Insurers defend proposals for higher health premiums

Minnesota health insurers are defending the dramatic premium increases they are seeking on the grounds that rates are so low that their companies have been hurt financially.

Several insurance plans are asking for average rate increases that range from 13 to 73 percent, proposals that have been denounced by Minnesota politicians. Gov. Mark Dayton called the proposed rate hikes "outrageous."

A big question for insurers is why some of the plans are proposing double-digit increases for individual and family coverage when spending on healthcare is growing at only 3 percent.

In Minnesota, 56 percent of people receive insurance through their employer. Another one third of Minnesotans do through public programs. In contrast, individual and family coverage makes up 6 percent of the state's total health insurance market.

Jim Schowalter, president and CEO of the Minnesota Council of Health Plans, which represents the health insurance companies, acknowledged the proposed increases are big and unpopular.

But when insurers set prices for individual and family health plans for last year and this year, they had to guess how sick and expensive the people enrolling would be. More than a year of claims indicated that the new customers used a lot more care than expected, Schowalter said.

He called the governor's remark "unfortunate" and said the overall increase in the cost of health care has nothing to do with what's occurring in Minnesota's individual insurance market.

"People joining the individual market are sicker than the people who were in the individual market before," Schowalter said, "making the overall cost worse."

For example, Blue Cross and Blue Shield of Minnesota, which has the largest share of business on the MNsure exchange this year, notes that for every 2014 premium dollar it took in, it spent $1.23 for claims and administration. The company expects bigger losses this year.

Blue Cross's average rate increase request for nine plans is 54 percent.

"It's pretty clear given the volatility that we've had in Minnesota in 2014 and now in 2015 that the market was, I would say, significantly underpriced," said Scott Keefer, the company's vice president of public affairs.

"We were doing something different adjusting to a new environment and a new market," Keefer said. "And rather than look at finger pointing or suggest that anybody's doing something that they shouldn't, I think that the best approach is for all of us to roll up our sleeves to have a real serious discussion about the data."

The data show Minnesota insurance companies lost a total of $319 million on individual and family coverage last year.

PreferredOne was particularly hit. Selling relatively low-priced plans, the carrier snatched up nearly 60 percent of MNsure's business last year. But after taking a major financial hit, PreferredOne walked away from the online state insurance exchange.

While big proposed rate hikes are receiving attention, the prices people will pay have yet to be determined, said Cynthia Cox, who analyzes health care reform and private insurance at the Kaiser Family Foundation. Only certain proposed price hikes have so far been made public. Also, insurers will only be able to charge rates that state regulators agree to.

"We only are able to see that plans that are increasing their premiums by more than 10 percent," Cox said. "We don't know yet what the lowest cost plans are going to be and for the most part in previous years exchange shoppers have migrated towards those lowest two silver or bronze plans."

If prices do rise sharply, consumers receive more tax credit help to pay the bills, she said.

Currently, 49.5 percent of Minnesotans who buy insurance through MNsure receive the subsidy, the lowest among the states. In part, because that's because the rates are so relatively low.

The Minnesota Department of Commerce will finalize proposed rates Oct. 1.

MNsure officials say they'll know exactly which plans will be on next year's exchange by this fall. It's not clear how many of the proposed double-digit rate hikes are for health plans to be offered on MNsure next year.