consumers in out-of-pocket costs, such as deductibles and copays.
Insurance carriers created their new health plan offerings under a cloud of uncertainty about what would happen if only the sickest people signed up for coverage.
Several cut deals with certain hospitals and doctors and limited consumers' choices in return for lower-priced premiums. Medica created geographic regions, offering consumers deals with North Memorial or Health East, but generally didn't include Allina Health, for instance. Blue Cross created health plans with narrow networks with Fairview and Health East as well as Sanford Health.
PreferredOne, which is owned by Fairview and North Memorial hospitals, made a decision to price competitively but still include most major hospital systems.
"A lot of people were testing limited networks," Baumgarten said, "and they did not get very much takeup."
PreferredOne had been pricing low in recent years and paying even lower claims.
"They said, 'We think the numbers will work,' " Baumgarten said. "The proof will be seen over the next year in terms of what kind of claim experience they get."
PreferredOne picked up nearly 50,000 new members during the first quarter of the year, which tracks generally with the end of the MNsure open-enrollment period. Medica's enrollment dipped by about 20,000. HealthPartners dropped 5,000 members during the quarter.
The state's largest plan, Blue Cross and Blue Shield of Minnesota, had small enrollment gains, but it dropped from having about two-thirds of the individual market to about 54 percent, the report found.
Insurers will be submitting their premium rates for 2015 to the Department of Commerce toward the end of this month. Fears of "rate shock" remain among some analysts, but not Baumgarten.
"I think some of them will reduce premiums," he said. "The evidence is pretty clear that people are buying on price. If you want to be in this market, you have to be competitive on price."