Minnesota insurance companies filed their preliminary premium rates for plans sold on the individual health insurance market. The rate increases for 2018 are much lower than the rate increases seen last year when premiums increases were as high as 50 to 67 percent. This blog provides my initial impressions on the preliminary rate increases for 2018 and additional context to understand the dynamics of a rapidly evolving health insurance market.

Minnesota’s individual health insurance market is in a state of flux with the implementation of the Affordable Care Act (ACA). Individuals without access to employer-sponsored insurance and without access to the premium subsidies offered through MNsure faced exorbitant, and for some, unaffordable, health insurance premiums in 2016. This crisis prompted the Minnesota legislature to pass two pieces of significant legislation last session. The Health Insurance Premium Relief bill provided enrollees with rebates to health plans, with the requirement that quoted premium prices would be reduced by 25%. The Premium Security Plan established a reinsurance plan to provide additional premium relief and stabilize the premiums in the individual market. Together, the legislature authorized nearly $1 billion in support of the individual health insurance market.    

Rate Increases with and without Reinsurance

The rate increases for 2018 are presented in the table below. Rate increases with reinsurance ranged from a 14.5 percent decrease in premiums submitted by UCare to an 11.4 percent increase in rates submitted by Blue Plus. Without reinsurance, the rate increases ranged from a 3.3 percent increase in rates submitted by Group Health to a 31.7 percent increase submitted by Blue Plus. 

Minnesota’s Reinsurance Proposal

Insurance companies buy reinsurance to reduce the volatility in their costs and provide stability to premiums. Reinsurance is basically insurance for insurance companies and is standard practice for different types of insurance products, not just health care. There are different models of reinsurance, and Minnesota is one of five states with current reinsurance proposals for health insurance offered in the individual market.

Minnesota proposed a publicly-funded reinsurance program using a claims corridor approach. The reinsurance company will reimburse insurers at an 80%/20% coinsurance rate for claims that fall between $50,000 and $250,000. Instead of the insurers covering the costs of reinsurance, the state has proposed public financing with an appropriation of $271 million per year for two years—a total of $542 million for the biennium.

The legislatively-created Minnesota Comprehensive Health Association would serve as the administrator of the reinsurance product, using state funds appropriated to the commissioner of commerce. The legislative language authorizing the reinsurance program requires federal approval of a State Innovation Waiver (a 1332 waiver), which was submitted on May 5, 2017. Under this waiver, Minnesota has proposed that the federal government pay about a third of the cost of the reinsurance program, with tthe federal government contributing between $138 million and $167 million toward the $270 million total cost of the program each year.

My Initial Thoughts

In general, the 2018 preliminary insurance rate filings are great news. Minnesota’s individual market is relatively small (about 300,000 pre-ACA and 170,000 in 2017), and implementing insurance reforms was difficult. The premiums in the individual market started low but over time had to catch up with increases in costs. Many of the premiums filed last year increased by more than 50% from 2016. The first look at the preliminary 2018 rates with limited increases, and in some cases decreases, was welcome.

There is also some hope that Secretary Price will approve Minnesota’s 1332 State Innovation Waiver. He recently approved the waiver proposal submitted by the state of Alaska, and the Minnesota approach to reinsurance is relatively straightforward. Governor Dayton recently met with Secretary Price, and the meeting reportedly went well.

However, there continues to be uncertainty at the federal level in terms of conflicting messaging around federal funding of CSRs and enforcement of the individual mandate, and the broader political debate about the ACA’s future has further escalated insurers’ concerns. These factors, in turn, have led to the exit of insurers from local markets or entire states, exceedingly high increases in premiums, and fewer plan choices for consumers. 

Here are a few of my initial concerns.

1. The legislature funded reinsurance for just two years, and reinsurance is likely to be an ongoing need. The state appropriated funding for just two years using funds from the Health Care Access Fund. If state-based reinsurance will be an ongoing need, and I suspect it will, a new source of funds will need to be found.
    
2. Financing of reinsurance uses funding from Minnesota's Health Care Access Fund (HCAF), which may soon be needed to support the state's safety net. Typically, reinsurance is funded by assessments on private insurers to cede a portion of their risk to another insurance company. The temporary reinsurance program provided in the ACA and the more recent Alaska reinsurance program were both funded with assessments on the insurance carriers.
   
   The HCAF comes from a two percent fee on most health care providers’ bills. The HCAF was initially established to fund MinnesotaCare, which was designed to support health insurance coverage for Minnesotans whose incomes fell just above the Medicaid income limits. The target population was Minnesota families working in low-wage jobs with no access to employer-based health insurance. MinnesotaCare provided needed coverage and limited premiums based on income, and providers who once provided care without payment now received reimbursement for their services.
   
   Minnesota was fortunate to move into the 2017 legislative session with a $1.6 billion dollar surplus, allowing the legislature to fund different programs including the premium rebates described above. Yet given the uncertainty at the federal level and discussions of cuts to safety net programs such as Medicaid, the HCAF may be needed in the near future to support the safety net in Minnesota as initially intended. For long-term funding of reinsurance, alternative financing should be considered, including fees assessed on the insurance carriers.
    
3. The 105,000 people purchasing coverage on MNsure who got a 25 percent rebate on their premiums this year will likely see some increase in their premiums next year, even with reinsurance. The premium increases cited in the table above are based on last year’s base premiums without the 25 percent premium rebate adjustment. For example, a person facing a $1,000 a month premium in 2017 received a 25 percent rebate, bringing their 2017 premium to $750. But even with no premium increase for 2018, the individual would be back to the $1,000 premium, which represents a 33% increase.
   
   In general, rates will remain flat for most people who purchase coverage on Minnesota's health insurance exchange, MNsure: Premium increases will not be felt by the 85 percent of people who are income-eligible (i.e., with an income of $24,000 to $48,680 annually for a family of four) for Advanced Premium Tax Credit subsidies to bring down the cost of their monthly premiums: Because the amount of the subsidy is based on household income, such that no individual will pay more than 9.6 percent of income on health insurance premiums, premium rate increases are absorbed by the premium subsidy. However, broad premium decreases for this segment of the MNsure population won't happen, either.
    
4. We still do not know if every Minnesota county will have options to purchase coverage in the individual market. And we do not know what the provider networks look like. Last year, the networks were tighter, and some of the pairings of hospitals and clinics did not facilitate the best geographical access. So, we still need to see what the plans look like and if all counties are covered.
    
5. The PreferredOne products with the largest declines in premiums are not offered on Minnesota's individual market for new enrollees. These are the products that have retained enrollees since PreferredOne abruptly left the individual market in 2015. They are not offering new products.Technically, PreferredOne should not be included on this list because its products are not currently offered on the individual market.

States like Minnesota and Alaska are forging ahead and making decisions to assure that people have access to affordable coverage. We are out in front of the pack but still have work to do.