A 40-year-old in the Twin Cities who wants the cheapest MNsure premium on a “silver”-graded policy could pay just $181 per month next year — the lowest such rate in the state.
Around Rochester, meanwhile, a 40-year-old who buys the low-cost silver option would pay $282 per month — about 56 percent more.
Figures released last week by MNsure, the state’s health insurance exchange, suggest that rates in southeast Minnesota will continue to be the state’s highest next year. But, as the second year of enrollment approaches, the gap with much lower prices in the Twin Cities is shrinking.
Something similar appears to be happening across the country, said Cynthia Cox, a researcher with the California-based Kaiser Family Foundation.
“The cities where the premiums were the lowest last year are seeing steep increases, and the areas where the premiums were the highest last year are coming down,” Cox said. “It looks like there’s an evening-out in premiums, although there’s only less than a third of states so far that have made this data available.”
There’s nothing new in geographic variations in what people pay for health coverage, but the federal Affordable Care Act that created the exchanges has made differences much easier for consumers to see.
The rates are for policies in the state’s individual health insurance market, for people who don’t get insurance from an employer or the government. As of May, about 6 percent of all state residents bought policies in the individual market — either through the private market, MNsure or the state’s high-risk pool.
After MNsure released rates in 2013, the discrepancy between what similar consumers in Rochester and the Twin Cities must pay for comparable policies prompted some state legislators to propose legislation to try to reduce the differences.
The bill didn’t make it far. Insurance companies opposed it, saying geographic differences in rates just reflect higher health care costs in some parts of the state than others.
‘Mayo Clinic effect’
Some have branded high rates in Rochester as a “Mayo Clinic effect,” since insurers say the clinic has negotiating power that results in higher reimbursement rates for services. In southeast Minnesota, the clinic’s leverage comes from the fact that it can be tough to sell a health plan without Mayo in an insurance company’s network, said Stephen Parente, a health policy researcher at the University of Minnesota.
“We sort of think of this as a Rochester or a Mayo effect, but it’s not just a Minnesota story,” Parente said. “If you look at health plans in Maryland and you want Johns Hopkins Hospital in your network, you will be paying a higher premium for that plan.”
Under the federal health law, insurance companies can compete in any of nine geographic regions in Minnesota. Premiums vary based on a person’s age, smoking status, the place they live and the “metal” level of health plan they buy.
Bronze policies must cover at least 60 percent of expected costs for an individual; platinum policies must cover at least 90 percent.
After MNsure’s rate release Wednesday, the Star Tribune analyzed a sample of 2015 premiums for comparable consumers across the state and found the highest rates in southeast Minnesota and lowest rates in the Twin Cities for nearly all types of policies. The findings fit with those from 2014 — when the regions also were the most and least expensive in the state — but the gap between the two regions closed a bit.
In Rochester, the cheapest policies saw percentage increases or decreases in price that could be measured in the single digits. In the Twin Cities, the cheapest policies got about 20 percent more expensive.
When announcing the new insurance rates Wednesday, state Commerce Department officials stressed that Rochester consumers will have better options than last time.
“In southeastern Minnesota, consumers have two strong companies to choose from, and they can choose from low-cost plans that are as much as 13 percent less expensive than in 2014,” said Commerce Commissioner Mike Rothman. “Both companies filed more products, and between them southeastern Minnesota will have 33 — or five times — more products to choose from than last year, including platinum plans for the first time.”
Wide range of plans
The rates approved Wednesday by Commerce are voluminous. Statewide, 84 different plans will be available to individuals, and prices are different across all ages and geographic rating areas. So, a quick analysis of overall premium trends is difficult.
The average premium increase for companies continuing to offer policies on MNsure next year will be 4.5 percent, the Commerce Department reported Wednesday. But the calculation was not weighted to reflect the market shares of the four companies — an adjustment that would take the average premium increase to about 12 percent, said Christopher Schneeman, president of SevenHills Benefit Partners in St. Paul.
Another limitation is that the Commerce Department average didn’t include figures for PreferredOne, which has more than half of the MNsure market but isn’t returning to the exchange for next year.
So, insurance agents worry that many subscribers will be frustrated when they learn their renewals are much higher than 4.5 percent.
“Very few people are going to see that,” Schneeman said. The general advice to consumers, he said, is: “Don’t listen to any averages. Wait for your actual renewal, and then we’ll be able to compare it with what the other opportunities are.”
Consumers should remember that the lowest-cost bronze, silver, gold and platinum policies on the market in different regions aren’t identical in terms of coverage details such as the network of doctors and hospitals that patients can visit, said Cox of the Kaiser Family Foundation.
The MNsure data suggest that people in the Twin Cities will see big jumps in the cost of the cheapest policies compared with consumers across the country, Cox said. Yet those rates in the Twin Cities will be relatively inexpensive.
“This may seem paradoxical — to have both the greatest increase and the least expensive premiums — but the Twin Cities premiums were very, very low last year relative to other major cities,” Cox said. “So, even with the steep increase, it’s likely that the area will continue to have some of the lowest premiums in the country.”