Consumers could see steady premiums as UnitedHealthcare enters Minnesota market

Oct. 14--UnitedHealthcare's move to sell more coverage in Minnesota starting next year could help keep a lid on health insurance premiums in the region, at least in the near term, analysts say.

Minnetonka-based UnitedHealthcare, which is the nation's largest health insurer, said last week that it plans to start selling coverage to small-, midsize- and certain large-employer groups in Minnesota over the next year plus a new type of Medicare health plan.

Lower premiums at the outset "are a realistic expectation," said Rulon Stacey, a managing director with Navigant Consulting, who expects longer-term changes, as well.

"It's inconceivable to me that it will not have a major impact on the market here," said Stacey, who is the former chief executive at Minneapolis-based Fairview Health Services. "It's a very, very big deal."

UnitedHealthcare's parent, UnitedHealth Group, is the largest publicly traded company in Minnesota, and is on track this year to post $200 billion in annual revenue for the first time. It employs about 18,000 people in the state, but has been a relatively small player in the state's health insurance market.

UnitedHealthcare has been absent from the market where small and large employers purchase "fully insured" coverage, meaning insurance companies take the financial risk for claims. Last year, about 967,000 Minnesotans were covered through fully-insured plans for small and large groups, according to the state Commerce Department.

UnitedHealthcare also has been absent from Minnesota's market for Medicare health plans, although it sells prescription drug plans and supplemental policies in the state. In 24 states, UnitedHealthcare has the largest market share among Medicare Advantage insurers, according to a report this year from the Kaiser Family Foundation, and the company is among the top three sellers of Medicare plans in another 19 states.

For the largest employers in Minnesota, UnitedHealthcare has had a presence in the state's insurance market for many years. The insurer has worked as a third-party administrator to large "self-funded" employers, meaning groups that take the financial risk for the cost of employee medical claims.

Large employers based in other states with operations here have provided UnitedHealthcare benefits to workers in Minnesota. Plus, for very large multistate employers based in Minnesota, UnitedHealthcare has worked as a third-party administrator in conjunction with Minnetonka-based Medica, using the local nonprofit health plan's network of doctors and hospitals.

UnitedHealthcare and Medica have collaborated not only on national accounts, but also on United's employee health plan in Minnesota. In addition, Medica obtains such certain back-office services as claims processing from United.

"The relationship with Medica is really not changing," said Philip Kaufman, the UnitedHealthcare executive leading the expansion in Minnesota, as well as North Dakota and South Dakota. "What's changing is us coming here directly, but Medica and United are going to continue to be great partners."

The situation, however, raises questions in the minds of some observers.

"I would not understand why, if you had 18,000 people in your group, that you wouldn't be trying to use that potential volume to drive a better deal with health care providers," said Christopher Ody, a health economist at Northwestern University in Evanston, Ill.

Roger Feldman, a health economist at the University of Minnesota, said one of the key questions going forward is: "How long do they keep working with Medica?"

The companies last week offered only limited responses to questions about whether UnitedHealthcare's announcement signals a change in the business relationship, which at times has been described as a "noncompete" agreement. Insurance cards for UnitedHealth Group employees in Minnesota currently list Medica's name, a spokesman confirmed, adding that the "announcement will not affect the benefits we offer to [Minnesota-]based employees today or in 2018."

"Health care markets around the country continue to evolve rapidly, with competitors entering and exiting on a regular basis," Medica said in a statement. "Minnesota is in some ways unique, because its health plans have been almost entirely nonprofit."

UnitedHealthcare isn't the only for-profit company looking to enter Minnesota's insurance market.

Earlier this year, Connecticut-based Aetna announced a collaboration with Minneapolis-based Allina Health System to create a new for-profit insurer that would sell to large-employer groups starting next year. Like UnitedHealthcare, the Aetna-Allina joint venture plans to sell Medicare Advantage plans in Minnesota starting in 2019.

Both companies say a forthcoming regulatory change with what are called "Medicare Cost" plans helps explain the timing. Currently, most Minnesota insurers sell Cost plans, but beginning in 2019 they can't be sold in service areas where two or more sizable Advantage plans are offered.

Feldman of the U said UnitedHealthcare would "shake-up the market" when it comes to Medicare plans. He added that UnitedHealthcare is taking a risk, though, because efforts at the federal level to "sunset" the Cost plans have repeatedly been delayed over the years.

More broadly, Feldman said he expected UnitedHealthcare in Minnesota would compete aggressively with lower premiums.

Minnesota lawmakers in 2017 eliminated the state's decades-old ban on for-profit HMOs in hopes of boosting competition in the insurance market. The ban was a bigger deal to carriers back in the 1990s when many commercial customers wanted HMO coverage. Over the years, however, many commercial customers have shifted away from HMO coverage, buying policies from for-profits that are allowed to operate in Minnesota with licenses as insurance companies.

Even so, the big for-profits have shied away from the Minnesota market -- until now.

"For years and years, we've been speculating about what might happen if for-profits could come into the market," Feldman said. "Now we seem to have one sort of alliance forming, with the Allina-Aetna alliance. And we also have UnitedHealth Group entering, which has been the biggest missing piece for many years."

Twitter: @chrissnowbeck

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