A new state program promises to significantly lower health insurance rates next year in the individual market, but that doesn’t necessarily mean consumers will see reductions in what they are paying each month for coverage.

The state Commerce Department last week released proposed rates for 2018 in the market that primarily serves people under age 65 who are self-employed or don’t get coverage from an employer.

The release cheered consumers who’ve endured several years of double-digit premium jumps by reporting some rates might actually decline thanks to a state “reinsurance” program, which is designed to provide a financial cushion for health plans that happen to enroll people with high-cost health problems.

Reinsurance would lower premiums, but insurance agents say consumers likely won't see the savings in the form of outright premium declines, because one-time rebates will be going away at the same time.

“In the current environment, very few people pay the full premium,” said Joshua Haberman, an insurance agent who is chief operating officer of the Alexander & Haberman Agency in Bloomington.

About 170,000 state residents buy coverage through the individual market, which has been highly volatile under the federal Affordable Care Act (ACA). After the state’s individual market nearly collapsed last year, state lawmakers created a one-time 25 percent rebate program for many consumers in 2017, plus the reinsurance program that’s scheduled to start next year.

Insurers in Minnesota are seeking average rate increases for 2018 that range from 3 percent to 32 percent, Commerce said July 31, but the range will shift significantly lower if the federal government grants approval for the reinsurance program. Two insurers say that with reinsurance, their average premiums will decline by more than 10 percent.

While this is good news for individual market consumers, insurance agents say, it also could be confusing. That’s because the rebates, which currently are subsidizing about 100,000 consumers in the market, will switch off in January just as the reinsurance impact would kick in.

Commerce reported last week that with reinsurance, consumers could see 2018 premium rates that are anywhere from a 15 percent decline to an increase of 10 percent compared with 2017 rates. The 2017 comparison rate, however, did not factor in the 25 percent rebates.

“If they’re currently getting a 25 percent discount, and then they read the news that says the premiums might go down 10 percent — they actually could be paying 15 percent more next year,” said Mitch Anderson, an insurance agent at Prime Time Health Advisors in Rochester. “It’s going to be a tough pill for people to swallow.”

As Haberman, the insurance agent in Bloomington, put it: “The only way to experience a [premium drop] by any potential reduction in the premium price [from reinsurance] is if that reduction is greater than the 25 percent rebate you are currently getting.”

Individual market consumers who aren’t getting rebates are being helped by federal tax credits under the ACA that effectively cap out-of-pocket premium costs. So, since they aren’t paying the full premium now — and presumably still won’t in 2018 — they likely won’t see changes in their monthly bill due to reinsurance.

“If their income and household size doesn’t change, the amount they pay the insurance company doesn’t change,” Haberman said.

Earlier this year, lawmakers decided to spend up to $532 million over two years on the reinsurance program, which must be approved by the U.S. Department of Health and Human Services. State officials hope to hear by the end of August whether the federal government approves the reinsurance program.

On Tuesday, Republican leaders in the state House and Senate sent a letter to federal officials describing the program’s potential impact on premiums.

“Premiums will remain flat or decrease for thousands of Minnesotans,” wrote House Speaker Kurt Daudt and Senate Majority Leader Paul Gazelka. “Respectfully, we ask that the department solidify this good news by approving [the reinsurance program] in an expedient manner.”

The HMO from Eagan-based Blue Cross and Blue Shield of Minnesota says average rate changes with reinsurance will vary from an 11.4 percent increase to a decline of 1.5 percent. At Minnetonka-based Medica, the average premium changes with reinsurance would range from a 5 percent increase to a decline of 5 percent.

Reinsurance at Bloomington-based HealthPartners would mean average premium decreases of between 13 percent and 15 percent, while the average premium at Minneapolis-based UCare would decline by nearly 15 percent.

All the talk about rates is somewhat premature, since Commerce is currently reviewing the proposals. Final numbers could be different when they are released by Oct. 2.

Besides, the real benefit from reinsurance is not simply about rates, but encouraging health insurers to compete in the market, said Christopher Schneeman, a health insurance agent with Seven Hills Benefit Partners in St. Paul. With insurer pullouts in other parts of the country, some counties are confronting the prospect that either few or no insurers will even try selling individual insurance policies.

“Absent reinsurance,” Schneeman wrote in an e-mail, “there is a reasonable chance that there is no viable marketplace at all under the ACA rules.”


Twitter: @chrissnowbeck