Much to the dismay of people who buy health insurance on their own, premiums for thousands in Minnesota’s individual market are going way up.
The state Commerce Department said Thursday that rates will increase an average of nearly 50 percent at Blue Cross and Blue Shield of Minnesota — the largest insurer in the market — and anywhere from 14 percent to 39 percent on average at four other insurers in the state that sell the policies.
The jumps apply only to the state’s individual market, where about 6 percent of state residents, or 300,000 people, currently buy coverage.
Even so, the increases renewed a broader debate about the Affordable Care Act and the state’s MNsure exchange, as consumers started scrambling for ways to deal with the financial pain.
“I can’t take an additional $8,000 automatic increase in medical without doing something about it,” said Cindy Penning, 58, of Wilmont who currently buys individual coverage for her family of five.
Penning echoed the advice offered by state officials on Thursday by saying she would shop for a different insurance policy with more affordable premiums. She will also search out whether the family qualifies for tax credits through MNsure.
Kristi Nelson of Hastings said she will look for ways to handle next year’s increase, too, but said future spikes would prompt her to consider dropping coverage. “You can only afford what you can afford,” Nelson said.
Premium increases announced Thursday were justified by actuarial evidence showing that care costs are exceeding premium revenue, said Commerce Commissioner Mike Rothman during a news conference near the Capitol. Rothman said insurers pointed to sicker, more costly patients in the individual market, plus rising prices for health care services.
Even so, the increases are “unacceptably high,” Rothman said, adding that he would push for regulatory changes to better spread costs in the future.
The insurance market for people under age 65 who don’t get health insurance from an employer is undergoing fundamental changes with the federal Affordable Care Act.
The health law eliminated pre-existing condition exclusions that insurance companies previously used to control costs in the individual market.
The law also created new online marketplaces like MNsure and extended tax credits to shoppers. It imposed tax penalties on people who lack coverage, and required public notice when health insurers seek rate increases of 10 percent or more.
‘Tied our hands’
This summer, all five companies in Minnesota’s individual market sought increases in excess of 10 percent, including a requested spike of more than 50 percent by Blue Cross. Rothman said his department negotiated slightly lower increases, but said the public nature of the proposals made things more difficult.
“When Blue Cross and Blue Shield filed higher rate increases in the mid-50 percent range, it made all the other insurers want to change and increase their rates, too,” Rothman said. “This effectively tied our hands, in some respects.”
In a statement, Blue Cross said the approved rates for 2016 could “mitigate the impact” of rising medical claims. But the insurer added: “Even with these increases, Blue Cross is likely to experience continued significant financial losses through 2016.”
MNsure accounts for only about one-sixth of the individual market in Minnesota, but the rate release rekindled debate about the state’s exchange.
Rep. Joe Atkins, DFL-Inver Grove Heights, said the increase showed why the state was smart to launch MNsure, since tax credits are more important than ever.
House Speaker Kurt Daudt, R-Crown, countered that the exchange was at least partly to blame for increased costs, saying the state should jump to the federal government’s health insurance marketplace.
“We don’t need this duplicate bureaucracy of MNsure,” he told reporters.
MNsure’s interim chief executive, Allison O’Toole, shot back with a statement saying: “The fact of the matter is that today’s news would be the same regardless of whether Minnesotans use MNsure or healthcare.gov.”
Senate Republicans issued a statement under the heading “The Unfulfilled Promises of MNsure,” saying the exchange hasn’t delivered consumers the relief on premiums that DFLers promised.
Gov. Mark Dayton blamed health plans for the rate increases, saying that if they make coverage unaffordable Americans will demand “that they be removed as the providers of health insurance.”
Insurers countered that they aren’t the problem.
“The bottom line here is that premiums are expensive because health care is so expensive,” said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers.
The final premium approvals announced Thursday describe increases in terms of overall averages. Beneath those figures, however, is a much more complicated truth, since particular health insurance products will have different levels of increase.
Premiums in Minnesota vary by the subscriber’s age, smoking status and where they live. As has been true for several years, premiums in the Twin Cities will be relatively low next year, while rates in the Rochester area will be high.
In the Twin Cities, the lowest-premium “silver” policy available on the MNsure exchange for a 40-year-old nonsmoker will increase from $181 per month this year to $228 per month next year In Rochester, the lowest-premium silver policy for that same consumer increases from $282 per month to $329 per month.
Even with the increases announced Thursday, premiums in the Twin Cities are still below the average across 13 major U.S. metropolitan areas where 2016 premiums have been released, said Cynthia Cox, a researcher at the Kaiser Family Foundation. Across those cities, Cox said the average price for the lowest-cost silver plan for a 40-year-old nonsmoker is $271 per month.
As was true for 2015, the size of rate increases in Minnesota in 2016 is larger than elsewhere, Cox said. The state started in 2014 with some of the lowest premiums in the nation, but now has had two consecutive years of above-average premium jumps in many parts of the state.
“This year in particular in Minnesota, I’d say it’s especially important to check MNsure,” Cox said, “because more people are going to be eligible for tax credits than before.”