May 1: Insurance exchange changes the health care game in Minnesota

John Borowicz has high hopes that a new state-run health insurance exchange will make buying coverage simpler and more affordable for his Plymouth-based business.

When he and his wife, Jackie Drury, bought Ovation Framing a year and a half ago, Borowicz set out on his own to find a good health plan for his six employees. It brought nothing but frustration.

"It was near impossible," said Borowicz, who previously worked in corporate IT. "It's a Byzantine and stupid system that doesn't make any sense."

Signed into law Wednesday by Gov. Mark Dayton, the exchange will represent a fundamental change in the health insurance marketplace for small businesses and for people who don't get health coverage at work.

A key aim is to level the playing field for the little guy.

"If you're overweight and 55 and have had a health condition, the plans basically can say we're not going to insure you or they'll cite you a really high premium," said Lynn Blewett of the State Health Access Data Assistance Center. "With the new health insurance exchange, every individual will be part of a larger pool. It's like having a large employer negotiating on your behalf."

Early estimates are that 1.3 million people eventually will enroll in health plans using Minnesota's exchange, which state officials call MNsure. That includes 300,000 uninsured Minnesotans and those who qualify for public programs such as Medical Assistance or MinnesotaCare, plus individuals and small businesses that may have coverage but want better options.

Minnesotans who earn too much to qualify for public health coverage may be eligible for federal tax credits or cost-sharing subsidies to reduce out-of-pocket costs. The sign-up process will automatically calculate that amount or determine eligibility for public health programs.

"That kind of one-stop shop has never been available to citizens before," said Leslie Wolfe, a division president at Maximus, the lead contractor for building the exchange. "People can shop in a user-friendly way that helps explain things in ways that haven't traditionally been explained."

Even though lawmakers hammered out a blueprint for how the Minnesota-made exchange will be set up and financed, there are plenty of unknowns.

For one, consumers and small-­business owners won't know for months what kind of plans insurance companies will offer and, more important, how much coverage will cost.

"There's some concern about increases in premiums," Blewett acknowledged. "It's hard to know without seeing who shows up and how the insurance companies set their prices."

Insurers also will have to cover a basic set of health care issues, including maternity care and mental health coverage, and they won't have the same freedom to set sky-high deductibles to offset premiums.

In Minnesota, where the exchange is estimated to cost $60 million a year to operate, insurers will kick in a 3.5 percent premium tax for plans sold on the exchange to help fund it. It's a cost they may pass on to consumers even as they go head-to-head to compete for business.

The state's private insurance companies stand to gain tens of thousands of new customers, however, and the major players have indicated that they are designing plans to sell on the exchange.

But with a May 17 deadline to get their exchange offerings to the state for review, some say they don't have the needed lead time to get well-thought-out plans off the ground. Developing a new insurance product can take a year, said officials of Blue Cross and Blue Shield of Minnesota.

Insurance broker Mary Setter has spent the past year keeping her small-business clients abreast of activity at the Legislature and explaining how the Affordable Care Act and new insurance exchanges will affect them.

Midsize businesses with more than 50 workers face the more-difficult choice — many are too small to have a human resources department but too big to avoid paying a fine if they don't provide a decent workplace health plan. Setter said she's already seeing more premium increases than in previous years because plans "are starting to price for provisions of health care reform," such as women's preventive services.

The state plans to begin a marketing campaign by summer, as it will be vital to attract young and healthy people to the exchange to spread out the risk and keep prices affordable. That's the concept that drove the controversial individual mandate.

At Ovation Framing, Borowicz and Drury want to expand their $800,000-a-year business, which produces framed promotional and original artwork, mostly for corporate clients.

The company faces a 10 percent hike in premiums this year through Blue Cross and Blue Shield, Borowicz said. He is 61 and Drury is 64, skewing the pool for their more-youthful employees, who are in their 20s, 30s and 40s.

"I want it to be a fair market," Borowicz said. "I don't want these discriminated pools."

Because Ovation has fewer than 50 workers, Borowicz can either use the exchange to buy group coverage or give his employees a set amount of money and let them find the health plan that best suits their individual needs. Borowicz isn't sure which tack he will take.

"It's a big culture shift to have people go out and do it on their own, even if it might take care of my headaches" he said.

"I'm president — and janitor — but I'm also the HR guy. Employees like HR."