Facing a 50 percent premium hike on health insurance, Brian Freeman and his wife decided to hold the line on monthly costs this year by switching health insurers and picking a plan with a lofty $13,000 deductible.
Freeman’s not thrilled with the results, and he’s wary about future premium hikes. “It feels like there are fewer and fewer places to hide,” he said.
More than two years after major changes under the federal health law, Minnesota’s health insurance market for people who buy coverage on their own continues to wobble. Proposed rate increases for 2017 won’t become public until August, but health insurers and agents already are signaling there could be significant price jumps.
Insurers and regulators, meanwhile, are starting to talk about whether Minnesota needs a policy fix to shore up the market where about 6 percent of Minnesotans buy coverage. The individual market serves people who don’t get health insurance through work or a government program.
“It’s been several years. We don’t have predictability. And we’re not sure when we will have predictability,” said Jim Schowalter, president of the Minnesota Council of Health Plans, a trade group for insurers.
Federal subsidies that have covered a portion of health plan losses under the Affordable Care Act will disappear next year. That change alone could add another 5 percent to 7 percent in premium costs, said Schowalter, who suggested that rising health costs could add yet another 7 percent.
The state’s largest health insurer, Blue Cross and Blue Shield of Minnesota, isn’t talking specifics yet for next year, but said in a statement that “cost pressures in the individual market show no signs of abating.” For 2016, the company hiked rates by an average of more than 40 percent.
A report this month from the California-based Kaiser Family Foundation found that insurer rate requests so far for 2017 suggest that the overall pace of premium increases is accelerating on the insurance exchanges for 14 states surveyed.
“I am certainly trying to set expectations,” said Heidi Mathson, president of the Minnesota Association of Health Underwriters, a trade group for insurance agents. “I really think we’re at 20 to 30 percent rate increases next year.”
Minn. rates are fairly low
But federal officials say take the gloomy predictions with a grain of salt.
Last year, after widespread reports of double-digit premium increases, many people shopped their way out of them by switching health plans. For people at certain income levels, tax credits provided by the federal health law also blunt the impact. Regulators also could chop down the proposals.
“This is just the beginning of the rates process,” said Ben Wakana, a spokesman for the U.S. Department of Health and Human Services, in a statement. “Proposed rates aren’t what most consumers actually pay.”
Minnesota had some of the lowest premiums in the country during the first year of health law changes in 2014, and carriers have been raising rates ever since. Even so, rates for many in Minnesota remain relatively low.
The national average price for the benchmark exchange plan for a 40-year-old nonsmoker this year is $299 per month, compared with $235 in the Twin Cities. The prices thus far suggest that premiums here will not “spiral out of control,” said Gary Claxton, a researcher with the Kaiser Family Foundation.
“That’s what you really worry about — that the premiums get so high that only sick people will enroll,” Claxton said.
People are still figuring out the new market, he said, and a lot of the problems could be solved if enrollment grows. In the meantime, Minnesota and other states are starting to look at options in case the numbers keep lagging.
Costs of high-risk customers
The Minnesota Council of Health Plans is studying, among other things, a “reinsurance” program that might provide money to insurers that attract enrollees with expensive health problems.
Mike Rothman, the state’s commerce commissioner, said a risk-adjustment program to spread costs among health insurers might help. “There is a need for state-level market reforms to help stabilize rates for consumers and costs for insurers,” Rothman said.
Before the federal health law, people with expensive health problems were denied individual policies due to coverage exclusions for those with preexisting conditions. They were directed to the state’s high-risk pool, which was funded by a tax on the state’s “fully insured” market, or about 1 million people.
The health law abolished preexisting condition exclusions, so many of those with health problems now buy in the individual market — where fewer than 300,000 people get coverage.
“Those costs are spread across far fewer people,” said Schowalter of the Minnesota Council of Health Plans.
Still, the shift brought benefits for individuals, noted Elizabeth Lukanen, a researcher at the University of Minnesota.
People in the high-risk pool had to pay above-market rates for their coverage. They had to obtain a rejection letter from a health insurer to qualify for risk-pool coverage, and they didn’t have as many choices in how the coverage could be structured.
Lukanen acknowledged, however, that the change concentrated risk in a smaller group of people. It’s one of the ways, she said, the federal health law’s benefits have been less clear in states like Minnesota that already had consumer protections in the health insurance market.
But she thinks it’s still early for the state to know what changes might be needed.
“In a couple more years, the picture might emerge quite clearly,” Lukanen said.
Brian Freeman, the insurance shopper in Woodbury, is grateful that the health law got rid of preexisting condition exclusions. He believes going back to the past on that issue would be a bad idea.
But providing coverage without regard to health status can be expensive, so why concentrate the costs with one small group?
“I think we are better than that as a state,” Freeman said, “and we ought to be coming up with a fairer way of sharing the costs.”