Iowa made national news recently as one of the first states to face the prospect that its 72,000 residents in the individual healthcare market may have no insurance companies to choose from next year. Experts say other states could soon follow.
The state’s two largest health insurers offering individual coverage announced last month that they will stop selling individual policies for next year because of heavy financial losses and uncertainty in the market. That left only one relatively small carrier left in the market facing the same challenges.
Iowa is leading the pack, but many other states may be soon to follow. In Tennessee, 16 of 95 counties are without a carrier for 2018 and several other states are down to a single carrier, meaning they could quickly follow in Iowa’s footsteps.
Why is this happening? Minnesota offers some insights that apply to states like Iowa and should be a concern to Minnesota consumers. There are two core challenges that should be addressed:
- Very few pay for the very expensive.
A small group of Minnesotans—5 percent of people who purchase insurance on the individual market—is being asked to pay the health costs of many of the 27,000 people who before Obamacare purchased insurance through the state’s high-risk pool, the Minnesota Comprehensive Health Association (MCHA). While MCHA enrollees paid insurance premiums, their costs were subsidized by other sources, mostly a tax on health plans.
A Minnesota Department of Health study shows just how significant it is when even a few people in a small insurance pool have huge costs. MDH found that health spending for a person with just a single chronic condition (like diabetes or asthma) is eight times as much as the person without a chronic illness. The MCHA enrollees brought with them an average of 3.3 chronic conditions per person when they enrolled in individual health plans through MNsure.
The result is that the 250,000 Minnesotans buying individual coverage are being asked to pay premiums high enough to cover not just their own health care, but the expenses of some of the state’s most vulnerable and high-cost people.
- Health care costs are rapidly rising for everyone.
University of Minnesota health policy professor Ezra Golberstein put it accurately and succinctly this last year, “We’re starting to learn now that Minnesota is actually a pretty expensive place for private insurance to be purchasing health care services. Private insurers just pay more for health care than they do in other places in the country.”
Both of these challenges underscore the reality that insurance premiums aren’t the cost of health care, they are a reflection of the marketplace. Immediate assistance needs to be coupled with long-term reforms.
Minnesota has offered some solutions. The legislature this year passed a subsidy to help individuals pay their 2017 premiums and approved a new reinsurance plan that will spread the cost of those who need substantial and very expensive health services.
The long-term fix, though, must include a serious effort to reduce the real cost of health care services. Investments in prevention; continued efforts to reimburse doctors, hospitals and other health providers more for quality outcomes, not for the amount of services provided; and, stronger incentives for patients and providers to use only the services they need and only the services that are proven to be most effective.