Why MNsure rates are the lowest in the country

With only a few more days before new state health insurance exchanges open on Oct. 1, Minnesota has something to brag about.

Plans offered on MNsure will have the lowest premium rates in the nation, according to research done by the U.S. Department of Health and Human Services and the Minnesota Department of Commerce.

Uninsured Minnesotans in the Twin Cities can expect to pay as little as $91 a month for health care coverage bought through the state's new online marketplace. Rates will be more expensive for those who want a more robust insurance plan, and for those who are buying insurance for a family or employees in small business.

WHY IS MINNESOTA CHEAPEST?

The conventional wisdom is that the exchanges, including MNsure, are fostering exactly the type of private sector competition that Congress intended when it passed the Affordable Care Act in 2010.

But University of Minnesota health economist Roger Feldman isn't buying that argument because Minnesota has a relatively concentrated market compared to other states. Historically, Minnesota's premiums aren't dramatically lower than those of other states, he said.

The whole situation has Feldman scratching his head, but he has come up with one theory: uninsured Minnesotans are a relatively healthy bunch and have benefited from a strong public safety net.

"It's possible we have a healthier uninsured population in this state with less pent up demand than you would find in other states like Texas or California with huge uninsured populations and poor safety nets," he said.

That means low health costs for the people who are potentially going to enroll in the exchanges, Feldman said.

The phenomenon may be compounded by other factors, he said.

For instance, the Minnesota Comprehensive Health Association, the state's longstanding insurance pool for people who have preexisting conditions is closing next year. But for a while, many of those high-cost health care consumers will remain in that program. It will make the MNsure risk pool healthier and less expensive — at least for the time being, Feldman said.

Lynn Blewett, another health policy expert at the University of Minnesota, credits the state's health care system.

Minnesota's long tradition of large, multi-group physician clinics is a model that that the rest of the nation is catching up with. Group practices and a tradition of coordinating care among providers have helped keep costs down, said Blewett, director of the university's State Health Access Data Assistance Center.

Additionally, Minnesota's insurance underwriting rules already incorporated some of the big changes outlined in Affordable Care Act. For instance, Blewett said, Minnesota insurers can't price plans based on gender, a requirement that other states are implementing for the first time.

"To move from where the plans are today to post-ACA is not a huge lift," she said. "For other states, it's going to cost them money to move and they're going to try to recoup that money in their premiums."

Others have suggested the rates are low because Minnesota's insurers are trying to lure new customers who don't have a lot of experience shopping for health plans and who are likely to be especially sensitive to prices.

REGIONAL DIFFERENCES

Feldman said it's important to remember that the Department of Health and Human Services and Commerce Department analyses are based on average costs.

As a result, rates for health care premiums will vary across the state.

The sticker price to cover a 25-year-old living in the Twin Cities is about $120 a month for a mid-level plan. But the rate for a 25-year-old living near Rochester, Minn., who picks a comparable plan is $231. The prices are for people who don't qualify for federal subsidies.

That regional difference is likely due to the fact that the Mayo Clinic is the primary provider in that area, Feldman said, and getting care there is costlier. Mayo Clinic officials have said that their system's intensive approach holds down costs in the long term by preventing expensive procedures in the future.

Minnesota Commerce Department Commissioner Mike Rothman said that's something his agency, which is in charge of evaluating and approving insurance rates, will be taking a closer look at in the future.

"For folks that live in that southeastern area, what are the contributing factors and are there additional improvements and things that can be done so that those cost structures can be more efficient," Rothman said.

Rothman thinks a combination of Minnesota's existing insurance rules and the Commerce Department's authority to be picky about insurance plan costs contributed to Minnesota's low exchange rates.

"It all factors into the ability... to come up with good pricing," he said.

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