Minnesota's Individual Health Insurance Market: Reform Is Needed

October 26, 2012: From the desk of SHADAC Director Lynn Blewett

Two recent reports raise concerns about consumers’ out-of-pocket costs in Minnesota’s private individual health insurance market.  These reports offer a firm reminder that although Minnesota has a relatively low uninsurance rate of 10.1 percent and a health care system with high marks for quality, cracks in the system are starting to emerge.

Minnesota Families Current Face a High Health Care Cost Burden

The first item is a chart measuring out-of-pocket health care spending, released in September as part of the new RWJF DataHub.  The chart shows that 21.1 percent of Minnesotans are in families facing a high healthcare cost burden, defined as spending more than 10 percent of annual household income on premiums, copayments, co-insurance and deductibles.[1]  Nationally, an estimated 18.3 percent of individuals are in such families.  Wyoming has the highest percentage of individuals in this category, at 26.2 percent.  At the other end of the scale, only 10.9 percent of individuals in the District of Columbia fall into this group.

Minnesotans face “Potentially Crushing Costs” for HealthCare

The second report was released by U.S. News and World Report.  The authors discuss findings from an effort to track down the many insurance products offered in each state’s individual market and rank them on a variety of indicators.  (This effort became an online tool to compare insurance products within any given state.)  The

article highlights two states in particular–Massachusetts and Minnesota—offering Massachusetts as an example of a reformed insurance market and Minnesota as an example of a more traditional one.

The authors praise Massachusetts for its low out-of-pocket costs and relatively comprehensive health products while observing that individuals in Minnesota face greater financial risks due to non-comprehensive coverage and a median deductible in the individual market that is five times as high as that in Massachusetts. 

This report also points out that over 70 percent of the products sold in Minnesota’s individual market did not provide coverage for labor and delivery, 60 percent did not cover any mental health or behavioral treatment, and few (28%) provided coverage for specialty drugs.  

Health Reform is Needed

Massachusetts has a reformed market, the principles of which formed the basis of many of the market reforms included in the Affordable Care Act (ACA): the implementation of rating reforms (i.e., how premiums are set) and guaranteed issue (i.e., plans cannot deny coverage), the elimination of pre-existing condition exclusions (i.e., plans cannot specify exclusions based on health condition) , and the establishment of a predefined essential benefit set.  

In addition, both the Massachusetts reforms and the ACA establish health insurance exchanges to make it easier to purchase coverage in the individual market, and both provide financial assistance for income-eligible people to purchase private health insurance coverage in the exchanges.   Reforming Massachusetts’ health insurance market helped to bring the state non-elderly (age 0-64 years) uninsurance rate down to a low of 4.9 percent (compared to 17.6 percent for the U.S. and 10.1 percent for Minnesota; see table below) and its median deductible to $1,000.[2]

What next?

Whatever the outcome of the upcoming presidential election, Minnesota should move forward with health care reform.  If a universal program cannot be implemented across the states, Minnesota should step up and provide the leadership needed to improve Minnesota’s coverage rates.  The state should also work to improve access to coverage that is comprehensive and affordable.  Using the resources provided by the Affordable Care Act to jump-start Minnesota’s reform is the responsible thing to do.

Related on the SHADAC Blog: “A Closer Look: Out-of-Pocket Health Care Spending and the ‘Underinsured’”

[2] Blewett, L.A., A. Ward, and T.J. Beebe.  “How Much Health Insurance is Enough?  Revisiting the Concept of Underinsurance.”  Medical Care Research and Review 63(6): 663-700.