Shrinking health insurance market could push up Minnesota premiums

Tuesday, June 7, 2016

Minnesota’s market for individuals and families to buy private health insurance has fallen far short of enrollment projections, and actually got smaller between December and March.

Both factors were highlighted by a report Tuesday from the trade group for Minnesota health insurers, and they add to concerns that premiums could be on the rise again next year.

The report from the Minnesota Council of Health Plans hinted that the state’s individual market might lack a critical mass of young and healthy subscribers to offset older people who are more likely to have costly health problems.

But the more central finding is that the individual market is about 260,000 people smaller than was previously projected, said Jim Schowalter, president of the Council of Health Plans. “There are fewer people to share the costs,” he said.

At issue is the health of Minnesota’s individual health insurance market, where about 5 percent of state residents buy coverage outside of employer groups and government programs.

It’s the portion of the market that’s undergoing fundamental changes with the federal Affordable Care Act, including the launch of new health insurances exchanges like Minnesota’s online marketplace, MNsure.

In a report last month, Allan Baumgarten, an independent health care analyst in St. Louis Park, also noted a decline between December and March in the number of people covered in Minnesota’s individual market. The market has seen very large premium increases in each of the last two years. “We expect to see double-digit increases again, though not as large as last year,” Baumgarten wrote. “If price increases do moderate, that will be a positive sign of the individual market moving toward stability here.”

At the end of 2015, just over 289,000 Minnesotans bought coverage in the state’s individual market, according to the report Tuesday from the Minnesota Council of Health Plans. By March, the number had fallen by about 6 percent to just over 270,000 people.

The tally is roughly half the 530,000 people that a consultant to the state in 2013 projected would be covered this year through Minnesota’s individual market.

The small size of the individual market is significant, Schowalter said, because that’s where many people with health problems that previously were covered through Minnesota’s high-risk pool now buy coverage. There are other factors, he said, that likely will push premiums upward.

 

“We know that some of the people with the highest costs are buying coverage on their own,” Schowalter said. “We know that some of the federal subsidies [for insurers in the health law] are phasing out. And we also know that medical expenses are growing much more quickly than they have from previous years.”

The health of the individual market, and the new exchanges, has been under the microscope since Minnetonka-based UnitedHealthcare signaled last year it would drop out of many exchanges because of financial losses. The concern is that without competition among insurers, premiums will increase in a cycle that drives healthy insurance buyers from the market and leaves only those with expensive health problems that require coverage.

This scenario is sometimes described as a “death spiral,” but some say any such predictions are premature.

Many insurers that have imposed hefty premium increases since 2014 have done so because they initially set prices too low, said Cynthia Cox, a researcher at the California-based Kaiser Family Foundation.

Overall, premium growth on the exchanges has been moderate, Cox said, adding that some areas have seen decreases. “What we’re seeing right now is likely more of a market correction than a failure in the market,” she said.

The “death spiral” critique often includes a look at how many young, and presumably healthy, people are buying coverage.

This spring, just 22 percent of enrollees in Minnesota’s individual market fell between the ages of 18 and 34, according to Tuesday’s report, compared to 28 percent nationally. The trade group’s report noted a 2013 Kaiser Family Foundation study that suggested a national goal of roughly 40 percent of individual market enrollees in the 18-34 age bracket.

But Schowalter said it’s too soon to say whether the age breakdown in Minnesota is a problem. And Cox said falling short of 40 percent is not a fatal flaw. “I don’t think there’s a magic number,” she said.

It’s not clear why Minnesota’s individual market got smaller between December and March. A key question is: Are more people going without coverage, or are they finding it elsewhere?

Whatever the cause, the numbers are disappointing for those who hoped the Affordable Care Act would revitalize the private health insurance market, said Roger Feldman, a health insurance expert at the University of Minnesota. “As I look in the crystal ball, I see roughly half of the population in group coverage and half in public coverage, meaning Medicare and Medicaid,” he wrote in an e-mail. “Will we get to a tipping point when public coverage becomes the norm?”