The prospect of massive premium hikes in Minnesota’s individual market has policymakers scrambling for solutions, but there’s no agreement on a simple fix.
Enrollment in individual health insurance policies, particularly through government-run exchanges like Minnesota’s MNsure, has fallen far short of expectations.
The people who have been buying plans, in turn, are using more health care than expected, prompting a growing number of insurers to recoil from the red ink or propose big rate hikes.
While there are several strategies that might drive more healthy people into the individual market, the measures could prove costly, complex and unpopular.
“There are trade-offs for every policy strategy or solution,” said Jean Abraham, a University of Minnesota researcher focused on health economics and policy.
The troubles are confined to the market for individual health insurance policies. They’re purchased by about 5 percent of state residents, or roughly 270,000 people, either through insurers, brokers or MNsure. The market is undergoing fundamental changes with the federal Affordable Care Act.
Starting in 2014, the health law prohibited insurers from denying coverage to people with preexisting health conditions. Government-run websites like MNsure were launched to connect health plan shoppers with tax credits under the health law.
Last week, the federal government released preliminary 2017 rate requests showing that Minnesota’s four primary carriers in the market want average increases ranging from 36 percent to 67 percent. This comes after carriers in 2016 boosted rates by 14 percent to 49 percent.
Health law supporters say a lot of the proposed increases would be absorbed by tax credits for individuals with qualifying incomes. Critics counter that many don’t qualify for the subsidies, which shift costs to other taxpayers.
Projecting more losses
For years, Eagan-based Blue Cross and Blue Shield of Minnesota has been Minnesota’s biggest player in the market for individual policies. The insurer says it projects about $500 million in losses for 2014 through 2016. In a filing last week, Blue Cross said it needs higher rates for 2017 because of expected increases in medical costs as well as new costs because a financial safety net for insurers in the health law is going away.
In addition, Blue Cross projects that more healthy people who are currently buying individual market coverage will drop out, adding to the costs for those who remain.
Across the country, health insurers have reported similar problems, with some like Minnetonka-based UnitedHealthcare dropping out of many state exchanges as a result.
Premium increases and cost trends have been more moderate for people in employer-based plans, or the Medicare, Medicaid and MinnesotaCare public health insurance programs.
While the individual market has been an outlier, federal officials say the exchanges aren’t fundamentally broken — they just need some improvements. Kevin Counihan, the chief executive for the federal exchange website used by most states, announced in August efforts to help insurers with high-risk enrollees and additional outreach to potential customers, particularly among younger and healthier adults.
The federal health law includes tax penalties for individuals who lack coverage. Bigger penalties might drive younger and healthier people who’ve been holdouts into the market, said Abraham of the U. Conversely, she said, giving more people bigger tax credits could drive more people into the market.
But she added via e-mail: “The former is a non-starter politically, and the latter will end up costing the taxpayers more.”
In Minnesota, lawmakers say they want to put all options on the table, but DFLers and Republicans haven’t found much common ground in the past.
If private health insurers don’t want to compete for business on MNsure, then the state might seek permission from the federal government so that MinnesotaCare coverage could become a “public option” on the exchange, said Sen. Tony Lourey, DFL-Kerrick. The approach could be limited to rural counties, Lourey said, where insurers have less incentive to compete.
DFLers have talked about providing state-based tax credits to Minnesotans who make too much money for federal subsidies, Lourey said. There’s also been talk of a financial safety net for health plans that would be funded by the state, he said, which could help recruit and retain carriers worried about drawing a particularly costly set of subscribers.
Rep. Greg Davids, R-Preston, said he’s open to considering the safety net idea, because it’s similar to how Minnesota previously funded a high-risk pool for patients with pre-existing health conditions. The tough question, of course, is how to fund the program.
State tax credits for individual subscribers are a possibility, too, Davids said, adding that Republicans in the next month expect to release a set of proposals for fixing the individual market. He sounded less interested in the MinnesotaCare idea.
“I don’t know that we want to put a lot more people on public programs,” Davids said. “I think that just adds to the cost. There should be a viable, vibrant private market.”
One way to get health insurers to compete might be to require participation from companies that sell Medicaid managed care plans. Sabrina Corlette, a researcher at Georgetown University, said Nevada has such a requirement, recognizing that carriers have been making money on Medicaid plans.
But Robert Laszewski, president of Health Policy and Strategy Associates in Virginia, said such a strategy would amount to “taking money out of the Medicaid program and putting it into Obamacare.” The fundamental problem, Laszewski said, is that the health law has placed regulatory burdens on insurers that prevent them from designing policies people want to buy.
Not all carriers, however, are losing money. A June report from Boston-based L.E.K. Consulting highlighted insurers that have profitably sold exchange coverage as an extension of their Medicaid managed care plans.
Medicaid plans typically pay lower reimbursement rates to doctors and hospitals, the L.E.K. report noted, so the insurers “had a different starting point for negotiations with providers, anchoring to Medicaid rates.”
“By contrast, most nationals and large commercial plans used their traditionally commercial network as the starting point, where providers were accustomed to rates that may be 1.5x or 2x Medicaid rates,” consultants wrote.
But hospitals and doctors would bristle at private plans paying Medicaid rates. Medicaid HMOs often have tight networks of doctors and hospitals that frustrate some consumers.
Pullbacks announced by insurers across the country mean that an estimated 2.3 million enrollees in health exchange coverage, or 19 percent of all enrollees, could have a choice of a single insurer in 2017, according to an August analysis from the Kaiser Family Foundation.
The report also said that the share of all counties where a single insurer sells exchange plans is likely to increase from 7 percent to 31 percent next year.
The prospect of counties with so few competitors is clearly a problem policymakers must tackle in the short-term, said Abraham. But it all speaks to a more fundamental problem with the growing cost of health care.
“We shouldn’t only blame the insurers,” she said. “We need to also be thinking upstream about the inputs. It’s about medical care utilization and the prices of medical care services that insurers are negotiating with providers.”