Farmer cooperative health plans may rattle individual market in Minnesota

Minnesota farmers are sizing up a new crop of health plans after struggling for years with skyrocketing premiums and diminished insurance options.

Lawmakers blessed the new coverage from agricultural co-ops earlier this year in legislation on the troubled individual insurance market under the federal Affordable Care Act.

Some fear the co-ops could hurt the individual market by pulling large numbers of healthy farmers from a risk pool that's already smaller and more costly than expected. But there are doubts about the immediate impact of the co-ops, since organizers face a big challenge in explaining a new program at a time when many farmers have been busy with a late harvest.

"It is damn hard to set up an insurance company," said Roger Feldman, an emeritus professor of health care finance at the University of Minnesota.

Farmers are among the roughly 166,000 state residents who buy individual health insurance policies — a group composed largely of people under age 65 who are self-employed or don't get coverage from their employers.

The new state law allows for agricultural cooperative health plans (ACHPs) in which farmers in certain circumstances can band together in "self-insured" health plans like those used by many large employers.

Co-op coverage is open only to members who actively work in production agriculture, the law says, or provide direct services to the state's industry. The statute says members must participate for at least three consecutive years or they could be subject to a financial penalty.

Open enrollment started Nov. 1 for co-op coverage through a new group called 40 Square Cooperative Solutions. Arden Hills-based Land O'Lakes launched the sign-up period for its new co-op health plan on Monday, offering it to 12,000 farmers in certain co-ops.

"We're losing too many farms," said Pam Grove, president of BuyPoint Insurance Solutions, which is a wholly owned subsidiary of Land O'Lakes. "Health care is just one of the reasons. We're hurting our farmers in the country by not providing some type of affordable coverage."

The individual market has seen sweeping change under the Affordable Care Act, which bans health insurers from denying coverage to people based on pre-existing health conditions. The federal law provides large tax credits for many individuals, but those with incomes that are too high for the subsidies — a group that includes many farmers — are stuck paying market prices that have been soaring.

Symptoms of the market's instability have been painfully obvious, including big premium jumps and carriers limiting options since major ACA changes kicked in for 2014. Data from the Minnesota Council of Health Plans point to examples of why insurers were surprised by high costs, since a greater share of patients in the market in 2015 had expensive conditions such as asthma, lung disease, diabetes and major depressive disorders.

Next year in Owatonna, unsubsidized premiums for a 60-year-old buying through the state's MNsure exchange for individuals will range from a low of $1,077 per month to a high of $1,748. If a married couple that age buy the plan with the lowest monthly cost, their combined annual premium will be $25,848 for coverage that includes a $6,000 deductible for each spouse.

Considering those big deductibles, premium payments feel like a "monthly slap in the face," said Anita Angell, 61, a farmer in Freeborn County, during an information session last week for the Land O'Lakes co-op. The co-op coverage features premium discounts of 10 percent to 20 percent compared with individual market prices, organizers say, plus a broad network of doctors and hospitals.

That all sounded good to Angell, since her current health plan doesn't provide in-network access to the nearest hospital. It's an example of the "narrow network" limits that are now common in the individual market.

"I'm leaning in that direction," Angell said of the co-op health plan following the meeting at an Owatonna hotel.

At the nearby Cabela's in Owatonna, 40 Square organizers explained their plan to a crowd of more than two dozen people a few weeks earlier. The audience included Matthew Keller, 33, of Kenyon, who said there's a 70 percent chance that he'll sign up his family for co-op coverage — once he gets the chance.

"Harvest is about two to three weeks behind schedule," he said last week. "It makes it hard to take any time."

To join the 40 Square health plan, farmers must purchase co-op stock and have at least one common law employee. (The co-op provides a two-page guide to help farmers determine which workers fit the definition.) If the co-op hasn't enrolled 500 families by early December, organizers will decide whether to extend open enrollment or shut down the offering for 2018 — with plenty of notice to those who've signed up, said Charlene Vrieze, the group's project manager.

As of last week, Vrieze said just under 100 member-owners had enrolled.

Organizers of 40 Square say they started working at the Legislature to clear the way for the new health plan long before the Affordable Care Act. The goal was to let farmers "participate in the risk-reward mechanism" in self-insured groups, so they benefit directly by controlling costs via efficient use of health care, said Jeff Nielsen, the chief executive of Winthrop-based United Farmers Cooperative, one of the groups backing 40 Square.

The co-op's paperwork includes answering a series of questions about a person's health history. 40 Square won't turn down anyone based on pre-existing conditions but could charge significantly higher premiums based on the responses. This "medical underwriting" process was required by the co-op's stop-loss insurer since the new group doesn't have a track record for projecting costs, organizers say.

Vrieze said it's not 40 Square's intent to cherry pick members who are less likely to run up big health bills. "However, in order for us to make this viable, we do, absolutely — just as the individual market — we have to have healthy people in our pool," she said.

That aspect of 40 Square raises concerns for Sen. Tony Lourey, DFL-Kerrick, who said: "They can really work to attract only the healthy consumers that otherwise are in the individual market." The co-ops could leave the rest of the market "smaller and sicker, and increase the average premiums," said Lynn Blewett, a University of Minnesota researcher, via e-mail.

Vrieze countered that people with health problems might sign up for co-op coverage, despite medical underwriting, for better access to doctors and hospitals. Republicans who wrote legislation clearing the way for the new plans say they aren't priced to undercut individual insurance offerings.

At Land O'Lakes, the new cooperative health plan will ask enrollees about their health history but won't charge different premiums based on the answers, Grove said. Land O'Lakes hopes to expand the new health plan to farmers in other states, she said, depending on what happens with a recent executive order from President Donald Trump for expanding "association health plans."

State regulators say it's not yet clear if the new Minnesota co-op plans will fit within Trump's order. But concerns about the federal action sound similar to those about the Minnesota co-ops, with the American Academy of Actuaries last month warning that expanded association health plans "could leave higher-cost and less healthy groups in the traditional insurance market, driving premiums up."

Insurers don't expect huge numbers to sign up for 2018 co-op coverage because the plans are new, but they have questions about the long-run impact, said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group.

"These new co-op plans have regulation and tax advantages that will save their members money right off the bat," he said. "It's good for their members, but those taxes and those regulations were there for a reason, and [it] leaves higher bills and more responsibility for everyone else buying insurance."