‘Alarming’ rate increases in Minnesota’s individual health insurance market

Minnesota is announcing double-digit premium increases next year for people who buy health insurance on their own, including bigger jumps than what insurers originally proposed in July.

The premium increases are for “Obamacare” plans purchased through the state’s health insurance marketplace, MNsure.

The rate hikes don’t reflect additional costs about 90,000 Minnesotans will see next year if Congress fails to extend pandemic-era tax credits, which is a key sticking point in ending the government shutdown that began Wednesday.

“Minnesotans on the individual market could feel the pinch from two different directions,” Libby Caulum, the MNsure chief executive, said during a news conference Wednesday. “Rates are higher this year. And extra savings may be going away.”

In the individual market, the state Commerce Department approved average premium increases for Medica (+30.76%), UCare (+27.48%), Blue Cross and Blue Shield of Minnesota (+18.7%), HealthPartners (+13.31% to +19.15%) and Quartz Health Plan (+7.4%).

Primary drivers for the premium increases include higher prices from doctors, hospitals and pharmacies as well as expanded use of health care overall.

“Health insurance rates for 2026 are going up, and the numbers are alarming,” Minnesota Commerce Commissioner Grace Arnold said during a news conference at the State Capitol on Wednesday. “We had anticipated an increase, but what we’re seeing is a real gut punch.”

Out-of-pocket premium costs for individuals in this market often have less to do with underlying premiums than the value of federal tax credits they receive via MNsure.

Although insurers previously proposed steep rate hikes, the extra increases disclosed Wednesday by Commerce included a particularly big jump for UCare, a Minneapolis-based insurer that covers about 50,000 people in the state’s individual market.

“The market is undergoing a period of corrective price action after several years of financial losses,” UCare said in response to questions. “The increase reflects UCare’s real cost of care for our members, while maintaining a strong benefit offering, and ensures the plan remains stable and able to serve Minnesotans.”

UCare is suffering extreme financial difficulties that have forced the insurer to exit the Medicare Advantage market and pull back its Medicaid offerings.

Originally, the insurer sought to boost its individual market rates by about 15%, but regulators are letting UCare impose an average premium hike of more than 27%.

“UCare assumed the market would perform better than it did,” Dreier said.

One report insurers cited projected more “adverse claims experience” than anticipated, Dreier said in an interview: “It basically means everyone is sicker and more expensive than what they originally projected.”

About 187,000 people in Minnesota buy coverage in the individual market, a critical tool to obtain health insurance for self-employed people, early retirees and those who don’t get insurance benefits at work.

Health plans for individuals, on average, will increase premiums next year by about 21.5%, Dreier said. That’s the biggest jump since 2017, when the market nearly melted down, and insurers hiked premiums in excess of 50%.

The Commerce Department on Wednesday also approved final rates in the market where small business buy coverage for about 200,000 state residents. Those “small group” premiums, for employers with 2 to 50 workers, will increase an average of 14.2%.

A report this month from Mercer, a New York-based human resources consultant, found total health benefit costs per employee next year will rise an average of 6.5% — the highest increase since 2010 — even after accounting for changes employers are making to reduce costs.

Costs would increase by nearly 9%, the survey found, if employers took no action to contain costs.

“Based on the projections, 2026 will be the fourth consecutive year of elevated health benefit cost growth following a decade of moderate annual increases averaging only about 3%,” Mercer consultants wrote in their report.

The Minnesota Council of Health Plans, a trade group for the state’s nonprofit health insurers, said health care service use has accelerated significantly as medical cost inflation continues to outpace general inflation. Medication costs are a major contributor to premium growth, according to the council.