The Star Tribune editorial "Fixes needed after Blue Cross retreat" (July 20) was spot on in its headline's assessment of the state of affairs in Minnesota's commercial health insurance market. The editorial unfortunately fell short in the actions it recommended.
The editorial identified several "market stabilization" proposals that were put forward by the state's Commerce Department last year in the wake of significant increases in health insurance rates for those buying individual policies in Minnesota. Among them, the department has suggested merging the individual market's risk pool with the small group risk pool and creating a state-level financial safety net or reinsurance program for insurers.
The editorial also tipped its hat to a recent push by Senate leaders to allow more Minnesotans access to MinnesotaCare, expanding the program beyond the ranks of the state's working poor for whom the program was designed. As the largest voice for business in state, we have voiced serious concerns about these proposals. They bear repeating.
It's true that merging the individual and small group risk pools would increase the size of the population associated with rate setting for the individual market. But it would do so at the expense of the rates paid by small employers. The small group market — albeit with its own challenges — tends to be a healthier and more stable risk pool. In merging the two, the state would be subsidizing the relatively unhealthy and unstable individual pool with the healthy, stable small group pool. Individuals may see their premiums go down — or rise less dramatically — but small employers likely would see rates increase.
In similar fashion, a state-level safety net or reinsurance program for insurers likely would require health plans to add fees to the fully insured products they sell to individuals and businesses in Minnesota — costs that would merely be passed along to all fully insured employers via higher premiums. A 1 percent increase in premiums for a 50-employee, fully insured small employer can mean higher premium outlays — on average, up to $6,000 annually. At 2 percent, 3 percent, or more, that cost rises quickly and exponentially.
The proposal to expand MinnesotaCare into the ranks of the middle class — and potentially beyond — would have significant consequences for employers as well. Of primary concern is the fact that an expansion of this public program — which pays doctors, nurses, and other health care providers very low rates — will only exacerbate the significant cost-shifting to commercial payers that already exists. Because the state pays providers such a low rate, they are forced to recoup the losses through their rates charged to commercial payers — increasing costs for individual and employer plans alike. Furthermore, given the fact that the funding for MinnesotaCare is set to expire in law, it's not the time to place even more demands on the program.
The state should be looking for ways to slow the increasing costs of both health care and health insurance. Among other things, we believe the former may be accomplished through greater efforts to align payments with outcome-based quality measures. And policymakers should begin tackling the latter by evaluating the significant portion of premiums driven by state-imposed benefit mandates and taxes. Academic studies have calculated that the average mandate increases premiums from .44 to 1.11 percent annually.
Minnesota has more than 60 mandates, among the highest in the nation. And in Minnesota, roughly 10 cents of every fully insured premium dollar goes to pay various health care taxes. Too often, leaders at the State Capitol are eager to add to these significant burdens on premiums, while at the same time decrying the cost of their constituents' health insurance.
Minnesota can and should do better. Fixes are indeed urgently needed, but they must be fixes that help, rather than hurt, the cause.
Doug Loon is president of the Minnesota Chamber of Commerce.