Insurance costs in mind, officials search for stability
ST. PAUL — A major jump in health insurance premiums next year for hundreds of thousands of Minnesotans has put state officials and lawmakers in brainstorm mode, figuring out the best way to get a handle on costs in an individual market that is smaller and more expensive to cover than both regulators and health insurance companies expected.
Regulators and lawmakers were troubled by the size of the increases announced last week, with increases ranging from 14 percent to 49 percent for consumers buying coverage through MNsure or directly from insurers in 2016. Department of Commerce Commissioner Mike Rothman had several suggestions to tackle costs, including a new state program to help cover costs for the sickest residents and the possibility of merging Minnesota's individual market with small employers. Some Republicans countered by saying Minnesota should scrap its exchange and move to the federal marketplace.
But lawmakers and health policy experts alike are also wary of acting too fast and making major changes that could cause further issues for the fragile individual market, which was fundamentally reshaped by President Barack Obama's health care law and is now facing major sticker shock.
"Let's make sure we understand," said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for the state's health insurance companies. "We're only now starting to understand what that market looks like."
It's small — less than 6 percent of residents buy a health plan through MNsure or from the insurers, while more than 80 percent are covered by employers or on a public program. But the responsibility for possible fixes on price will fall to a new health care task force assembled by Gov. Mark Dayton and the Legislature earlier this year.
At the top of Rothman's wish list is a state-based re-insurance program that helps offset the costs for the sickest — and most expensive — enrollees. It would replace a similar federal program that dries up at the end of 2016.
Dan Mendelson, president at Washington, D.C.-based Avalere Health, said it's a sound idea that's worked in other states like Massachusetts. But it's not without a downside: Those programs generally require the state to assume some of the financial risk — a burden that health companies may be better equipped to handle given their deep relationships with hospital systems, Mendelson said.
"Many states just don't want to take on that liability," he said.
And the state would have to pay for it. Rothman suggested reviving a tax on health care providers — currently set to expire in 2019 — as a possible funding source. Some Republican lawmakers rejected that proposal.
"We've got a system that isn't working. Now the best solution to fix the problem is just to increase a tax to pay for the system that's failing and the mismanagement of that system?" House Speaker Kurt Daudt said. House Republicans pushed this legislative session to abolish MNsure and use HealthCare.gov.
Daudt renewed that idea last week, arguing the "duplicate costs" of MNsure and the federal hub may have worsened the rate increases, though it's unclear whether eliminating MNsure would affect the health of Minnesota's individual market.
But Daudt and other lawmakers welcomed Rothman's suggestion that Minnesota look at combining its individual market with small group coverage, where costs aren't rising as fast. The merger would roughly double the size of the market, a potential benefit because it would spread out the risk of sick consumers in a larger pool.
"It's time we have that explicit conversation. From what I know right now, I think it's a pretty decent idea," said Sen. Tony Lourey, a Democrat who chairs a critical health care committee.
Mendelson said that would likely drive up costs for employees in small businesses, but said it would ultimately stabilize the market and reduce premium increases.
Along with Rothman's call to scrutinize insurers' budgetary reserves and executive pay to ensure they're not out of line, Mendelson said the ideas being circulated in Minnesota have been suggested across the nation. Nor are the rising costs unique to Minnesota, he said.
"There are a lot of states that are experiencing the same thing," Mendelson said.