HealthPartners and a hospital system in Iowa have jointly invested $7 million to launch a new health insurer that will compete for Medicare business next year in portions of Iowa and Illinois.

In November, Bloomington-based HealthPartners announced it would jointly create the new company with Des Moines-based UnityPoint Health to compete in the growing market for Medicare Advantage health plans.

The new insurer has since received regulatory approval to sell coverage in 25 counties in Iowa and five counties in Illinois, said Troy Caraway, the senior vice president of the insurance division at Unity­Point Health.

On Monday, the company — which is called HealthPartners UnityPoint Health — is launching a media campaign to create awareness for the new insurer. The $7 million of paid-in capital, disclosed in a regulatory filing, includes equal contributions from the joint-venture partners, Caraway said last week in an interview.

"It would not be unusual for there to be additional start-up [funding] over the first couple years," he said. "At this point, though, we have confidence in the funding and capitalization projections that we've put forward."

Medicare Advantage plans are sold by private insurers that contract with the federal Medicare program to provide all benefits in the portions of the program that cover hospital and doctor services. Some plans also include "Part D" prescription drug benefits.

Medicare health plans are an alternative to coverage through the traditional governmental program, which some seniors use in conjunction with "Medigap" supplemental insurance policies.

For private insurers, the Medicare Advantage market has grown significantly in recent years.

Nearly one in three people on Medicare, or 17.6 million beneficiaries, are enrolled in a Medicare Advantage plan this year, according to the Kaiser Family Foundation. The tally is about 5 percent higher than 2015, according to the foundation.

The aging of the baby boomer generation is a key contributor to growth, but the health plans also have a growing share of the overall Medicare market, according to a July report from Mark Farrah Associates, a Pennsylvania-based consulting group.

"Given the increasing number of Medicare-eligible citizens coupled with numerous states who lag behind the national penetration averages, growth opportunities abound in the Medicare Advantage market," the report stated. "As long as industry support for managed care Medicare options remains strong, insurers will continue to invest in these growth opportunities."

Iowa is one of those states that has lagged in seniors opting for Medicare Advantage plans.

About 55 percent of Medicare beneficiaries in Minnesota are enrolled in private plans, according to the Kaiser Family Foundation, and the national average is 31 percent. Iowa has one of the lowest rates in the nation at 15 percent, the foundation says, while the Illinois rate is 18 percent.

"That creates a lot of opportunity," Caraway said.

UnityPoint is Iowa's largest health systems, with major medical centers in Des Moines and Cedar Rapids, and operates in the western Illinois markets of Peoria and Rock Island. The new insurer will sell coverage in counties that are near the health system's service area.

For an out-of-town insurer, such partnerships with a local hospital can make sense, said Gretchen Jacobson, an assistant director at the Kaiser ­Family Foundation.

"It can help the plan … because the provider or hospital may have strong name recognition in the community," she said. "And it also helps to immediately form the provider network for the plan, which can be one of the most difficult aspects in forming a new plan."

It's not entirely clear why Medicare Advantage plans have been seeing such growth, Jacobson said. Some seniors like how the plans limit out-of-pocket expenses and have a "one-stop shopping" aspect to how they can combine hospital, doctor and pharmacy benefits, she said.

Even so, the federal Affordable Care Act in recent years has been cutting payment rates to Medicare Advantage plans.

"Many people predicted that Medicare Advantage enrollment would decline, because the plans would be forced to reduce benefits and increase cost sharing," Jacobson said. "Instead, we've seen enrollment continue to increase. Premiums have been relatively flat, and we don't really know how benefits and cost-sharing have changed."

Like all Medicare health plans, HealthPartners Unity Point Health isn't allowed by regulators to talk about specific health plan options and prices until October, when the annual open enrollment period begins. The marketing campaign being launched Monday will include a mix of TV, radio, print and digital ads, and is meant to create general awareness of the new insurer and Medicare Advantage plans.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck