Minnesota’s Individual Health Insurance Market Down 30%

Feb. 10--Insurers say that Minnesota's market for individual coverage has shrunk by about 30 percent, a significant decline that could drive premium increases for consumers, financial losses for carriers and more of the volatility seen over the past three years.

A preliminary analysis released Thursday shows that no more than 190,000 people currently are buying individual market coverage, which in March was the source of insurance for about 270,000 state residents, according to the Minnesota Council of Health Plans, a trade group for insurers.

The news came a few hours after state officials announced record enrollment at MNsure, the government-run marketplace where consumers can tap tax credits on individual coverage.

The MNsure news shows that the exchange simply has a bigger share of a shrinking pie, the trade group said, while calling the overall trend "alarming."

"People who probably don't use as much care are opting not to buy insurance," said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, in an interview.

"If enrollment is down, that means that fewer and fewer people are helping shoulder the high medical expenses," Schowalter said. "That makes everyone's premiums go up, which means that even fewer people will choose to buy insurance in the future -- making a very bad situation worse."

The discouraging words are just the latest grim take of an insurance market that state regulators last year said was on the verge of collapse, with all insurers threatening to exit given the prospect of mounting financial losses.

The individual market serves primarily self-employed people and those who don't get coverage through work or a government program. It's a small slice of the health insurance world that's undergone fundamental changes with the federal Affordable Care Act (ACA).

The health law prohibits insurers from denying coverage to people with preexisting health conditions. Since the prohibition took effect in 2014, insurers have struggled to make the business profitable, with many pulling back health plan options in Minnesota and across the country as a result.

The ACA also called for the creation of state-level exchanges like MNsure, where people at certain income levels can tap federal tax credits to discount premium costs. On Thursday, MNsure reported a record-high volume of business during the enrollment period that ended this week, with more than 117,000 sign-ups overall for 2017 coverage.

MNsure's number represented an increase of about 38 percent over last year. Nearly two-thirds of those buying through the exchange qualify for tax credits that collectively could generate up to $372 million in savings, MNsure officials said.

In addition, about 41,000 people who bought through MNsure and don't qualify for tax credits will tap special rebates the state created in January to help some consumers in the individual market handle the premium jumps. The rebates are worth about $130 per month, said Allison O'Toole, the MNsure chief executive, during a news conference Thursday in St. Paul.

"Minnesota set a new enrollment record," O'Toole said of sign-ups through MNsure. "Forty-seven percent of enrollees are new to MNsure. That will likely lead the nation."

Republicans in Washington, D.C., have pledged to repeal the federal Affordable Care Act. In St. Paul, some Republicans have threatened to eliminate MNsure, which was launched as part of the ACA but is run by the state.

On Thursday, O'Toole stressed how the enrollment numbers suggest MNsure will exceed its current revenue forecast. The exchange funds operations by collecting a 3.5 percent tax on policies sold through MNsure.

"I would like to make this plea to Minnesota's state and federal leaders -- please don't take Minnesota backward," O'Toole said. "Minnesota has the highest rate of insurance in state history."

Schowalter said he welcomed news of growing enrollment through the exchange, since that means more Minnesotans are getting financial help. But it doesn't change the larger trend.

Individual market premiums skyrocketed for 2017, with carriers imposing average increases of 50 percent or more. The increases likely contributed to the market shrinking, said Eileen Smith, spokeswoman for the Minnesota Council of Health Plans.

The ACA requires almost all Americans to have health insurance or pay a tax penalty. Repeal could eliminate what's known as the "individual mandate" for coverage, so the prospect of its demise might also have contributed to people leaving the market, Smith said.

Finally, there's evidence, she said, that some people covered in the individual market during last year moved into group coverage for 2017.

Insurers boosted premiums in the individual market due to financial losses. When it looked like no insurers would compete in the market for 2017, regulators let several insurers cap their enrollment on an emergency basis.

Health plans in the market for 2017 have tighter networks of doctors and hospitals as another cost-saving measure. Some consumers who have bristled at those network limits have told the Star Tribune they moved to group coverage in order to bypass these restrictions.

The numbers released Thursday from the insurer trade group aren't final, and likely overstate the number of people who will have insurance, the trade group said. Historically, people drop policies after signing up, although carriers hope the rebates will help minimize the number of people who drop health plans during the year.

Open enrollment in the individual market effectively ended on Wednesday, and there have been hints since it opened in November that the market might be shrinking despite record growth at MNsure. Interpreting the numbers was difficult because insurers thought some consumers might be waiting on the sidelines until lawmakers guaranteed rebates, which weren't finalized until late January.

But even with rebates, insurers didn't see the enrollment surge at the end of the sign-up period they expected, Smith said. Through special circumstances, some who were in the market still have the chance to buy coverage through the end of February.

But Smith said the recent experience makes insurers pessimistic they will see big increases.

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