The average small business in Minnesota should see a relatively small increase in health insurance premiums next year, as rates in the market continue to be more stable than for people who buy individual policies.
Last week, the state Department of Commerce released data on premium rates for 2016, including average jumps of about 41 percent in the individual market.
But for “small groups” that provide health insurance coverage to between two and 50 people, the average rate of increase next year will be 1.29 percent, after factoring market share projections among different insurers, Commerce said.
“Rates for small businesses … will increase only slightly in 2016, in contrast to annual increases of 7 to 10 percent that were typical just a few years ago,” Commerce Commissioner Mike Rothman said last week.
About 6 percent of Minnesotans buy individual policies, and about 5 percent are covered through small groups. So, the rates don’t apply to the vast majority of Minnesotans, including those in the Medicare or Medicaid health insurance programs or to people in large employer-sponsored health plans.
One reason the individual and small group markets are seeing different rates of increase is because they’re starting from different premium points. Individual market rates apparently are catching up with those for small groups, said Roger Feldman, a health policy researcher at the University of Minnesota.
“In 2014, the individual market was underpriced,” Feldman said, “and the small group market was overpriced.”
At Eagan-based Blue Cross and Blue Shield of Minnesota, individual market rates next year will increase an average of 45 percent to 49 percent, depending on the product. But in the small group market, average rates at Blue Cross will increase 1.4 percent in some cases, while decreasing an average of 4.8 percent in others.
The small group market experienced turbulence in 2014 as the federal Affordable Care Act imposed new rules that eliminated premium discounts and penalties for small groups based on the collective health status of enrollees. The change created winners and losers during those years, but the changes are now complete and the market is stable, said Jim McManus, a Blue Cross spokesman.
“This is in sharp contrast to what is happening now with the individual market, where the overall risk mix continues to transition as new people enter the market and change plans with greater frequency,” McManus said in a statement.
In the individual market, one of the big changes with the health law in 2014 was the elimination of pre-existing condition exclusions that insurers previously used to control costs. As part of the change, Minnesota closed its high-risk pool for people with costly health problems, and many have moved to the individual market.
Premium increases in the market for 2016 reflect an “adjustment to what the rates really need to be,” said Doug Smith, senior vice president of health solutions, sales and account service at Bloomington-based HealthPartners. He added: “My sense is the vast majority of that adjustment is happening in this cycle.”
Minnesota saw enrollment in small group health plans decline from about 320,000 people in 2013 to about 268,000 people last year. Insurance agents said some small groups opted to drop coverage because workers could find better rates in the individual market.
As individual market premiums catch up with small group rates, “fewer employers will dump their group insurance, and more employers will come back to the group market,” said Dave Wiest with Emex Benefit Systems in Medina.