It is an exercise in extreme frustration to compare the responses in Minnesota and Alaska to the obvious signs of individual health insurance markets going haywire — namely, skyrocketing rate hikes and insurers exiting after posting dramatic losses.
Faced with premium increases of almost 80 percent over two years, Alaska’s state leaders accomplished what their Minnesota counterparts have failed miserably at: finding a solution to protect consumers from stiff price increases for 2017 coverage. Alaska’s pragmatic “reinsurance” reform went into effect this summer and is already delivering results in the form of a much more manageable increase — 7.3 percent for 2017 for Alaskans who buy insurance on their own.
In Minnesota, the consequences of state leaders’ do-nothing approach became apparent last week when Commerce Department officials announced that those in this small slice of the state’s market will face average rate increases of 50 to 67 percent. There also will be caps on the number of enrollees accepted by most insurers remaining in the market after the exit of Blue Cross and Blue Shield of Minnesota.
The individual market comprises about 5 percent of Minnesotans who don’t get their health coverage from an employer or a public program such as Medicare. Many will be able to tap into federal financial assistance through MNsure to substantially discount the cost of monthly premiums. Still, some won’t qualify. In addition, the caps raise questions about whether some people will be unable to buy insurance if they wait too long. While Commerce Commissioner Mike Rothman said in an interview that this is an “unlikely scenario,” it’s an unsettling prospect.
The price hikes and caps are unacceptable. The Star Tribune Editorial Board began calling for individual market reforms to protect consumers last fall. The year since then has been wasted, with DFLers scared to admit that the Affordable Care Act (ACA) needs fixes and too many Republicans unhelpfully obsessed with killing MNsure. A special session is needed this fall to address relief for consumers. Among those demanding action: the University of Minnesota’s respected health policy expert Lynn Blewett.
Alaska’s approach ought to be given serious consideration in Minnesota. The reinsurance program works by recognizing two key realities. One, a small number of people with expensive medical conditions can significantly drive up the cost of coverage for all individual policyholders. And two, when this happens, the market is not a viable business for private insurers without government aid.
Under the new program, Alaskans with certain medical conditions will continue to shop and buy in the private individual market. Insurers will still administer the policy, but the state program will pick up the care costs, said Lori Wing-Heier, director of the Alaska Commerce Department’s insurance division.
If it sounds a lot like what Minnesota used to do before the Affordable Care Act, it is. But a key difference is that Alaska’s program still respects a popular pillar of the ACA — its coverage guarantees for preexisting medical conditions. An insurer can’t go back to denying coverage. Instead, the program offers a workaround that stays within the ACA’s legal framework, a detail that will help speed implementation. “It had an immediate impact on our individual market,” Wing-Heier said.
Alaska’s initial annual cost for the reinsurance program is estimated at $55 million, and Wing-Heier said it’s possible that federal funds may be available in future years to offset this. It is unclear what the price tag would be for a similar program in Minnesota, which has a much bigger individual market. But there appears to be a substantial surplus to tap in Minnesota’s $731 million Health Care Access Fund, which is generated from an existing dedicated tax on medical providers.
Numbers from the state Commerce Department suggest strongly that a state-run reinsurance program would bring down claim costs and thus monthly premiums. “If the top 0.65 percent most expensive individuals had been removed from the market (those with claims $200,000 and higher), average claims would have dropped 29 percent. If the top 1.79 percent most expensive individuals had been removed ... (those with claims $100,000 and higher), average claims would have dropped 45 percent,” officials said.
Other options to consider include allowing the public to buy into the state-run MinnesotaCare program. Minnesota leaders urgently need to explore and enact innovations. Why they haven’t yet done so also urgently needs an answer.