This week, Minnesotans subject to three years of spiking health insurance premiums on the individual market got their first bit of good news. Rates won't be spiking again in 2018, according to preliminary health insurance rate information released by the Minnesota Department of Commerce.
Minnesota's reinsurance program helps calm health care rates
Premiums have stabilized in the individual market, thanks to a $542 million subsidy, but legislators still have more work to do.
By Peter Nelson
Proposed average changes range from a 14.5 percent reduction to an 11.4 percent increase across the four major health plans. Every plan projects that at least some customers will experience a rate reduction. Group Health and UCare rates are projected to drop by around 14 percent for all their customers.
Rates stabilized entirely due to the state's two-year, $542 million reinsurance program that Republicans in the Minnesota Legislature passed largely on party lines earlier this year. DFL Gov. Mark Dayton was not fully on board, but he let the bill become law without signing it because he agreed it was necessary to induce health plans to stay in the market.
Though Dayton worried in April that health plans were not willing to commit publicly, every health plan involved in the 2017 market came back to the 2018 market. It remains to be seen whether some health plans will cap enrollment as they did this year.
While premiums stabilized, thanks to the reinsurance subsidy, the Commerce Department also reported what premiums would have been without the subsidy, which suggests that the overall market has yet to stabilize. Without reinsurance, Blue Plus rates would have risen by up to 31.7 percent, Group Health's by 4.6 percent, Medica's by 29.4 percent and UCare's by 9.4 percent.
These averted rate increases suggest that the underlying insurance claim trends driving rates higher have not yet stopped. With average insurance claims continuing to spike, it is still an open question whether the reinsurance program is too little, too late. Premiums will not truly stabilize until the per-member claims experience stabilizes. The fact is, for insurers to stay in the market, insurer premiums must cover the claims they pay.
All that is to say, Minnesota's individual health insurance market is not out of the woods yet. The reinsurance program is only for two years and there is much more work to be done to develop a long-term solution.
But these data do show that the reinsurance program was a necessary first step to begin stabilizing the individual market. If people had been exposed to a fourth year of rate increases well into the double digits, the market might have been lost — at least lost to everyone who does not qualify for generous federal tax credits.
Some may question why this matters so much, considering that so few people get coverage in the individual market. There is, of course, the matter of basic fairness. People who do not have access to employer-sponsored coverage should not be forced to choose between no coverage and coverage whose cost exceeds their monthly mortgage payment.
Also, the individual market is an important resource for entrepreneurs who want to break out of the traditional workforce and build a business. Entrepreneurism is already waning in Minnesota; the state can ill-afford to erect another barrier to the risk-takers willing to create tomorrow's jobs.
Conservatives may be tempted to label the reinsurance program as a bailout for big insurance companies. But clearly, the benefits of the reinsurance program are accruing to the people who will pay 20 percent lower premiums in 2018.
Conservative critics also forget that the state's old high-risk pool — something most conservatives aspire to get back to — was also subsidized, to the tune of $160 million per year. The subsidy was well-justified considering that high-risk people come to the individual market from all over, including from employer-sponsored plans.
Although $542 million over just two years is a lot of money, the federal government should be picking up much of the tab, meaning that Minnesotans likely will be paying less for this reinsurance program than for the old high-risk program.
Those are still our tax dollars. But considering that the federal government broke the market, it's appropriate they put up dollars to help save it.
Can it be saved? That remains to be seen. Considering that state lawmakers did not create this problem, there's no guarantee they can fix it.
We do know that they are doing everything within their power to help Minnesotans harmed by Obamacare. So far, the reinsurance program Republicans passed kept rates much lower and induced every health plan to come back. Dayton's Commerce Department is also doing what it can to keep insurers in the market and is working to guarantee that the federal government supports the reinsurance program.
The fact that state lawmakers have taken these immediate and necessary steps when Congress has failed to deliver a fix from Washington, D.C., demonstrates why Obamacare should never have stripped states of the power to regulate insurance. State lawmakers are closer to the people they represent, more sensitive to their problems and better able to set aside partisanship when serious problems erupt.
Peter Nelson is a senior policy fellow at the Center of the American Experiment in Golden Valley.
about the writer
Peter Nelson
Let this Jewish man fill some space in the newspaper, so the writers and editors can take a break.