Losses widen for health insurers in Minnesota’s individual market

April 02--Health plans say losses grew last year in the portion of the insurance market that's undergoing sweeping changes with the federal health law.

The losses drove a negative operating margin overall for Minnesota's nonprofit insurers, according to figures released Friday, as health plans also saw an 8 percent increase in medical bills.

Views differed Friday about whether the 2015 results suggest another round of big premium increases are on the horizon in the individual market, where about 6 percent of state residents buy coverage.

Either way, the general trend likely continues of insurers selling more health plans with larger deductibles and limited choices in doctors and hospitals, said Roger Feldman, a professor of health policy and management at the University of Minnesota.

"Everything that's going on is reducing the value of the product that you're getting for your premium dollars," Feldman said. "That contributes to the declining enrollment of the healthier and younger people."

About 300,000 Minnesotans buy coverage in what's known as the "individual market," where people get health insurance outside of employer groups and government programs.

Nonprofit health insurers lost $351.8 million in the individual market last year on revenue of about $1.1 billion, according to numbers released Friday by the Minnesota Council of Health Plans, a trade group for health insurers. In 2014, health insurers lost $228.5 million in the individual market.

The council's numbers reflect financial performance for seven health insurers: Blue Cross and Blue Shield of Minnesota; HealthPartners, Medica; Metropolitan Health Plan; PreferredOne; Sanford Health Plan of Minnesota; and UCare.

Losses in the individual market during 2014 and 2015 would have been higher, the trade group said, except for financial safety nets for health insurers that are built into the federal Affordable Care Act.

Questioning the system

Over the last five months, health insurers across the country have reported continuing losses for 2015 in the individual market, which includes new health exchange marketplaces created by the federal health law. The losses have prompted insurers like Minnetonka-based UnitedHealth Group to question whether the new exchanges are viable, with pullouts a possibility for 2017.

Minnesota is different from most states, however, since most people in the individual market purchase coverage outside the state's MNsure exchange.

Even so, the off-exchange market is undergoing health law changes, too, since starting in 2014 the Affordable Care Act forced insurers to issue coverage to people without regard to health status. Before 2014, preexisting condition exclusions were a key tool for health insurers to limit costs in the state's individual market.

This week, the national Blue Cross Blue Shield Association reported that individual market enrollees since 2014 appear to have higher rates of certain diseases, greater use of medical services and bigger care costs than others.

"It's taking longer to adjust to the new individual market," said Jim Schowalter, president of the Minnesota Council of Health Plans, in an interview. "Everyone hoped that would happen in just a couple of years, but the sorting out is taking longer."

Overall, health insurers posted an operating loss of $158.5 million, or less than 1 percent, on revenue of $25 billion, the trade group reported Friday. In 2014, the health insurers collectively posted a 1 percent profit overall. Overall results include revenue and income from employer groups and government programs.

Eagan-based Blue Cross was the largest insurer in the state's individual market during 2015, and its $265 million loss apparently was the biggest among the Minnesota carriers. Poor performance in the individual market was the explanation for an overall net operating loss last year of $178.1 million, Blue Cross said, on revenue of $10.6 billion.

There's no talk at Blue Cross about dropping out of MNsure or the broader individual market, said Scott Keefer, the insurer's vice president of public affairs and communications. While state officials are talking about studying possible policy remedies for the individual market -- like merging it with the state's health insurance pool for small employers -- Blue Cross doesn't see an immediate need for changes, Keefer said.

"We think that the market is starting to stabilize," Keefer said. "We shouldn't rush into anything."

Next year's premiums

At Bloomington-based HealthPartners, spokesman Vince Rivard said it was "too early to speculate" on what the 2015 financial results mean for premiums next year.

Filings with regulators for 2017 premium rates will be submitted later this spring, and will take into account financial performance thus far in 2016. Mary Quist, the vice president of finance at Minnetonka-based Medica, said she thought the state's individual market might experience more losses in 2016, "but nothing to the extent that it did in 2015," she said in an interview.

While that gives reason for hope when it comes to 2017 premiums, there also are factors pushing in the other direction. Medical cost trends continue to increase, and one of the financial safety nets for insurers that was created by the health law goes away.

Plus, there's all the recent noise from health plans about financial losses.

"I don't know if we can say the magnitude of that increase at this point," said Cynthia Cox of the California-based Kaiser Family Foundation. "But the fact that a number of insurers are pointing to their losses publicly right now suggests that many of them will be seeking premium increases again in 2017."

Twitter: @chrissnowbeck

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